Agricultural loans should be well managed
Starting an agricultural business can be an expensive activity. Not everyone will have the required finances required to get a business off the ground. With a good plan of action and proposal, an agricultural loan can be sought to support the initial stages of the business as its finds it feet and starts earning profits.
Loans can be sought from microfinance institutions and from banks. Agricultural loans can finance business activities such as diary, poultry and piggery projects, bee keeping and food processing. Financiers structure loan periods and repayments based on the nature of the business and the season of the agricultural activity to be financed.
Centenary Bank for example offers the below when applying for an agricultural loan:
- Loan period for working capital purpose is up to a maximum 12 months but development / investment may exceed 12 months.
- No principal loan repayments during the grace period except for the interest.
- Repayable through equal installment payments whose amounts are dependent on the projected cash flow of the agricultural activity.
- Interest charged on reducing balance.
- Minimum loan amount UShs. 100,000
- Maximum loan amount is UShs. 15million.
The basic requirements to secure a loan from CentenaryBank include the below (Most banks will have similar requirements):
- Savings or Current account with the bank.
- Project undertaken must be an activity in the agricultural value chain.
- Business project must be profitable.
- Applicant must be resident within the branch designated area of operation.
- Applicant must be owner or tenant of the land on which he/she operates.
- Securities include land titles, unregistered land or moveable assets like cows, goats, sheep, household property or business equipment and tools.
- Application fee of UShs. 5,000
- Commitment fee of 2%.
- Completed agricultural loan application form.
Centenary Bank website: http://www.centenarybank.co.ug