Farmers are exposed to a multitude of factors that can place stress on their finances. Farmers know that they can’t necessarily count on a future harvest as money in the bank – while they may have made a big profit one year, they may struggle to match this with their next harvest. Because they’ll still have to meet a lot of expenses even if they have a poor year, farmers need to keep enough money on hand to pay wages and invest in more seed and livestock, but this prevents them from investing in expanding their farm. Money tied down to protect against a bad year is money that could be spent on new equipment, new land and other income-generating investments.
This is why agricultural finance can be such a useful tool for farmers: it reduces their obligation to keep cash on hand “just in case”, and lets them invest profits as and when they wish. Because farmers are able to source the finances they need from specialist lenders they no longer have to be exceptionally cautious in their spending, and can afford to take on opportunities that they might otherwise need to forego.