In the current agricultural economic environment, it is no surprise there are many challenges pertaining to qualifying for farm operating loans and loans on farmland. Farmland values are holding strong in many areas as well as interest rates for farm loans, which makes it harder to obtain a farm operating loan if you do have the capital to purchase farmland or already own farmland to use as collateral. This is how ARM is different; you do not need to have land to use as collateral for your farm operating loan. ARM utilizes crops, crop insurance, and government payments to secure our lines to farmers.
Why Traditional Farm Loans Are Hard to Get
On top of the farmland as collateral requirement that many other lenders have, there are also strict requirements for credit scores, balance sheet metrics, and historical profitability. ARM views the farm loan requirements differently and utilizes data beyond balance sheets and tax returns to approve operating loans. Farmers just building their balance sheets and can’t quite meet the requirements of other lenders can look to ARM to offer a solution. ARM can offer solutions to farmers with low credit scores, higher debt to asset ratios, and those with no real estate collateral.
How ARM Helps Farmers Secure Operating Loans
In the past many would look to USDA/FSA to secure operating lines if they did not have the real estate collateral needed to secure their line of credit. This of course is still an option, but there are limits to how much a farm operation can borrow, and as a farmer builds their acreage (rented or purchased) their need for operating funds increases. Those farmers who build their business model on renting farmland in lieu of purchasing, have been underserved and limited in their ability to grow, by their access to operating funds being limited. ARM can grow with farmers and increase operating loan amounts year over year to line up with the number of acres farmed, even with no real estate collateral.
No Real Estate Collateral
ARM underwrites the loan using the crop, crop insurance, and government payments as the collateral.
Bad Credit-Friendly
ARM looks at your farm holistically and assigns operating loan amounts based on projected crop revenue, not just credit scores.
Steps to get a Farm Operating Loan with ARM
- Assess Your Needs: Determine if you need an operating loan for daily expenses or a real estate loan for land purchase or improvements.
- Check Eligibility: Contact ARM to verify qualification based on crops and insurance.
- Explore Loan Options: ARM offers flexible terms for farm loan interest rates tailored to your situation.
- Find a Lender: Use ARM’s location finder to connect with lenders.
- Apply with Confidence: ARM’s process supports farmers rejected by traditional banks.
- Submit application.
Tips for Farmers with Bad Credit
- Work with ARM to set a budget
- ARM can help get accurate revenue projections to underwrite farm operating lines
- Discuss with ARM options to consolidate debts to help with payment issues and timing
How Different Farm Loans Use Collateral
- Equipment Loans: Equipment and down payment
- Real Estate Loans: Real Estate and down payment
- ARM’s Crop-Based Operating Lines: Crop, Crop Insurance, and Government Payments
Conclusion
In tough economic environments such as the one we are currently in, more and more farmers are being declined for operating loans. Farmers who were declined due to requirements related to balance sheet metrics, tax return data, credit score, and no real estate collateral can find a new opportunity with ARM. Contact ARM to learn more about our flexible lender model and product suite of solutions.
FAQs About Farm Operating Loans
- Can I get a farm operating loan with bad credit?
- Yes! ARM utilizes an underwriting process that is not reliant on a benchmark credit score.
- Do I need land to qualify for an ARM farm operating loan?
- No, you do not have to own farmland to receive a farm operating loan with ARM.
- What kind of crops does ARM finance?
- ARM finances a variety of crops that are insured by crop insurance. The majority of crops financed are those with revenue protection MPCI policies, but ARM can finance others. Reach out to the ARM location nearest you for more information on all crops financed in your area.
Disclaimer: The information provided in this publication is for educational and informational purposes only and does not constitute legal, financial, tax, or securities or investment advice. Nothing herein is a commitment to lend or a guarantee of credit approval. All financing is subject to standard credit and collateral underwriting criteria and may not be available in all states or for all applicants. Terms, conditions, and restrictions apply. The purchase of crop insurance through ARM or its affiliates is not required as a condition of credit approval. Information contained in this publication is subject to change without notice.