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Securing financing for a grain bin is a significant financial step. Thorough preparation and understanding of key factors will not only increase your chances of approval but also ensure the investment is sustainable for your farm.
The purchase price of the grain bin itself is only one part of the equation. A complete cost analysis is crucial to avoid unexpected expenses. For a typical 50,000-bushel steel bin, consider the following estimates:
Grain Bin Purchase Price: $30,000 - $60,000 (shell only)
Foundation and Site Preparation: $15,000 - $30,000 (concrete slab, excavation, drainage)
Installation Costs: $10,000 - $25,000 (labor for assembly)
Aeration, Fans, Heaters, and Other Accessories: $10,000 - $30,000 (critical for grain quality)
Electrical Work and Permits: $5,000 - $15,000 (power supply, wiring, necessary permits)
Insurance Costs: Varies, but factor in annual premiums for property and liability.
A fully installed and operational 50,000-bushel system could range from $150,000 to $250,000, while a 100,000-bushel system might be $250,000 to $400,000+. Always get detailed quotes for all components.
Lenders want to see a clear path to repayment. A well-structured business plan demonstrates your understanding of the investment and its potential financial impact.
Projected Grain Production and Storage Needs: Clearly outline your current and future production, justifying the size and number of bins you need.
Expected Revenue Increase from Improved Storage: Quantify how the bins will increase your income (e.g., "expecting to capture an additional $0.50/bushel on 50,000 bushels, leading to $25,000 annual revenue increase").
Cash Flow Projections to Support Repayment: Provide detailed projections showing how your farm's income will cover the new loan payments.
Lenders will scrutinize your financial standing. Being prepared means understanding what they look for.
Importance of a Strong Credit History: A good personal and business credit score (e.g., FICO score above 700) indicates responsible financial management and can lead to better interest rates.
Debt-to-Income Ratio: Lenders assess your existing debt relative to your income to ensure you're not overleveraged.
Net Worth and Liquidity: Your overall financial strength and access to readily available cash are key indicators of your ability to manage debt.
The interest rate and the length of the loan significantly impact your total cost and monthly payments.
Fixed vs. Variable Rates: Understand the trade-offs. A fixed rate offers stability, while a variable rate might start lower but carries the risk of increases.
Loan Duration and Monthly Payments: A longer loan term means lower monthly payments but more interest paid over the life of the loan. For example, a $150,000 loan at 7% over 7 years might have monthly payments around $2,270, while over 15 years, it might drop to $1,350, but the total interest paid would be significantly higher.
Prepayment Penalties: Check if the loan agreement includes penalties for paying off the loan early.
Most lenders will require a down payment, which reduces their risk and your overall loan amount.Down payments typically range from 10% to 30% of the total project cost. For a $200,000 project, this could mean an upfront payment of $20,000 to $60,000. Plan ahead by setting aside funds from previous harvests or other farm income.
Protecting your investment is non-negotiable. Grain bins are subject to weather events, fire, and other risks. Ensure your farm insurance policy covers the new grain bins for property damage and includes adequate liability coverage in case of accidents.
Securing financing for a new grain bin can be a major hurdle. However, FBN Finance can help. We offer competitive rates on land loans that can be used to fund on-farm grain storage. Our team is committed to helping farmers succeed. In fact, many of our finance experts have farming backgrounds, which allows us to provide practical financial solutions that fit your specific needs, whether it's an operating line or an equipment loan.
We've already helped farmers nationwide secure over $2.5 billion in financing, a testament to our proven expertise and dedication to supporting farm growth. Additionally, our application process is fast and completely online, so you can spend less time on paperwork and more time managing your farm.
Ready to get started? Apply today.
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Financing offered by FBN Finance, LLC and its lending partners. Terms and conditions apply. To qualify, a borrower must be a member of Farmer’s Business Network, Inc. and meet all underwriting requirements. Interest rates and fees will vary depending on your individual situation. Not all applicants will qualify. NMLS ID 1631119.