Farmers today have many opportunities to expand operations, buy land, invest in technology and diversify. But those opportunities cost money, and traditional financial institutions aren’t always in a position to finance that growth.
That’s where alternative ag lenders can help. No longer just for distressed borrowers, these non-bank lenders provide capital for growth. They’re publicly traded firms and private companies looking to invest their ample capital in worthwhile projects.
THE NEW LENDING PLAYERS
Alternative lenders are found in every industry, and they’re playing a bigger role in agriculture. You might recognize some of them: Farmers Business Network, Sandton Capital Partners, AgAmerica, Conterra Ag Capital and Alternative Equity Advisors.
Derrick Deardorff, senior manager of AgKnowledge at Pinion, has watched the emergence of alternative ag lenders and says: “Today, as the U.S. ag industry grows, shifts and changes, producers need all the resources of both traditional and alternative ag lending. Each has its place.”
In the past year or two, Deardorff says, alternative ag lenders have begun rolling out programs that help producers capitalize on real estate to finance an expansion. Some programs allow you to keep ownership of your farm while boosting your cash flow.
Farmers Business Network, for example, created its Farmland Capital program after farmers asked for products that could go beyond conventional debt and match their income and capital requirements. Its program covers that gap by connecting farmers with investors. FBN also launched a bridge loan program that allows farmers to compete for land with cash buyers.
Conterra developed its alternative lending program with the understanding not all borrowers look the same or meet traditional lending standards. As one example, Conterra worked with a feedlot and cow-calf operation in Oregon, providing cash from refinancing real estate to relieve the daily pressure of cash outflows.
DO YOUR HOMEWORK
If you’re thinking about increasing your herd size or investing in a $600,000 combine, consider an alternative ag lender. But first, educate yourself. Online searches aren’t going to give you enough information. Attend industry conferences. Network to learn more about alternative ag lenders. Talk to others and ask questions.
If you find an alternative lender that works for you, remember you’ll need a well-thought-out plan for how you’ll put that additional capital to work to make your business grow. That could include reorganizing your business, investing in technology or building your brand.
Bottom line: Having another financing option can make all the difference when the right opportunity comes your way.
