Sometimes it is hard to cover the purchase of new machinery or land with your own savings. In this situation, it is worth applying for a loan for agricultural activity. Unfortunately, banks require farmers to provide a large number of documents to help assess creditworthiness.
Identity card or passport
The basic document that you must present when applying for a loan for agricultural activity is an identity card. It can be an ID card or passport. Some of the banks require confirmation with two documents with a photo – then you can also use your driving license.
Document your income
Whether your bank grants you an agricultural loan depends on your creditworthiness. The basic factor that determines it is, of course, your income. Therefore, it is worth ensuring the best possible documentation. What can help with this? First of all, prepare agreements confirming ownership of agricultural land and possible leases.
In addition, it is worth having with you the current payment order for agricultural tax and its amount, and confirmation of its payment. You also need documents that will confirm the income obtained from agricultural activities. These can be lists, VAT invoices, certificates, and receipts.
Sometimes banks require the submission of bank account lists. It is worth mentioning that depending on the bank, you will need documents from the last few months or even from the entire previous year.
EU subsidies – how to present them
Farmers receive income not only in connection with their activity but also with EU subsidies received. If the farmer has this type of support, it is worth presenting it to the bank. It can significantly increase our credit standing.
What documents should be presented to the bank in relation to subsidies? First of all, they should be documents issued by the Office of the Poviat Agency for Restructuring and Modernization of Agriculture.
Importantly, it is worth presenting not only targeted subsidies that we have received, e.g. for the purchase of equipment, but also the amount of area payments, which can help us obtain a larger loan amount.
Investment loan – necessary plan presentation
Some farmers decide to take out an investment loan. In this case, it is necessary to collect a number of documents that will confirm the profitability of the investment. The bank may require the presentation of an investment plan containing all information on planned expenses and forecast profits. Sometimes it is also necessary to provide various types of cost estimates, certificates and permits.
To sum up, the farmer’s path to obtain a loan for agricultural activity is slightly more difficult than for private individuals wishing to take e.g. a cash loan. So many farmers decide to use the help of a financial adviser who will help us gather all the necessary documents.