The final refinance: End uncertainty for ag borrowers with participation lending
If there’s one universal truth about agriculture, it’s that things don’t always go as planned. The effects of things that are beyond a farmer’s control — such as global events, rising input costs, severe weather, land valuation, tax obligations — will find their way into the balance sheet.
Maintaining a margin of profitability can be a challenge in the constantly fluctuating climate of agriculture. One unwanted source of uncertainty for farmers is the five- to 10-year repricing of refinancing mortgage loans. As interest rates and loan terms fluctuate based on market conditions, refinancing can bring either financial relief or financial stress when the next cycle begins. That uncertainty can be a source of stress and potentially hinder long-term planning.
However, as a lender, you can end the uncertainty and stress. Make it their last and final refinance by participating your ag loans with Agri-Access. You’ll gain the ability to offer extended terms and bring greater stability to their working capital.
Refinancing farm loans: Understanding the uncertainty
Refinancing in the ag space is essential for many producers to maintain solvency. Because capital is better spent on maintaining and growing the operation, versus paying a land debt to zero in 5-10 years, refinancing is unavoidable.
Though refinancing is common practice in agriculture, it introduces yet another element of financial uncertainty into a farmer’s operating budget.
Loan rates fluctuate and so can the lending terms. As farmers make big decisions about their operation, they’re forced to contend with the risk of upcoming cycles of refinancing. There’s no telling if the next cycle will mean higher payments or a bit of financial relief.
This uncertainty creates a source of financial stress for ag borrowers. Not only that, having to refinance every five to 10 years brings other drawbacks, aside from the market risks. Refinancing comes with high transaction costs, and the manually intensive process of gathering documentation and completing paperwork.
Ending the refinancing cycle with Agri-Access
How would participation loans with Agri-Access end the refinance cycle and its uncertainties? Farmers can obtain up to 30-year amortization, which effectively reduces their monthly payments and offers greater control over their working capital.
There’s also a key benefit for lenders: You can safeguard liquidity by selling 100% of the loan to Agri-Access, while maintaining the borrower relationship. But given fluctuating market conditions, partnering with Agri-Access can raise your value to ag borrowers:
- Stability in working capital
- Mitigation of risks associated with fluctuating interest rates
- Reduced need for frequent refinancing and its associated expenses
- Greater financial predictability
The Agri-Access approach: Our difference
What makes Agri-Access’s approach different? Our lending services are designed specifically to cater to the needs of ag borrowers. Many members of our team come from a farming background. We’re deeply committed to supporting the agricultural community and rural America through our highly effective lending tools. We understand the impact of predictable interest rates on their financial planning, and our lending solutions are designed with farmers in mind.
Our lending solutions are also easily incorporated into your workflow. Our Scorecard lending streamlines the application and approval process, so you won’t be forcing borrowers to wait.
By helping farmers reach the end of the refinancing cycle through the power of participation loans, it’s a win-win. For farmers, it introduces stability to the monthly mortgage payment. Down the line, having that financial stability can mean saying yes to future expansion and investments. Offering these solutions makes you a key contributor to the sustainability of the ag sector.
Expand your lending power
At Agri-Access, we’re committed to empowering farmers and lenders with options that make growth and financial stability achievable.
Learn about our participation loan offerings, and reach out to a relationship manager any time to get started.
