The length of the loan term can vary and can range from as little as one month or as much as 30 years, depending on the loan program and rate selected. In general, loan terms can be broken down into three categories, short, intermediate and long term. Short (less than 18 months), intermediate (18 months to 10 years) or long term loan repayments (up to 30 years in special cases).
Good financial management dictates that loan terms correspond to the life of the operation or asset being financed. For example, seed, fertilizer and other agricultural operating expenses are “used up” with the crop being grown. Loans for this purpose should be paid when the crop is sold.
On the other hand, loans for items that have a very long life, farm real estate, for example, are suited to longer terms, up to 30 years in some cases.
Short-term Operating Loans
Short-term loans are intended to cover operating expenses and are financed for up to one year. Typical uses for these loans might be:
- Labor, seed, fertilizer, chemicals, equipment repairs, and custom work
- Feed, electricity and veterinary costs
- Other general operating costs
- Family living expenses, including college costs
The interest rates for these loans are competitive. The interest rate options include fixed rates, and variable rates (indexed to LIBOR).
Intermediate-term Loans
Intermediate-term loans are for amortization terms of 1 to 10 years.
Typical uses for these loans might be:
- Real estate purchase
- Machinery and equipment purchases
- Livestock purchase
- Refinancing of short-term debts
- Vehicles purchase or refinance
The interest rates for these loans are competitive. The interest rate options include fixed rates, balloon rates, adjustable rates (1, 3 or 5 year), and variable rates (indexed to LIBOR).
Long-term Loans
Long-term loans are for amortization terms up to 20 years. Typical uses for these loans might be:
- Real estate purchase
- Refinancing short- and intermediate-term indebtedness
- Dwelling and facilities construction
- Farm improvements
- Orchard Establishment/Replanting
- Nursery/Greenhouse Facilities
The interest rates for these loans are competitive. The interest rate options include fixed rates, balloon rates, adjustable rates (1, 3 or 5 year), and variable rates (indexed to Prime or LIBOR).
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