Extending your finance on an existing hobby farm

Many traditional lenders such as banks and credit unions will not lend for larger properties such as larger hobby farms. This can be unfortunate if you get an opportunity to extend your farm, either through starting a varied income stream which requires investment in new agricultural equipment or buying additional fields and property from a neighbour.

Here are some of your options. 

Extend your home loan 

If you have held your home (primary residence) for a long time you may have a lot of existing equity in your home. You can see if you can extend your home loan in order to finance your planned expansion to your hobby farm. This is a relatively easy option in that it doesn't require justification against the way that you plan to spend the money. The interest rate is usually one of the lowest interest rates that you can access, which can help make repayments more affordable. 

Look at non-traditional lenders

It can be worth looking at non-traditional lending or lenders. This could include lending through finance companies or leasing agricultural equipment from the agricultural company. If you are looking to lend through one of the non-traditional lenders it is very important to have a business plan prepared showing how you will use the funds and your expected cashflows from this expansion. This can help to convince the lenders that you have a sensible purpose for the funds and that you are likely to be able to repay the loans. 

Another non-traditional option can be owner finance, where you agree to pay the seller installments over a period of time. This can often be a good option if you are buying a parcel of land from a neighbour who is looking to downsize. 

Look for commercial loans

If you are looking to expand your farm to the point it becomes profitable as an enterprise you may be able to apply for a commercial loan. This can be a good way to finance very large expansions or capital projects. Be sure to have your business plan prepared when you visit the bank or credit union to see whether you can get a loan. 

If you are looking to access finance to help expand your hobby farm it can be useful to think broadly and pursue a range of source for finance. Often a less traditional option will be the best option to get your dream expansion financed. 

About Me

A layman's guide to dealing with real estate agents?

Are you buying your first home? Is dealing with the brokers and agents seeming a little intimidating? You're not alone! Almost everyone finds this difficult the first time round. I've bought and sold a dozen properties over the course of my life, and along the way I've picked up some tricks for dealing with the people you need to help you out. I've started this blog to share my knowledge, and over the coming posts I'll be helping you to learn how to choose the right agent or broker, what you need to ask them and how best they can help you through the process.


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