Horse Farm Mortgage
Mortgages have served a lot of business and residential purposes. It can be regarded as a way of securing the loan agreement between the mortgagor (borrower) and mortgagee (lender). You might have already noticed that people who intend to grow and expand their businesses usually opt for infusion of outside capital into their endeavors. The same goes for the horse business. There is a lot of avenues to secure finance for your horse business. You may be surprised to discover that mortgage may be the best option for your business. The concept of horse farm mortgage will hereafter be discussed.
Why Horse Farm Mortgage?
A horse farm often referred to as an equestrian facility, is an area of land purposely created and maintained for breeding and training equids, especially horses. There are different sizes of equestrian facilities or horse farms, and these sizes are used to describe their uses. A typical (large) facility may have a barn, riding hall or stables, and also include commercial activities such as livery yard and boarding stable. For larger facilities, they are equipped with repair machines or a tack shop, a riding school, and employ the services of vets and farriers.
In all, managing a horse farm might require outside finance. Even if you want to keep a farm purely as a hobby, you will need to incur expenses in maintaining it. Either you want to maintain a horse farm for commercial purposes or you want to finance it, what’s certain is that you will need money.
Starting Your Horse Business
Having a horse farm and managing it can be eventful and tasking. The surprising thing is that most people who are ranchers do not know how lucrative the horse business can be. The horse business has two peculiar aspects. One is that it involves sports and the second is that it is a business. Getting benefits from it requires that you continually do great in both aspects. Also, setting the two aspects on a balance scale will ensure one does not overwhelm the other.
Ranchers should already know what it takes to run a horse farm. Operating an equestrian business involves a high-risk effort and a stable level of commitment. In order to record a successful business, horse farm owners must understand that it is more than keeping horses and training them. So, either you already are a rancher or just starting your equine business, you should be familiar with the following kind of farm organizations available in a horse farm business.
This is considered the most common of all horse farm ownership, especially in the United States. In this kind of business ownership, there is only one owner which is the original owner of the farm. The total right of control falls in the hands of the owner. He takes all the losses, liabilities as well as the profits. The distinct feature of this ownership is that there is no need for filling legal agreements to form any entity. The administration of the business falls on the owner alone.
This requires an arrangement between two or more persons. In this kind of business organization, the partners are equal administrators of the business. They are also equally responsible for decisions made. The administrators share the burden of control, losses, profits, and liabilities.
This kind of business organization involves large numbers of owners, usually known as shareholders. A constituted board of directors governs this arrangement. The directors assumed their positions through an election at the shareholders meeting.
All these business organizations have distinct characteristics which include the description of taxation, instance, and level of liability, the order of work, as well as the decision making processes. So, when you are making your horse business plan, consider what best works for you, how large you want to make your business and all other relevant factors that determine the success and otherwise failure of your horse business.
Financing Your Horse Business
If you want to start your horse farm business, you need to see it like any other small business. You will need start-up capital, which in some cases you may not have enough of. This is where outside funding comes in. It should be noted that there are many avenues to obtain finance for your horse farm. Most of them include direct or guaranteed loans.
Direct loans are loans that come directly from the provider. Guaranteed loans are loans which imply that the provider has received a warranty from another establishment that the other establishment will be liable for part of the loan in the instance that there is a default on the loan payment. Consider the following avenues which grant loans for horse farmers.
Some providers usually offer loans to horse farms. These loan providers offer specific loans to areas such as equipment purchase, farm improvement, and livestock. They also provide mortgage services for real estate purchases. Unlike traditional banks, you can meet farm credit providers to set up a payment structure.
The foremost body in this regard is the Farm Service Agency of the United States Department of Agriculture. They offer loans in several areas. For instance, Beginning Farmers and Ranchers Loan and Socially Disadvantaged Farmers and Ranchers Loan, as well as granting guaranteed and direct loans. FSA also give loans to people who could not obtain loans from more traditional banks.
- Small Business Administration (SBA)
The Small Business Administration (SBA) has formulated procedures and guidelines that make getting an SBA-sponsored loan much quicker and easier than it used to be. The body does not give loans but back granting loans. The SBA requires that you present a business idea with a plan and state the projections. Then the SBA will decide whether it will back you or not. Most times, however, they back loan applications requested for small businesses.
What to Consider Before Applying for Mortgage
As already established, adequate funding is a requirement in any establishment. Finance is one of the factors that determine whether you grow and flourish or close down. Funding is a determining factor that you must deal with, and sometimes, it is difficult and time-consuming to find adequate finance for your business.
Mortgage institutions are readily available to grant mortgage loans as long as you can furnish your part of the agreement. Your proposal will go a long way in hastening the approval of your mortgage application.
Choosing A mortgage
Before you apply for a horse farm mortgage, it is essential to note the four main components of any mortgage agreement.
This is the initial sum of the mortgage. The amount that you request from the loan company and that was given.
This is the amount added to the principal sum that is required to be paid with the principal over some time.
There are property taxes in any mortgage payment. This is usually based on the location of your property. After you have paid the principal and interest in full, you will need to pay your taxes.
Insurance is usually less than taxes. As a lifetime cost, it is payment for any unforeseen circumstance.
Understanding Mortgage Payment
The type of horse farm mortgage agreement you will take should be determined by how much you intend to pay as principal, interest, and insurance. It should be noted that the principles of all mortgages are the same. So, what may be the difference is the way you want your mortgage agreement to be structured. In all instances, two factors determine the length of payment and the amount you pay.
- Long Or Short Term Payment
This is the first consideration. It is important to decide which is the right term for you and how much you can afford. There is a popular rule in this regard that says, “the longer the term, the higher the interest rates.”
- Adjustable Or Fixed Interest Rates
Originally, there are three types of interest rates in mortgage: fixed, adjustable, and interest-only rates, but interest-only rates are quite rare as compared to the other two. A fixed interest rate offers stability in rate payment. For instance, if your mortgage is agreed to run for 30 years, you will pay at the same interest rate for the whole 30 years.
On the other hand, the adjustable interest rate is a variable mortgage rate that offers a low interest at the initial stage of the agreement, but changes after the initial rate interest period have elapsed. For example, in a 5/1 adjustable interest rate, the “1” implies how often the interest rate will be adjusted after the initial 5 years fixed interest rate is over.
Finally, for the interest-only mortgage rate, payment is initially lower during the first stage but increases during the final phase of the loan payment.
It is advisable not to go for adjustable and interest-only mortgage rates if you plan to own the horse farm for a more extended period or if there is every likelihood that interest rates might increase. This is because of the tendency of the rates to jump significantly after the initial stage of payment.
On a final note, horse farm mortgage will set you up on perfect financing as you will be able to execute the necessary plans required in your horse business. United Farm Mortgage offers a good recommendation in terms of setting horse farm owners on mortgage plans. If you are looking for secured loans and a convenient payment structure, you are sure to receive a total package when you do business with us.