The agriculture sector contributed 20% of India’s GDP in 2020-21, and more importantly, it employs 58% of the country’s population. The prosperity of this sector and its participants is crucial to the country’s economic growth. Finance being key to prosperity, how accessible are financial options to our agricultural business owners?
Business loan requirement in farming
An agriculture business owner may need to look for favorable business loan interest rates for funds to manage day-to-day operations, purchase farm machinery, purchase farmland, organize storage purposes, product marketing, expand agricultural activities, etc.
Apart from cultivating crops, agricultural loans in India are sought for animal husbandry, silk farming, horticulture, floriculture, aquaculture, pisciculture, and apiculture. Here are some financing options for agriculture business owners.
1. Crop Loan/Kisan Credit Card (KCC) –
KCC is an electronic RuPay card that can be used to draw money from ATMs. This scheme helps meet short-term credit needs like expenses arising from crop cultivation, maintenance of farm machinery, activities related to crop harvest, etc. Therefore, it is convenient to use to meet the daily farm operations.
2. Agriculture term loan –
This is a long-term loan of up to 48 months, catering to the non-seasonal agricultural expenditures. This includes purchasing new machinery or upgrading present ones, installing windmills, solar power, etc. Lenders offer a repayment period of 3 to 4 years for this loan. It can be paid back in monthly/bi-annual/yearly installments. The borrower can select the tenure as per the preferred business loan EMI.
3. Loan against agricultural land –
It is a business loan meant for people directly related to agriculture like farmers, planters, or horticulturists. It is a long-term loan of up to 20 years with no hidden charges. To obtain this loan, a farmer has to pledge his land as security to the financial institution. By availing this loan, the borrower can use it on a wide range of agricultural and related activities.
4. Dairy farm business loan –
It is a working capital business loan obtained by agriculture laborers, farmers, dairy cooperative societies, and limited companies. The repayment tenure ranges from 3 to 7 years. Borrowers can use the business loan EMI calculator for checking the EMI burden on the business loan.
5. Animal husbandry loan –
It is a long-term loan with a low interest rate available for farmers, companies, NGOs, and self-help groups. It is offered to purchase livestock and assets, manage farm animals, infrastructure development, construction of animal shed, milk processing units, purchase of feeds, fish foods, etc.
There are more financing options other than these options available in grants and subsidies that protect the farmers during crop damage or crop loss. Since business loan eligibility is comparatively relaxed in agricultural borrowers, it can be used to invest in the crops for better results.