Securing loans for your farm or your agricultural business is getting easier these days. That is according to market trends and farmmortgageloan.com.
Ag land interest rates are expected to be more inviting in the coming years due largely to more positive market reactions after the credit crunch. If one would ask: Is this the best time to apply for a farm loan? The answer is in the affirmative.
Higher rates for non-real estate farms, lower for ag land
By the end of 2016, as per a Survey of Terms of Bank Lending to Farmers study, there was a 40% decrease in the volume of new farm loans at commercial banks, the largest in two decades.
One reason was the declining farm revenues experienced during the past years. Farmers and ag business owners were keeping costs low. Another was that bankers raised interest rates for all non-real estate farm loans, discouraging farmers and ag business owners to seek credit.
A consequence of such is that private lenders will become more attractive alternatives. It is also worthy to note that farm real estate loans were edging lower in recent years.
Decreasing number of commercial banks
Adding more benefit to private lenders is the decline in the number of farm banks. The past six years saw a declining number of farm banks (commercial, savings, and thrifts banks insured by the Federal Deposit Insurance Corporation).
By mid-2016, there were over 5,200 active US commercial banks. This is 21% fewer than the numbers in 2010. With less competition, growth in private lending is inevitable.
Since private lenders are smaller and are larger in number, more choices for ag land loans are available. This will also help in decreasing loan interest rates.
With lower real estate farm loan interest rates, higher farm bank rates, and more lending alternatives, now is the best time to secure an ag land loan.