Agricultural Lending: Which Bank is Best?

As a farmer, finding the right bank that caters to the agricultural industry is important to your success. Yet, not all banking options are created equal. The right lending institution should offer flexible options, an understanding of agriculture, and provide good customer service. How do you go about finding the right bank for you? We want you to make an informed decision, so here are a few of the options out there. 

 

Options for Agricultural Financing 

Farm Credit System - The Farm Credit System is a nationwide network of over 70 lending institutions that offer financial products and services to farmers, ranchers, and rural communities. They have been supporting agriculture for over a century, and the experience gained over the years has enabled them to understand the unique needs of farmers. They offer flexible financing options, including long-term and short-term real estate, operating, and equipment loans. Additionally, they provide affordable interest rates and customized loan packages that suit your specific needs. Because they only lend to farmers, they understand the industry well, but their underwriting guidelines are often stricter than you might find at other lending institutions. 

 

Community Banks - Community banks are an excellent option for farmers who want a more personal touch to their banking. These banks are locally owned and operated, and they generally understand the needs of their community and the agricultural industry in the region. Because of their size, they can offer more personalized services tailored to your needs. Community banks often have flexible lending options, including operating loans, equipment financing, and real estate loans. Community banks are a good option for the small or medium-sized operator, but for the large commercial grower they may not have the resources to manage all your business needs. 

 

National Banks - National banks can be great for farmers who want a wider range of financial services and have significant borrowing needs. However, some national banks don’t lend to agricultural operations due to the perceived risks of the industry – so be sure to do your homework. National banks are large and have a presence all over the country. Many offer various financial products and services, including agricultural loans, investment accounts, and financial planning to support your business. However, loan officers at national banks tend to be less knowledgeable about agriculture because they are not specialized and service all commercial loans. 

 

Credit Unions - Credit unions are not-for-profit, member-owned financial cooperatives. They offer a wide range of financial products and services at lower interest rates than traditional banks. Credit unions are local and focus on being very involved in their communities. They tend to specialize in the products and services they offer, so check if your credit union lends to farmers – many credit unions do not provide agricultural loans. Also, like community banks, credit unions are better suited to the small farmer than the large grower. They may not have the lending capacity to meet the needs of the large operator. 

 

Digital Lenders in Agriculture - Digital or online lenders like Bankbarn are a new entrant into the agricultural lending space. They offer quick and easy online applications and approvals, making it easier for farmers to access financing. Online lenders offer flexible lending options, including short-term loans, lines of credit, and agricultural loans. They also provide competitive interest rates and fast funding. However, it’s important to do your due diligence when dealing with online lenders. Ensure that the lender is reputable and that you are comfortable with their loan terms and conditions.

 

As a farmer, choosing the right bank for your agricultural needs can significantly impact your financial well-being. Whether you choose a larger national bank, a community bank, a credit union, Farm Credit System, or a digital lender, it’s important to assess your needs, set your goals, and find a lender who understands your needs. Doing so allows you to access flexible and affordable financing options that will help you grow your farm and improve your bottom line

Ready for the next step? Check out this article on 5 Tips to Prepare for a Meeting with Your Ag Lender.

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Financing Options for the Beginning Farmer

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Why Young and Beginning Farmers Are Underbanked and What We Can Do About It