A loan secured by farm or ranch land and its improvements, usually made to buy or refinance the land and repaid over many years from farm income.
A farmland loan is real estate debt, but it is underwritten as farm debt. The OCC handbook on agricultural lending puts real estate with the other capital assets a farm buys with term loans, and says the primary source of repayment is normally cash flow from operations, with sale of the collateral only a secondary source. It gives the usual amortization for real estate as up to 30 years.
That is why a farmland lender asks for more than an appraisal. Expect to hand over several years of production and financial records, a balance sheet for the whole operation, and the terms of your operating line, because one bad crop year affects both loans.
Who lends matters here more than in most property types. The handbook says Farm Credit System lenders are traditionally most competitive in farm real estate because they fund long-term mortgages with long-term bonds, and that life insurance companies mainly finance larger operations, generally amounts above $1 million. Many community banks hold farmland loans too, some with a Farm Service Agency guarantee.
How it shows up in the data here
Banks and credit unions report loans secured by farmland as a balance held on the report date. The largest are ranked at farmland books, and state lists are at farm lenders. These are balances, not loans made, and no public file gives loan-level farmland records for banks. Farm Credit associations and life companies, two large farm real estate lenders, file no bank call report and are not in these books.
Go further
- Farm lenders by state: Banks and credit unions holding farmland loans.
- Farmland books, ranked: The largest farmland balances held.
- Amortization and balloon calculator: Payment, balance at maturity and interest paid, for a loan that amortizes over longer than it runs.
- LTV and LTC calculator: Loan to value and loan to cost, the equity a lender will ask for, and the federal supervisory limit for the property type.
- Farm loan package checklist: A farm lender reads a balance sheet, a production record and a cash flow budget. The land is the collateral. The crop or the herd is the repayment, and it comes in once or twice a year.
- How to read a bank call report as a loan searcher: Every bank files a call report each quarter. One schedule in it lists the bank's loans by kind. Read that schedule and you know what the bank holds. You still do not know what it made last quarter.
Related terms
- Farm operating loan: A short-term loan or line that pays a farm's yearly costs, such as seed, feed, fertilizer and rent, and is repaid when the crop or livestock is sold.
- FSA guaranteed loan: A farm loan made and serviced by a bank, credit union or Farm Credit lender, on which the USDA Farm Service Agency covers most of the lender's loss if the borrower defaults.
- Farm Credit association: A borrower-owned cooperative lender in the Farm Credit System that makes loans to farmers, ranchers and other eligible rural borrowers.
- Farmer Mac: The Federal Agricultural Mortgage Corporation, a federally chartered company that buys and guarantees farm and rural loans from lenders so they can make more of them.
- Land loan: A loan to buy land that has not been developed, repaid from other income or from a later sale or development loan.
- Term loan: A business loan for a set amount with a maturity of more than one year, repaid on a fixed schedule from the company's cash flow.
Sources
Plain definitions for orientation, not legal, tax or credit advice. A lender's own policy decides what it will do.