Farming has the most extreme cash cycle of any business on this site. Seed, fertiliser, fuel and labour are paid for in spring and the crop is sold in autumn, so the operating line is not a convenience, it is the mechanism by which the season is financed. That is why an ag line of credit is sized against the crop plan rather than against last year's profit.
How an operating line is sized
Against the cost of putting the crop in and getting it off, per acre, for the acres you are actually farming. A lender that knows agriculture will want the crop plan, the acreage, the input costs and a realistic yield and price assumption, and will lend a percentage of the projected input cost rather than a multiple of profit. That is a different conversation from every other product here, and it is why a general business lender who asks for three months of bank statements and nothing else is not really underwriting a farm.
What secures it and what that means in a bad year
Usually the growing crop and the stored grain, sometimes machinery, sometimes land. Crop insurance frequently sits behind the facility and its presence changes the terms materially, because it puts a floor under the lender's downside in the year the weather goes wrong. If you carry insurance, lead with it. If you do not, expect a lower advance and a closer look at everything else, and understand that the risk the lender is declining to take is the one you are keeping.
Where the specialist lenders are
The Farm Credit System institutions and agricultural banks do most of this lending, and they underwrite differently from the online funders in this record: slower, with a human reading a crop plan, and with far more appetite for a seasonal repayment structure. None of the twenty-six US lenders on this site publishes a criterion specific to agriculture, and the published bars here, five hundred to six hundred and twenty-five on credit and a hundred thousand dollars a year upward on revenue, apply to a farm the same as to anybody else. For an operating line specifically, the specialist route is usually the right first call.
Questions people ask about ag line of credit
How is an ag line of credit different from a business line of credit?
It is sized against the cost of a growing season rather than against general trading, secured on the crop and stored grain as often as on other assets, and repaid when the crop is sold rather than monthly. The underwriting reads a crop plan rather than bank statements alone.
Does crop insurance affect the borrowing?
Substantially. Insurance puts a floor under the lender's exposure in a bad year and frequently improves the advance and the terms. If you carry it, put it in front of the lender at the start rather than answering a question about it later.
Can an online business lender fund a farm?
For general working capital, yes, on the same published bars as any other business. For a seasonal operating line sized to a crop plan, an agricultural lender or a Farm Credit institution is usually the better fit, because the repayment structure the farm needs is one they already offer.