Shop for a Lender for 2026

Farmers may be harvesting the 2025 crop, but they're preparing for 2026, too. While most look for deals on next year's seed, chemicals and fertilizers, many will also shop for lenders and compare the cost of capital closely.

"It's challenging, at times, out there," says Matt Falk, chief financial officer (CFO) for his wife's family farm as well as a fractional CFO for several large, primarily cash rent operations. "The farmer is trying to manage cash-flow however they can, and so having access to credit, even if they don't use it, is very helpful."

After several years of near- or below-breakeven profits, farms in crop-heavy production areas are repaying their non-real estate loans at a lower rate, according to survey data from the Kansas City Federal Reserve. Data shows demand for operating notes is rising.

"Obtaining and ensuring we have an operating line of credit is always the most important thing," Falk explains, "because if a farmer doesn't have a loan, then they don't have a farm."

For some, 2026 will be business as usual. For others, it may mean restructuring debt with their current lender to obtain next year's operating note. For a few, it may mean finding a new lender altogether.

Cash isn't necessarily king in this environment, says David O'Malley, manager of agribusiness and aftermarket for John Deere Financial North America. "There's not a lot of it out there, and if you do have it, it's probably best to hold onto it and use alternative sources of financing and capital."

BEYOND THE BANK

Without large portfolios of farmland to use as collateral, many of Falk's clients are limited to a handful of nontraditional lenders, like Ag Resource Management, FarmOp Capital, Conterra and others. These tend to be private-equity-backed organizations that lend based on your anticipated production, crop insurance and future cash-flows.

These types of lenders, when combined with vendor financing and individuals, hold roughly 10% of U.S. farm debt, according to data from USDA's Economic Research Service. As of 2023, 46% of farm debt was held by the Farm Credit system, 35% by commercial banks and 3% by USDA's Farm Services Agency.

Kansas State University Flinchbaugh Agricultural Policy Chair Jennifer Ifft says she thinks alternative and vendor finance's share of farm debt is larger than currently reported.

"We hear that demand for alternative financing is through the roof," she says, but since these companies are not subject to the same reporting requirements as banks, it's difficult to assess how popular they are.

Keir Renick, CEO of FarmOp, says businesses like his don't take customer deposits, so they can make more flexible credit offerings.

Renick says private credit lending has been around for more than 40 years in the commercial real estate and corporate lending space.

"I think ag has just been a little bit behind because it hasn't really needed it, in my opinion," Renick adds, stating that the creation of Farm Credit solved many of farming's lending struggles until "the catalyst of young farmers that are renting more ground" presented different lending needs.

DIFFERENT WAY OF DOING BUSINESS

Doing business with FarmOp or any of the alternative lenders is different in a lot of ways, Falk says. While they carry higher interest rates than what you can find at a bank, their timing and structure allow farms to buy inputs at optimum times.

"In an ideal world, you would have a lender capable of opening a 2026 line of credit in late 2025," Falk says. This is an advantage FarmOp and others have since traditional lenders may want end-of-year financials before renewing. One of the farms Falk manages saved 14% on seed last fall because it could prepay using the operating line for his upcoming season.

He says he finds nontraditional lenders take less time to underwrite loans but are more involved in the operation. Rather than being able to draw on a line of credit for any cost, most break costs down into subcategories, like rent, seed, inputs, etc., and make the funds available during specific time frames. Checks for large expenses, like rent, will be cut directly by the company.

"It takes a bit of getting used to," Falk says, adding that it's how these companies "prove to their funding source that the loan is well-managed."

In addition to being involved in crop-insurance decisions, they're often involved in the hedging of grain and monitoring inventories, since this is their collateral.

LEAN ON SUPPLIER CREDIT

Falk says his clients regularly use credit from suppliers and vendors alongside their operating note to manage their cash-flow, whether it's to secure discounts on products, earn lower interest rates or secure repayment terms that fit with their production schedule.

John Maman, Nutrien Financial's senior director of North America, says these unsecured lines of financing can free up the primary operating note to pay for critical expenses like rent and labor. There are a wide variety of programs available, but they all vary by product and brand.

"It's not that individuals fail to use these programs because they're not beneficial. The real challenge is awareness -- many simply don't know these resources exist," he says, adding that his company just launched the Nutrien HUB, which connects customers and their crop consultants to financial services and resources.

Deere's O'Malley says their interest rates for crop inputs, parts and service are significantly lower than what farmers can find from banks and traditional lenders.

Farmers also have more tools than ever to research what's out there. https://InputFinance.com/… was launched by John Deere Financial to help farmers locate the best offers, rates and terms for seed and crop-protection products. A digital calculator is integrated to analyze how much interest you can save versus your operating line of credit at the bank.

"For example, a $100,000 crop input purchase at 1% interest would save a farmer over $9,000 a year in interest and would not be due until after the 2026 harvest. Lower overall interest costs and improved cash-flow ultimately help a grower lower their cost per acre as they work toward a profitable season," he says.

Maman says the amount of transparency and resources farmers have to navigate these programs is at an all-time high. But, while the digitization makes it easy, sometimes the best approach is old-fashioned.

"If you have trusted advisers, put them in that combine with you and talk about options to improve your financial position," he says, adding it's an especially good time to include retailers, because fall is often when the best promotions are available.

Falk adds that farmers will be looking for all possible sources of savings this year.

"Any little spot to help with profitability or to cut costs is helpful," he explains. "It's absolutely, positively tough times out there in ag."

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