Agricultural Lending

By:
Ray Thieman
Prairie Ridge
Buffalo
719-775-8742
Sources of Ag Financing
There are four basic
sources of Agricultural
financing.
• Private Financing
• Commercial Lending
• Farm Credit System
• Farm Service Agency
 Private financing
• If available this can be your best option as it will
allow for more flexibility and less restrictions.
One of the key issues in obtaining financing for
buffalo is finding a lender that is familiar and
comfortable with buffalo as collateral. In private
financing you only have to convince yourself or
usually a friend or relative that your proposal is
sound and secure enough to invest. This can
also be less restrictive. This can be a good
source of financing in conjunction with other
commercial financing providing the much
needed collateral position they will require.
 Commercial Lending
• This would include banks, credit unions, credit cards etc.
Banks would be the most common source of credit to the
Ag sector. The first bank to contact is always your own
bank. They will know you the best and are more likely to
help if you have a history with them. The problem is that
more and more banks are moving away from Ag lending.
You may have to go out of your area to find a bank that
would do Ag financing. When applying for a loan you
need to have done your homework. When you present a
plan to your bank have it supported with realist
projections including a solid marketing plan. The first
impression will be the lasting one. If you are shooting in
the dark it will be apparent and your success unlikely.
 Farm Credit System
• This would be the Federal Land Bank or
Production Credit System. They are found in all
rural areas and are exclusively involved in Ag
Credit. They are not part of the government
although there is some oversight They are
producer owned so can provide better rates and
terms on real estate loans and have a complete
portfolio of real estate and operating type loans.
With their total involvement being in Ag lending
they will have a good understanding of what you
want to accomplish.
 Farm Service Agency
• This is an agency of the U.S. Government that provides
assistance and support to farmers. Within FSA there will
be the farm loan department and they will have
representation in each county throughout the U.S. They
are able to make direct loans to farmers or work with a
commercial lender in providing guaranteed loans. This
will allow lenders to make loans that they are not
completely comfortable with due to risk or uncertainty
since the loan is backed by FSA. The major advantage
to FSA is that they can make loan with little or no equity
and are designed to help new farmers and ranchers get
into the business of Agriculture. The drawbacks are that
you must meet certain eligibility requirements and they
have limited funding.
 Summary
• When developing
your operating
plan, be creative in
your approach to
obtaining financing.
Look at the
possibility of using
more than one
source to provide
the best plan.
• In my own operation I use all of the mentioned sources,
except for FSA, since I would not meet their eligibility
requirements.
• I have my real estate with Farm Credit and my Operating
with a local commercial lender.
• I use balance transfers on credit cards to lower my
overall interest rate, and utilize funds from my parents to
improve my equity position and provide them with a
better return on their money. Note: If you use balance
transfers on credit cards be sure and keep enough room
on your line of credit to pay them off. Their rates are
subject to increase and the new rates can put them at a
disadvantage. They should only be used to lower interest
rates not as a source of credit.
 Be
Creative,
Adventurous
and
Persistent
in researching all
financial possibilities.