Producers who need farm loans have a variety of options available to them, ranging from traditional bank loans to alternative lenders. Understanding the differences between the two is important for producers looking to finance their operation and make the best choice or their specific circumstances.
Traditional farm and ranch loans are typically provided by banks or other lending institutions and are backed by the borrower’s real estate or other assets. These loans often have strict requirements for creditworthiness, collateral, and documentation. They may take longer to process and approve than alternative lending. Traditional farm and ranch loans usually offer longer repayment terms and lower interest rates than alternative farm loans but may be more difficult to qualify for.
Alternative farm loans are typically provided by non-traditional lenders, such as private lenders or community development financial institutions (CDFIs). These loans may have more flexible underwriting criteria than traditional lending, and may be easier to qualify for, especially for borrowers who have less established credit histories or less valuable collateral. Alternative farm and ranch loans often have shorter repayment terms and higher interest rates than traditional loans, but they may offer other advantages, such as faster approval times, more personalized service, or access to specialized expertise or resources.
In general, traditional farm and ranch loans are better suited for established producers who have a solid credit history and significant collateral, and who are looking to finance long-term projects or land purchases. Alternative farm loans are typically designed for growers who may have less established credit or collateral, or reduced credit scores. Alternative lending is often used for developing growing operations or right-sizing balance sheets. Ultimately, the choice between traditional and alternative farm loans will depend on the specific needs and circumstances of the borrower, as well as the availability and terms of different types of lenders within the agricultural market.
Conterra Ag Capital is a stand-out among agricultural lenders. We offer both traditional and alternative lending, and our loan products are available to borrowers with a range of credit ratings. Conterra’s variety of loan programs offer flexibility of terms and includes long-term fixed rate lending as well as shorter terms and variable rates. Our alternative farm and ranch loans can include interest only periods to allow for balance sheet right-sizing and debt restructures. Conterra has also expanded loans to include a Crop Operating loan program with partner crop insurance.
Conterra regional loan officers are available to answer your questions regarding the variety of agricultural loans available. Find your Conterra relationship manager here: Find an Ag Lender – Conterra Ag Capital
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.