Smart Fast-Funding Strategies: A Guide to Short-Term Financing for Agribusinesses

For farms and agribusinesses, the need for short-term financing can result from a range of time-sensitive circumstances–to get a new business off the ground, to purchase or repair a key piece of equipment, or to leverage opportunities during planting or harvest seasons, for example. Knowing your short-term financing options in advance can help you choose a solution that solves an urgent need while enabling you to create a smart payoff or refinance strategy.

This guide includes the pros and cons of common types of short-term financing used for farm loans (often called “ag loans”), tips for refinancing, and ways to strengthen your cash flow to prevent common challenges.

What is short-term financing?

Short-term financing is borrowed funding with a quick repayment period—usually from several months up to a year. It can help you overcome temporary cash flow challenges, cover unplanned expenses, or even help you leverage limited-time opportunities, such as purchasing equipment or inventory that rarely goes on sale. In addition, for many start-up businesses or those with limited credit history, short-term financing is often the only option.

Most types of short-term financing have higher interest rates, so a payoff or refinancing plan is key when using this as part of your financial strategy.

Common reasons agribusinesses use short-term financing

Anytime your agribusiness’s revenue is slow to come in and/or it falls below projections, you may need short-term financing to get you through:

• Your farm or agribusiness is in a prolonged seasonal slowdown and you need financing to cover payroll and other ongoing expenses.

• You have unexpected expenses such as an equipment breakdown or an urgent repair.

• You've received notification of a grant award but need to complete the work before getting paid, so you need a short-term bridge loan.

  
  

The need for short-term farm loans is common when you're starting out, but even businesses in operation for generations sometimes use it to overcome cash flow gaps.

Common types of short-term financing

Whether you need a few hundred dollars for a new laptop, tens of thousands of dollars to replace a key piece of equipment, or something in between, there’s likely a short-term financing solution for you.

Here are the most common types to consider:

• Lines of credit: A line of credit is like a mix between a credit card and a loan. With a line of credit, you only pay interest on the amount you use, not on the full line (unless you use your limit); as you pay down the balance each month, your available credit increases again. Lines of credit tend to allow for flexible uses, too. Credit scores play a big role in approvals and interest rates, so keep an eye on your credit health before applying.

• Credit cards: Many agribusinesses start with credit cards because they’re the easiest form of credit to secure. While they often have high interest rates, some offer special deals with zero-percent interest for 6-12 months, which can work well if you have a solid plan to either pay off the balance quickly or switch to a different type of financing before the regular rates kick in.

• Short-term loans: These are loans in which you borrow a fixed amount and pay it back on a set schedule, usually within a few months and up to a year.

• Merchant cash advances: This option gives you money upfront based on your future sales or outstanding invoices. The lender takes a percentage of your credit card and/or debit sales until the advance is paid off. While this can be helpful, remember that it will affect your daily cash flow.

Your commercial bank is a good place to start when you need short-term financing. They may offer some or all of these options and can help you understand what's best for your situation. In addition, some community development financial institutions (CDFIs), like HVADC, offer bridge loans that provide short-term financing to help when you need fast financing to fulfill the terms of an agricultural grant award.

Pros and cons of short-term farm loans

Fast funding options like the options presented here can be lifesavers when urgent needs arise, but as with any type of financing, there can be drawbacks along with the benefits. Here are pros and cons of short-term financing to help you figure out the best path for your business.

Pros:

• Quick access to funds: Several types of short-term financing offer quick applications, approvals, and cash in times of immediate need.

• Flexible uses: Most short-term financing has flexible uses and can help you cover equipment replacement, cash shortfalls for payroll, and more.

• Short-term commitment: Short-term financing is paid back quickly, which means you can get your debt behind you as long as you keep up with the payments.

• Build a strong credit history: When you repay short-term debt as agreed, it can help you build a stronger credit history for you and your business.

Cons:

• Higher interest rates: Short-term loans and credit cards often have higher interest rates, especially if your credit score or history isn’t great.

• Risk of continued cash flow issues: If short-term financing isn’t managed carefully, it can lead to an ongoing cycle of debt and cash flow problems.

• Repayment pressure: The quick repayment timeline can make it harder for businesses with unpredictable cash flow to meet deadlines, which adds to existing business and financial challenges.

Also, not all types of short-term financing work for all needs. For example, while you can purchase equipment or inventory with a credit card, you may not be able to cover payroll with it (unless a very costly cash advance option is available to you).

Key considerations for fast funding

Short-term financing should be just one part of your overall financing strategy. If you rely on it too often or too heavily without a longer-term plan, it can quickly become difficult to manage. Here are key considerations:

• Understand your business’s cash flow: Review your business’s financial statements and assess whether you can afford the repayment you’ll need to make.

• Find the best terms. A longer repayment term usually makes it easier to budget and repay fast funding. Also, try to match the payment schedule to your cash flow patterns. If you sell at farmers' markets every weekend, weekly payments could work. If you rely on seasonal crop sales, monthly payments during your selling season might be better.

• Evaluate the total cost: Ask lenders about the annual percentage rate (APR), which includes additional costs such as application fees, origination fees, processing fees, prepayment penalties, and late-payment fees. When possible, compare rates from multiple lenders to find potential savings.

• Have an exit plan. Because short-term debt often has higher interest rates or may come with repayment terms that can stress your cash flow further, it’s important to have a plan to put high-cost debt behind you.



Pay off short-term financing: You can pay off the debt, as agreed, until it's paid in full. If your cash flow allows, you may also choose to pay it off early–before you do that, though, check to see if your financing agreement includes any prepayment penalty. If so, you may be better off making payments for the full term (until it’s paid off) and, in the meantime, you can use any extra funds you’d have used to pay off the financing early to begin building an emergency fund instead.



Refinance to a longer-term loan: If your current short-term financing includes a brief repayment time frame and a high interest rate, that can cause a lot of cash flow strain for your business and a lot of emotional stress for you. If you refinance to a three- or five-year loan with a lower interest rate instead, you can reduce the amount of your monthly payment, which can make it easier financially and emotionally. 



To get the best loan offers, you may need to improve your credit score and/or strengthen your relationship with your bank or an agribusiness lender, so it’s a good idea to begin having conversations with potential lenders as soon as you think you may need to refinance high-cost debt. Through the Agribusiness Loan Fund, for example, HVADC has ag loans that can help ease cash flow challenges and position your farm or agribusiness for success.

Additional tips

Although most small businesses have a need for fast funding from time to time, to help you avoid the kinds of situations that lead to unwise financing decisions, here are some proven tips:

• Keep a “safety net” amount in your account. Keeping a minimum-balance amount of cash in your business bank account at all times can help you avoid overdraft fees and give you peace of mind. For many agricultural businesses, this might be equal to 1-2 months of basic operating expenses.

• Watch your accounts receivable (AR). The sooner you send invoices, the sooner you get paid. Consider using accounting software that can automatically send invoices and payment reminders to help you stay on top of accounts receivable.

• Don't pay vendors early just to "get it done." If suppliers offer 30-day or 60-day payment terms, use them. This isn't about delaying payments—it’s about managing cash flow wisely.

• Document your regular and seasonal cash needs. This helps you find the income gaps and make a plan to cover them before they hit. For example, you might need extra cash for planting season months before harvest income arrives.

• Check and monitor your current credit score. Your credit score affects your financing options and rates. Check your score regularly (many credit card companies offer free monitoring) and work to improve it. A better score can save on interest charges.

By following these guidelines, you can use short-term financing to help your agricultural business thrive.

Make short-term financing work for your business

Short-term financing can be a helpful tool for your agricultural business when used wisely. The keys are to understand your options, choose wisely, and have a solid repayment or refinance plan.

Also, as part of your longer-term financial strategy, build strong relationships with your bank, vendors, and agribusiness lenders in your area. Agribusiness lenders, like HVADC, offer more than just loans—we have business advisors who can help you make smarter financial decisions.

Don't hesitate to ask for advice, especially if your business is new or isn't performing as expected. To learn how we can help, contact us today.