Row Crop Farmer Expands Operation with $18MM Interest-Only Loan
High interest rates are making it harder for farmers to increase profitability, but AgAmerica is helping them do it anyway.
Interest rates have doubled in the past year for agricultural loans. The Federal Reserve met in mid-September to discuss mortgage rates, and experts warn that unless inflation is brought down to what the Reserve deems more acceptable levels, they may raise rates further to counteract it.
For farmers, this means financial uncertainty is on the horizon. Many are turning to fixed-rate loans to secure predictable financing before rates go up even more.
The Challenge
A third-generation row crop farmer saw an opportunity when more than 40 acres of irrigated farmland located in the same city as his existing operation went up for sale. The land included 63,000 tons of storage and a seed-cutting facility the farmer wanted to use to expand his operation. But in a high-interest rate environment, he wasn’t sure if the higher cost of borrowing outweighed the benefit of expansion.
The Solution
The farmer was referred to AgAmerica by their existing lender, who could not make a loan for them due to stricter lending policies. Through our range of rural land financing options, we were able to craft a custom $18MM interest-only fixed-rate loan. This solution allowed the farmer to lock in his rate for five years with interest-only payments to conserve short-term capital and the option to refinance to a more long-term solution once rates begin to drop.