Choose the best Agricultural Loan in South Africa – Calculator

Choose the best Agricultural Loan in South Africa – Calculator

In South Africa, agriculture is the foundation of the economy. For this reason, our country needs to foster the agriculture sector so that it can thrive. However, the context in which this activity is carried out might not be helpful at all. Here we will talk about a tool that can help you if you need to grow your agricultural business: an agricultural loan. We will discuss different loans offered by the reliable financial companies of the country, and we will list the most important things that you need to know in order to choose the best agricultural loan out there.   

Why do Farms Need Loans in South Africa?

South Africa is a country with limited fertile land. This means that farmers need to work hard to strengthen the fertility of their land so that their crop yield is sustainable. All of this work can be translated into money. Farmers need money to make their land operational and 56% of the financial source for agricultural business is banks.

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How to Get a Loan to buy Farm?

There are many farmers that work a land they do not own. If this is your case and you want to put your knowledge to work for you and your family you should definitely read what we’re going to tell you now.

Land Bank is a commercial bank that specializes in the field of agriculture. They offer different types of loans, and among them you can find loans to buy a farm. Before we move on, let us make it clear that this company does not offer grants or subsidies; Land Bank offers loans. What do we mean by this? If you take out a loan with them, you will have to pay it back.

Land Bank has designed a credit line called Financing for Farming and Agri-Enterprises in order to assist South African farmers in their financial needs. With this loan you can buy a farm or machinery that you will need to make it operational. You can visit the bank to start your loan application process.

3 Characteristics of Standard Bank Production Loan

Many farmers endure great difficulties due to the rise in costs and low rainfall. These farmers have to work hard in order to keep their units sustainable. One solution to this problem might be a production loan. This financial instrument is meant for helping farmers face the costs in their production.

Standard Bank is one of the credit companies that provide this service. They offer a short-term loan to help farmers in their crop or livestock production in a specific season. The minimum loan amount is of R50 000, the repayment term can be from 4 to 18 months, and the interest rate they offer is personalized to your specific situation.  

Below, we will discuss some characteristics of the Production Loan offered by Standard Bank.

  1. In order to qualify for this loan, you will need to have Business Account with Standard Bank.
  2. The amount of the loan you will be given will depend on your cash flows needs. Also, Standard Bank will assess your risk and affordability.
  3. You can pay the interest each month and pay for the loan amount when the term is over, or you can repay the full amount of the loan in a single installment when the season is finished.

If you would like to see what your repayment would look like with this agricultural loan, you can use Standard Bank’s Business Loan Calculator.

Where can you Find Loans for Livestock Purposes in South Africa?

In South Africa, 69% of the land is appropriate for grazing. This makes livestock farming the biggest agricultural sector in South Africa. Livestock farmers might need finance for many reasons; one of them may be the need to expand their business.

First National Bank offers a medium-term loan to help farmers finance their livestock and production. The loan amount can be repaid in up to five years. This loan can be used to finance the production, to purchase machines or instruments and to make improvements in the farm.

What other Opportunities other than Farming Loans are there in South Africa?

Rich countries know that agriculture is the foundation of a thriving economy and for this reason they spend billions to subsidize the sector. This can turn into a challenge for developing countries such as South Africa since it is hard to compete against subsidized farmers around the world.

Farmers in our country are not subsidized and usually have to turn to agricultural loans to find the finance they need. However, there is an opportunity for a grant provided by the government. This program is called Land Redistribution for Agricultural Development. This grant is for the purchase of land to farm; the amounts range from R20 000 to R100 000.

It should be made clear that this is not a subsidy; we are talking of a grant that involves a contribution of a minimum of R5 000 on the part of the farmer. To find more information about this grant you should contact the Department of Agriculture, Forestry, and Fisheries.

5 Qualification Criteria you should Meet for Farming Loans In South Africa

The agricultural loans offered in South Africa are not subsidies and are not managed by the government. This means that the companies that offer these financial services need to make a profit, just like any other company. In order to guarantee that their credit business is profitable, they will make sure that your farm unit is sustainable and that you will be able to repay the amount you borrow.

The only way for the bank to have some assurance that you will pay is asking you to meet certain requirements and qualifying criteria. In this article, we talked about different agricultural credit institutions since we wanted you to have an idea of the options you have. Each of these banks will have their own requirements and qualification criteria. However, some of these items are asked by most banks.

These are the 5 qualification criteria you will be generally asked to meet:

  1. Being a South African citizen or a permanent resident of the country
  2. Having a clear credit history
  3. Providing the bank with your business plan
  4. Providing some kind of security
  5. Proving that you can afford to repay the loan

The main agricultural loans offered by reputable finance companies in South Africa were discussed in this article. Also, the general requirements asked by these companies were listed so that you know if you can apply for these loans or not. 

Preguntas Frecuentes

If I want to buy a land with a loan at Land Bank, do I need to pay a deposit?

In general terms, if you want to buy a land for farming with a loan provided by Land Bank, you will have to pay a deposit. The amount of this deposit will vary according to your specific situation. However, if you ask for a loan to buy machinery, for instance, Land Bank will finance its whole amount if it’s new.

What are Land Bank Interest Rates?

Land Bank will be able to inform you about the interest rate they can offer you once they receive all your personal and financial information. The bank will run an affordability check on you and will look into your credit history to see if you are clear. The better your credit record, the lower interest rate you might get.

If I ask for a production loan at Standard Bank, how will I receive the money?

As it was explained in this article, you will need to have a business account at Standard Bank in order to be allowed to apply for their production loan. One of the reasons for this requirement is that the money of the loan you applied for will be deposited into that account.

How long does LandBank take to approve a loan to buy a farm, 6 months or more?

The time that LandBank takes to approve a loan to buy a farm will depend on several factors, for example, meeting all the qualifying criteria. The bank needs to analyse all the documentation to make a determination. If everything goes well, the time of approval can take less than 6 months. 

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