Figuring out financing is one of the big challenges every new indoor farmer faces. Like death and taxes, its nearly inevitable. According to research from software provider Artemis, indoor farmers’ greatest challenge is finding funding.
Contain’s mission is to change that, and in their work using tech to better connect growers to vendors and lenders, they always get the same question: how do you up your odds of securing equipment leases?
Contain put together this guide to help anyone considering working with Contain up their odds of funding. They hope it helps demystify the funding process in general, too.
1. Where are you based?
We work with growers across the U.S. and Canada, but our best lender coverage is in the lower 48.
2. How long have you been farming?
We work with lots of startup farms. They’re great. But those with at least a two-year history of operations are more appealing to lenders. They’re viewed as a safer bet. Occasionally, lenders are willing to consider the track record of a different kind of business as you finance your farm.
3. Is your farm profitable?
Naturally, lenders prefer to work with profitable farms. That said, they also understand that increasing a farm’s scale will transform its economics, too. Don’t count yourself out if you’re still building towards the black.
4. What lease size are you looking for?
For a startup farm, we’ve found that it’s best to start small, sell out your produce and then scale to meet your customers’ demand. A common mistake we see is new growers trying to launch with a large setup, more than $1 million in equipment. Lenders rarely back farms like this at the get-go.
5. How much deposit will you put down?
Lenders generally want at least 20% down, and up to 50%. Of course, higher deposits often mean lower interest rates and, generally, better funding odds.
6. Do you have other collateral?
Lenders like to see other collateral for the lease, such as land or an existing property—especially if you’re a new grower. It’s not always necessary, but it definitely helps.
7. Do you have agreements with customers?
We know that most farmers sell produce without a prior written agreement but — at least where it makes sense for your business — lenders always appreciate letters of intent, or even letters of support from customers. No bank has ever been mad because it got too many documents vouching for you.
8. How does your credit look?
A good credit rating with no recent bankruptcies usually translates into better leasing offers.
Want to calculate your own odds of finding lease funding? Take the quiz here.
For more information:
Contain
www.contain.ag