You can get a loan for mushroom farming by going through a traditional institution to get a personal loan, or by getting a farming loan from an institution like the USDA.
Do you want to start a mushroom farm, but don’t have enough cash upfront to get it off its feet? Learn all about loans for mushroom farming by reading this guide!
How much does it cost to start a mushroom farm?
The cost of your mushroom farm can widely vary depending on how big of an operation you want to have. It can range anywhere from $3,000 to $100,000.
While those might seem like big numbers, they’re actually low compared to other crops.
The main cost in mushroom farming is getting the correct space. You will need a building that has concrete floors where you’ll be able to implement good ventilation as well as temperature control.
You’ll also need outdoor space, preferably concrete.
How large is the mushroom farming industry?
Markets and Markets states that the mushroom industry was $16.7 billion in the year 2020 and will likely grow to $20.4 billion by the year 2025.
The industry is expected to grow because health consciousness is rising, and people are catching onto the many health benefits of mushrooms.
Oyster and shiitake mushrooms are particularly popular, and luckily easy to grow.
Button mushrooms are expected to be the most bought mushroom because of their health benefits.
More exotic mushrooms are also expected to start taking up more space in the market as people learn more about their medicinal health benefits.
What kind of loans can I get for mushroom farming?
You have two main options to get a loan for mushroom farming: a personal loan through a traditional bank, credit union, or online lender- or a loan through a farm-specific institution such as Farm Credit or the USDA, which finance agricultural operations anywhere from small to large.
What is a farm loan?
Farm loans help farmers start, expand, or maintain their family farms. Through the USDA, they have very low interest rates.
Operating loans can be used to purchase seeds and equipment. They also cover the cost of farm operations and family expenses while the farm gets on its feet.
Farm ownership loans can be used to expand or purchase a farm. You can use them to construct buildings and pay closing costs.
Microloans are designed for small and beginning farmers, or for specialty operations. This is probably the best type of farm loan for beginner mushroom farmers.
What is a personal loan?
A personal loan is money that you borrow from a credit union, bank, or online lender that you pay back in fixed monthly payments, usually with lending terms between two to seven years.
Unsecured personal loans require no collateral. Secured personal loans require collateral.
Lenders will decide whether or not to give you a loan based on things like your free cash flow, debt-to-income ratio, credit history, and credit score.
If you have a low credit score, finding a co-signer will help you get more favorable terms.
How do I get a loan?
There are 8 steps to getting a loan.
- Run the numbers. Figure out how much you can afford to pay each month. You can use personal loan calculators to help you with this.
- Check your credit score. Your APR and lending term will be dependent on your score.
- Consider your options. You might need a co-signer if your credit is not great. If you have bad credit, online lenders or credit unions might be better options than a traditional bank.
- Choose your loan type.
- Shop around for the best rates. Pre-qualify for loans and see what your options are.
- Pick a lender and apply.
- Provide your required documents.
- Start paying your loan.
What factors go into my credit score?
There are five factors that determine your credit score. Each factor is a different percentage of your score.
30% of your credit score is your amounts owed, or how much debt you have.
10% is new credit, such as if you just got a new credit card.
15% is your length of credit history, or how long you’ve had credit.
10% is your credit mix, or how many things are factoring into your credit score (loans, bills, cards, etc.)
35% of your score is your payment history, or how well you’ve paid off credit in the past.
What is a loan term?
Quicken Loans defines loan terms as how long it takes to pay off a loan completely when the borrower makes regular scheduled payments.
The longer your loan term is, the cheaper your payments will be. However, you will be paying more interest over time.
If you have a short loan term your payments will be higher, but in the long run you won’t be paying as much interest.
What is APR?
APR stands for Annual Percentage Rate.
The Consumer Financial Protection Bureau defines it as how much you pay to borrow money.
Your APR is your interest rate plus other costs like insurance, closing costs, and lender fees.
An interest rate is a percentage of the amount that was loaned that you have to pay back on top of the original money you took out.
You want to find an APR that is as low as possible. The lower your APR, the lower your monthly payments will be. You will find better APR’s if you have better credit.
How do I choose the best loan?
The best loan is one that you can afford, meets your needs, and has the most favorable terms out of all the loans you’ve looked at.
Shop around for a low APR because because that means you will be paying less extra money while paying back your loan.
Find a lending term that works for you. You don’t want to be paying off your loan forever, but you also want monthly payments that are manageable.
Lastly, decide between a personal loan and a farming loan.
Hi, I’m John Stephens, chief editor and writer for Totalgardener.com. I’ve been gardening and raising animals for over 15 years starting with a small backyard plot in Northern Virginia where I grew corn, potatoes, squash, and using a high mulch technique called the Ruth Stout Method. I also raised ducks and small mammals for meat and eggs in a movable pen similar to the ones used by Joel Salatin. I later moved to Colorado where I experimented with growing greens using aquaponics inside. I eventually added a microgreens setup and home sprouting operation. I’m excited to share everything I’ve learned plus more from the other local gardening and animal raising experts I know.