Banks ignore us as individual farmers. We heard an FPO can borrow more easily and there is some guarantee. How does it really work and what does the bank ask for?
An FPO borrows as a company, which opens doors an individual small farmer does not have. The usual route: 1) The FPO builds a track record, audited accounts, GST returns, and a clear business with cash flow. 2) You prepare a proposal, a working capital loan for buying produce or inputs, or a term loan for an asset like a godown or sorting unit. 3) You approach a bank, and there is a credit guarantee facility for FPOs that covers a large share of the loan, so banks can lend without demanding heavy collateral. This guarantee is real and is meant exactly to fix the no collateral problem; the FPO pays a guarantee fee. The bank will still check your management quality, business plan and repayment ability, so a clean balance sheet and a competent CEO matter a lot. NABARD, NCDC and some NBFCs also lend to FPOs. Start with a small working capital limit, repay it cleanly, and your limit grows. Confirm the current credit guarantee cover percentage and eligibility on the SFAC/NABARD official portal.
We got a small cash credit limit after our first audited year. Repaid on time, next year they doubled it. Clean books are everything.
The guarantee really did help, the bank did not ask us to mortgage land. But they grilled our CEO on the business plan hard. Be ready for that.
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