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October 19, 2022

Is a Hard Money Agricultural Loan Right for You? 

Agriculture based hard money loans can be an effective alternative to conventional financing when they are part of a long-term plan. 

In agriculture, flexibility is everything. As a farmer, you need financing that makes sense for your unique operation. But sometimes, it can be difficult to find from a bank or conventional lender due to rigid underwriting requirements and regulations.  

As a nonbank lender, AgAmerica has greater autonomy over our financing decisions. While we are regulated by the U.S. Securities and Exchange Commission (SEC), we have access to government-backed capital and private equity, unlike local banks. Our alternative, or hard money loans for ag operations, give you the capital you need when it’s difficult to secure a conventional loan. We have the flexibility to craft these loans in a way that fits your immediate needs—like getting more capital or expanding your operation.   

So, what exactly are ag hard money loans, and how do you know if it’s the right choice for you? 

What Is a Hard Money Agricultural Loan? 

Hard money lending, or private lending, is often misunderstood. Put simply, a hard money farm loan is an asset-based loan. In the nineteenth century, it was nearly impossible for a lender to verify a borrower’s income, so all mortgages were asset-based loans. Over the decades, as banks competed for business, lenders slowly began evaluating borrowers’ abilities to repay the debt according to their income instead of just looking at the value of the collateral. 

Even though alternative loans tend to have higher interest rates, they are also usually interest-only with shorter terms. This equips the borrower with cash flow in the short term when it would be difficult to secure elsewhere through conventional lenders. 

Is an Ag Hard Money Loan Right for You? 

Unfortunately, unforeseen financial challenges happen all too often in the ag industry. From hurricanes to supply chain disruptions, your operation could be in financial distress in an instant.  

Due to stricter underwriting requirements and regulations, traditional lenders often can’t offer financing to help financially distressed borrowers. And that’s where hard money loans come in. These short-term loans can provide access to capital quickly in order to provide the resources necessary to meet debt obligations and build on the resilience of your operation. 

And hard money loans aren’t only for financially distressed borrowers. They can also provide the needed flexibility to secure capital quickly that can be used for expansion. While the customizable nature of hard money loans provides more options than conventional financing, it can be hard to find one with terms that can set you up for long-term financial success.  

Evaluating Hard Money Loans 

When seeking alternative financing options, it’s a good idea to find a lender who has your long-term financial well-being in mind. Lenders that only provide short-term solutions can end up causing significant harm by backing you into an overleveraged financial position. AgAmerica works alongside you to create a long-term plan to transition you to a conventional loan

In this way, you get the financing you need, when you need it, while also having a long-term plan in place to migrate to a conventional structure. As AgAmerica’s Senior Director of Partner Relations Curt Covington puts it, our farmer-focused approach to financing means that we value relationships over transactions. And that means we prioritize your financial well-being so that you can prioritize running your operation. When you apply for an accelerated interest-only loan through the AgAmerica Pivot™ program, you can expect a painless application process and a preliminary approval within two business days.

Hard Money Loans in Action  

To put more context to the concept, here are a few examples of how farmers have strengthened their operational finances with the help of an agricultural hard money loan.  

Sucess Story

Southeast Farmer Transitions an Interest-Only Loan to a Conventional Product

A first-generation farmer leveraged an interest-only alternative loan to grow their operation into a vertically integrated and innovative farm. Once improvements to the operation were made, the borrower returned to AgAmerica to restructure their loan into a long-term conventional loan with lower payments, equipping the borrower for long-term success.

Sucess Story

Veteran Farmer Leverages Transitional Loan to Recover from External Challenges

After dealing with weather and pricing challenges, a military veteran and multigenerational farmer secured an interest-only loan for immediate cash flow, allowing him to revitalize his family operation. After improvements in the operation’s financial health, the borrower returned to AgAmerica to transition part of his alternative loan into a $2.3MM conventional loan with the Accelerate Land Loan Program.

Sucess Story

Row Crop Farmers Work with AgAmerica to Secure Working Capital

After securing an interest-only alternative loan to recover from adverse weather events, two brothers returned to AgAmerica to transition to a conventional loan structure. Through this refinance, the farmers secured a $40K cash out for rising production costs. This long-term solution will help ensure the operation’s financial resilience for years to come.

Sucess Story

Rural Landowner Exits Bankruptcy with Alternative Loan Package

After finding themself in a challenging financial situation, a ranch and recreational landowner turned to AgAmerica to refinance existing debt into more manageable, interest-only payments. Through a two-note alternative loan package, the landowner exited bankruptcy and set their operation up for success.

Get the Cash Flow You Need with AgAmerica Pivot™

AgAmerica works to remove the barriers to securing ag financing—and that means offering flexible options customized to your unique needs. 

At AgAmerica, we’re in it for the long haul—not just when you’re doing well. We understand that your needs change over time, and your financing should be capable of evolving with you. That’s why we’re the leading agricultural lender in the nation capable of providing alternative financing with the option to refinance to more conventional terms when the time is right.

Prioritize the financial health of your operation and learn more about the AgAmerica Pivot™ program.

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