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Starting an agriculture business is a trend these days. People taking up agriculture for a living has spread to cities and other urban areas as well. If you are looking to start an agriculture business, then you can consider taking an agriculture business loan to fund your agri startup.
What is an agriculture business loan?
Agriculture business loans help entrepreneurs who are interested in starting an agri business to fund their business idea. These business loans are also given to agriculturists to keep up with all of the costs associated with running a farm or to start a new product variety within their business unit.
Agribusiness includes all farming and farming-related commercial activities. It encompasses all the activities required to send an agricultural good to market, including production, processing, and distribution.
Banks that offer agriculture business loans
For most financial institutions in India, agriculture business loans come under the umbrella of business loans. The forms you fill out for an agriculture loan are the same as those for a business loan.
Here are a few banks that offer agriculture business loans:
| Name of the bank and loan product | Maximum limit | Interest rate |
| Tata capital – Small business loan | ₹1.5 Lakh | 12% p.a. |
| Bajaj Finserv – Business loan | ₹50 Lakh | 9.75% – 30% p.a. |
| Poonawalla Fincorp | ₹50 Lakh | 15% p.a. |
| LendingKart – Business loan | ₹2 Crore | 12% – 24% p.a. |
| SBI Agriuculture loan | ₹100 Lakh | 7% – 12.10% p.a. |
Purposes of an agricultural business loan
Agriculture business loans are given by banks and other financial institutions for different farm related expenses:
- Purchase of agricultural land
If you are starting an agriculture business or wish to expand your current agriculture business, you can get a loan to buy agricultural land.
- Fund operating costs
There are several operating costs associated with agriculture. Buying farm equipment, building storage units for storing the harvest, buying more livestock, sourcing seeds, etc., are expensive activities which can be covered using these business loans.
- Fund product exports
India is one of the top countries for agricultural exports. To start an export business in agriculture or even to start exporting your products, you would need to obtain the Import Export Code, RCMC registration and certificate of inspection.
You would also need to find a retailer/buyer and sign an agreement mentioning the terms of the export. An agriculture business loan can cover these expenses for you.
- Financial assistance for marketing agri products
If you are cultivating a rare rice variety or crop with medicinal value, your final products would need to be marketed as there is severe competition when it comes to agriculture products. A business loan can fund your marketing campaign and advertising activities so you can spread the word of your product.
Benefits of an agriculture business loan
Getting an agriculture business loan has several benefits:
- Funds individuals, sole proprietorship firms, partnership firms, private limited companies, limited companies, etc.
- Different types of business loans can be obtained for agriculture including working capital loans, term loans, bank guarantee, Letter of credit, cash credit loan, etc.
- An agriculture business is one of the most encouraged businesses in India therefore business loans are easily available at attractive interest rates.
- Can be short-term, medium-term and long-term loans.
- According to RBI you can get a collateral-free loan for up to ₹1 Lakh.
Eligibility for an agriculture business loan
The eligibility requirements for agriculture business loans vary according to financial institutions. Here are some of the common eligibility criteria set for sanctioning agriculture business loans for existing businesses:
- Business should have been in existence for a minimum of 3 years
- The net worth and profit after tax should be positive for at least 2 out of 3 financial years
- No history of loan defaults
- Credit score should be 650 and above
For individuals, financial institutions usually check:
- Age of the applicant should 18 to 55 years
- Should have a source of income
- Credit score should be 750 or above
- Applicant should have no previous loan defaults
Documents required
Here are some of the most common documents asked for an agriculture business loan application:
- KYC documents of applicants like Aadhar card, Voter’s ID card, Driving License, PAN Card, etc.
- Business address proof
- Bank statement of the last 12 months
- Income tax returns of the last year
- Business incorporation certificate
Documents required for individual applicants include:
- KYC documents
- Proof of income
- Bank statements of the last 12 months
- Project proposal
Interest rates for agriculture business loan
Interest rates vary based on lenders, market conditions, loan amount requested, value of collateral, etc. The interest rates typically vary from 5% to 15% on agricultural business loans. Make sure you contact your chose bank to know about their interest rates and other charges related to applying for a business loan.
If you are looking to apply for a business loan with reasonable interest rates, do visit Tata nexarc. Tata nexarc Finance offers business loans up to ₹30 Lakh from reputed lenders. You can get the funds within 72 hours after your loan gets approved, which only takes five minutes.
Also read: Loan against property for businesses: Eligibility, rate of interest, documents and more
Priyanka is a seasoned content marketing professional with more than 6 years of experience crafting various forms of business and technology sector content. Her insightful writing tackles critical issues faced by small-scale manufacturing businesses. Priyanka’s clear and concise communication empowers businesses to make informed decisions and thrive in today’s dynamic business environment.
