Borrowing is not bad.
Borrowing without knowing the price is bad.
Ask one question
Will this money bring me more than it costs?
Money that buys fertiliser, and the fertiliser brings more harvest than the loan costs — that money paid for itself.
Money that pays for a funeral, a phone, or last month’s gap does not bring anything back. You must still pay it, out of a harvest that is now smaller.
Sometimes you must borrow for those things. Just be honest with yourself about which one you are doing.
Compare offers the same way
Lenders describe their price in different ways. Put every offer in the same shape:
How much do I pay back all together? And in how many months?
“Five percent” means nothing on its own. Five percent of what? For how long?
Five percent every month is much more costly than fifteen percent in a year — even though the number sounds smaller.
The loan that does not look like a loan
A buyer gives you 100,000 francs today. In three months you give him your crop. The crop is worth 150,000 francs. He keeps all of it.
That is not a gift. That is a loan.
It cost you 50,000 francs in three months. That is 50 francs on every 100, in only three months.
Almost no bank or microfinance is that costly.
This is the most expensive money most farmers ever take. It is expensive because nobody calls it a loan and nobody says a rate.
When a buyer offers money before harvest, work out what you will give up at harvest. Then compare.
Before you agree
- How much do I pay back all together?
- In how many months?
- What if the harvest is poor? Can the time change, or do I lose my land?
- Can I wait one season and buy it with the farm’s own money?
That last question has saved many farms.