A new partnership announced on Wednesday between Finance of America Holdings LLC and FarmOp Capital looks to address what the two organizations describe as a “lending void in agriculture.”
“In our view and understanding of what's happening in agriculture is an evolution, the ownership of the land is being separated from the operator of the land,” explains Bill York, CEO of FarmOp. “So you have significant renters operating very sizable operations that don't have the traditional assets of farm real estate to offset some of the credit risk.”
Traditional underwriting tends to focus on the ownership of land as being an important asset in the operation. However, York says traditional underwriting doesn't fit very well with the growing number of farmers who are operators rather than owners.
“The structure of our loans tend to work better for this new type of operator,” he notes.
Keir Renick, FarmOp’s Co-Founder and Chief Financial Officer, says he expects the trend of more farmers renting versus owning ground to continue.
“I think that trend is nearly irreversible, given the capital cost of the land and the size of the operation growers need to purchase inputs for and to operate efficiently,” Renick says.
“The high capital cost of owning land means it’s not always operators’ best use of capital,” York adds. Plus, he notes, “Many families want to retain the land ownership within their family, and then you've got a small, growing segment of institutional buyers that buy land and rent it to operators.”
Initially, the partnership is focused on working with farmers in 19 states, including Arkansas, Iowa, Illinois, Indiana, Kansas, Kentucky, Louisiana, Michigan, Minnesota, Missouri, Mississippi, North Dakota, Nebraska, Ohio, Oklahoma, South Dakota, Tennessee, Texas and Wisconsin.
Eventually, the lenders expect to work with farmers in approximately 30 states.
York says the partners are looking to work with farmers earlier, well in advance of the production season, to give them plenty of time and flexibility to purchase inputs. “We’re taking applications now for the 2020 crop year, so farmers will have lines of credit ready sometime this fall,” he notes.
About Finance of America
Finance of America is a diversified national lender dedicated to providing best in class financial solutions to improve the financial well-being of its customers. Finance of America serves borrowers through trusted brands including Finance of America Mortgage LLC, Finance of America Reverse LLC and Finance of America Commercial LLC. The Finance of America family of companies employs more than 4,000 professionals in more than 350 offices across the country. For more information, please follow us on LinkedIn.
FarmOp is an agriculture lender addressing long-term macro trends in farm operations. With the requisite leadership, flexibility and innovation, FarmOp fills a growing lending need: providing credit to growers based on their operational efficiencies. Headquartered in St. Paul, MN, FarmOp provides debt products that increase independence and buying power by aligning agricultural lending with agricultural tech to help growers make more profitable decisions. Find out more by visiting FarmOp.com.