What financiers look for in a farming business plan

A business plan is often treated as a document farmers compile because a bank requires it. According to farmer and businessman Tshedi Molatedi, that approach misses the point entirely.

By Talitha Janse van Vuuren, multimedia editor at African Farming

Having spent more than a decade preparing business plans and navigating funding applications himself, Tshedi Molatedi says a business plan should demonstrate far more than financial need. It should convince a financier that the applicant understands the business, has identified the risks and has assembled the right people to make the venture work.

“I’ve been dealing with business plans for the past 12 years,” he said. “I’ve always wanted to be in business, but what I didn’t know was that it comes with so much responsibility because you’re taking decisions on behalf of so many families.”

Drawing on his own experience of acquiring a commercial farming operation, Molatedi unpacked the elements every financier wants to see before approving an agricultural loan.

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Start with an executive summary

The executive summary is one of the most important sections of a business plan because it is often the first thing a lender reads.

“This part is very important,” Molatedi said, “because someone who doesn’t have time to go through the entire document must be able to understand what the business is about, who the people involved are, what the risks are and what kind of funding is being requested.”

A concise overview gives decision-makers enough information to decide whether to continue reading the proposal.

Rather than filling the section with unnecessary detail, applicants should summarise the business, the opportunity, the management team and the funding request clearly and professionally.

Clearly identify the legal entity

Applicants often overlook administrative details that financiers consider essential.

“The legal entities that are involved are important,” Molatedi said. “State the company registration number. If it’s a trust, say it’s a trust. If there are shareholders, identify them.”

Funders need complete clarity about who owns the business and who will ultimately be responsible for the loan. The same applies to directors and trustees. “It is important for the financier to understand which entities are applying for the money and who the directors behind those entities are.”

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Sell the strength of your management team

This is one section of a business plan where applicants should not be modest, Molatedi believes. “This is where you tell them about the skills you have.”

If a commercial mentor or technical partner is involved in the business, include this information. “If you’ve partnered with an established commercial farmer, tell them your partner has been in the business for 30 years and manages several farms.”

He encouraged applicants to highlight every relevant qualification and achievement that strengthens the business. “The more you explain, the easier it is for the financier to see that this business has people with the necessary skills to make it successful.”

Back your proposal with production history

A business plan should not rely on ambition alone. Where production records are available, they should be included. “If you’re applying to acquire a farm, tell the financier how productive the land is,” Molatedi said. “Share the production figures if you have them, because those numbers form the basis of your financial forecasts.”

Historical production data demonstrates that the projections in the business plan are based on evidence rather than guesswork. If previous production records are unavailable, applicants should explain how they arrived at their assumptions.

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Explain how the business will make money

Another section that deserves careful attention is the marketing plan.

“It doesn’t help to produce a quality product if you don’t have customers to sell it to,” Molatedi said. Financiers want to understand exactly where produce will be sold and how income will be generated.

In Molatedi’s own case, working with an established marketing partner formed part of the strategy. By demonstrating existing relationships with buyers, packhouses or processors, applicants reduce uncertainty for lenders. The clearer the route to market, the lower the perceived risk.

Photo for illustrative purposes: ullstein bild/Getty Images

Support every financial request

When applying for finance, every major expense should be justified. “If you’re applying for equipment, get quotations,” Molatedi advised.

Supplier quotations allows financiers to verify costs and assess whether the requested funding matches the intended investment. It also speeds up the assessment process because financiers are less likely to request additional information later.

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Don’t hide the risks

Perhaps the most valuable advice Molatedi offered was about risk.

Many applicants focus entirely on the strengths of their businesses, believing that acknowledging weaknesses will reduce their chances of success.

“Business is a game of managing risk,” he said. “There is no business that exists without some level of risk.”

Instead of pretending those risks do not exist, applicants should identify them honestly. “This is where you need to spend time thinking about what could cause your business to go backwards.”

Weather events, volatile input prices, labour shortages, pests, disease outbreaks, market fluctuations and cash-flow pressures all deserve consideration.

More importantly, every identified risk should be accompanied by a practical strategy explaining how it will be managed.

“It doesn’t help if your model shows brilliant profits but you don’t have risk management.” For financiers, recognising risks demonstrates maturity rather than weakness. “The moment the financier sees that you’ve identified your risks and thought about how you’re going to manage them, they understand that you have a solid understanding of what business is all about.”

Complete the SWOT analysis

Molatedi encouraged applicants to include a realistic SWOT analysis – a planning tool that helps assess a business by identifying its Strengths, Weaknesses, Opportunities and Threats.

Strengths should include management experience, technical skills, partnerships and any financial contribution from shareholders.

“If you have equity on the table or you’ve put cash into the business, that’s something the financier wants to see,” he said. He believes applicants who invest their own money demonstrate commitment. “Most people want funding, but they’re not willing to fund their own businesses. So why should the financier risk their capital if you’re not willing to risk yours?”

The opportunities section should extend beyond the immediate project. Financiers want to know whether the business has room to grow over the next decade rather than simply survive the next production season.

Applicants should acknowledge genuine threats. Global events, changing input costs and climate uncertainty all affect agricultural businesses. Recognising these realities strengthens the credibility of the plan.

Present yourself professionally

A strong business plan does not end with the document itself. If applicants are invited to present their proposal, professionalism matters, Molatedi said. Professionalism, confidence and preparation all contribute to the impression applicants make on lenders.

He encouraged farmers to know their businesses thoroughly rather than relying on commercial partners to answer technical questions. “You need to be the one telling them about your business. If the commercial partner is doing all the talking, they’ll wonder whether you really understand your own business.”