Red Flags in Farm Financing Explained
Your relationship with your ag lender should make your life easier, not add another layer of stress to your operation. But for many producers, the connection with their lender doesn’t evolve with the operation. If you’re not hearing back or if your terms don’t line up with how your season runs, it’s worth a second look.
Your ag lender should provide more than funds. They need to know how your farm works and how to support it through the ups and downs. If that’s not happening, here are the signs it may be time to reevaluate your lending relationship.
Your Ag Lender Doesn’t Understand Your Operation
If your lender doesn’t ask the right question, or worse, treats you like any other commercial borrower, it’s a sign they may not be the right fit. If they’re not asking how you structure your cash flow, how input cost inflation is affecting your margins, or how your equipment and improvement investments align with your production goals, that’s a concern. An ag lender’s ability to support you depends on their grasp of the operational realities you face.
A common issue borrowers face is a basic lack of understanding between lender and borrower. Agricultural businesses don’t run on the same timelines as traditional small businesses. They run on seasonal cycles; and weather, input costs, and commodity markets shift constantly.
Questions to Ask Your Ag Lender:
- Do you factor seasonal income patterns when setting up loan terms?
- How do you handle loan risk when weather or markets hit hard?
- How do you assess the financial health of my operation?
When The Loan Doesn’t Fit the Farm
If your repayment schedule feels like it was designed in a vacuum, ignoring when your cash actually comes in, that’s a problem worth fixing. Look for a lender who actually gets how your farm runs and sets up loan terms that work with it, not against it.
That might mean setting payments around harvest, going interest-only when margins are tight, or refinancing to keep cash flowing. Because when the weather shifts or prices dip, stiff terms can turn a small problem into a bigger one.
Questions to Ask Your Ag Lender:
- Can we line up payments with when income actually comes in, like after harvest?
- If weather or markets throw a wrench in things, is there room to adjust the loan terms?
Silence Is Not Support
A supportive ag lender checks in more than once a year, not just when it’s time to sign papers. Generic service, long delays in communication, or vague answers to concerns can erode trust quickly. Good lending partners communicate openly and check in when the ag economy shifts. They follow up on documents or rate changes regularly. And they respond promptly when you need to make a time-sensitive decision. If that kind of interaction is missing, you may be left managing unnecessary uncertainty.
Questions to Ask Your Ag Lender:
- Do you check in with your clients regularly, or is it mostly up to me to reach out?
- If I have an urgent question, how quickly can I usually expect to hear back?
Fees Without Clarity
Every borrower expects to pay interest and certain administrative costs, but hidden or unexplained fees are another warning sign. From the initial conversation to your monthly statements, you should know exactly what you’re paying for and why. Transparency from your ag lender is everything.
Questions to Ask Your Ag Lender:
- Can you walk me through the loan fees?
- How and when would I be notified if there’s ever a change in fees or loan terms?
- Are there prepayment penalties or extra service charges?
Little or No Strategic Insight
There’s a big difference between someone who provides you with a loan and someone who understands how to use it to grow your business. A lender who only talks about your current debt load, but never about your future plans, risk exposure, or capital needs may be missing the bigger picture.
Your ag lender should be helping you explore financing options that align with the direction you’re taking your operation, not just approving transactions. Whether you’re looking to restructure your current debt, invest in more efficient equipment, or prepare for succession planning, your financial partner should be offering real perspective, especially in a high-inflation environment.
Questions to Ask Your Ag Lender:
- When you work with producers, how do you help them plan for the long run, not just the next season?
- If I’m thinking about refinancing or taking on new debt, will you help figure out the right timing based on where I want to take the operation?
- Do you work with clients on bigger-picture moves, like land purchases, equipment upgrades, or passing the farm to the next generation?
Know What to Ask Before You Sign
A lender who asks the right questions, knows your business model, and is ready to adjust alongside you isn’t just a service provider, they’re part of your strategy. If you’ve spotted some of these signs in your own lending relationship, you’re not alone, and you’re not out of options. There are ag lenders out there, like the team at Conterra, who specialize in agricultural finance and take a relationship-driven approach.
Farming is complicated. Your financing should meet you there, not fall short. If your lender isn’t helping you adapt, optimize, and plan with confidence, it may be time to find someone who will. The difference between surviving a tight season and setting yourself up for long-term growth often comes down to who’s on your team. Make sure your ag lender is one of them.
📌 If your current lender isn’t offering the insight or flexibility your farm needs, it may be time for a fresh perspective. Give your a Conterra Relationship Manager a call; we’ll sit down, talk through your numbers, and see what a smarter lending approach can do for your farm.
Conterra offers agricultural financing designed around the real-world needs of farmers and ranchers. Our local relationship managers bring regional insight and personalized support to producers across the country. Whether you’re growing your land base or refinancing existing debt, we tailor solutions to your goals. We’re committed to financing agriculture from a different perspective.
Disclaimer: Please note that the information provided in this article is for educational and informational purposes only, and should not be construed as financial or investment advice. While we have made every effort to ensure the accuracy and reliability of the information presented, Conterra Ag Capital and its affiliates make no representation or warranty as to the completeness, correctness, timeliness, suitability, or validity of any information contained in this article. You should always consult a qualified financial advisor, tax professional, or other qualified professional for advice on your specific financial situation.
