FBN Finance launches financing product, Farmland Capital
Owners of farmland can tap into that equity with a new product from Farmers Business Network (FBN).
Successful applicants to the company’s “Farmland Capital” instrument will receive cash, in return for a lease contract up to 10 years in length. FBN Finance invests in a slice of the farm’s equity as a passive minority partner, paying farmers cash today for a share of the farm’s future appreciation. Farmland Capital provides cash in exchange for “…a “bet on the future opportunity in farmland,” says Pepo Peschiera, managing director of equity investments at FBN.
There are no interest or rent payments to FBN Finance, giving farmers a path to full ownership of the land without the burden of debt. Moreover, the landowner continues to have full control over the farm, deciding what to grow and receiving all payments. Landowners can receive up to 25% of a farm’s value, but not more than 49% of the equity, Peschiera says.
“For example, if a farm is worth $1 million, and debt is $600,000, landowners could qualify for up to $196,000,” he explains.
“There is very limited access to capital in the market for farmers, which results in farmers having to make tough, no-win decisions for their farm,” said Dan English, general manager of FBN Finance in a news release. “FBN Farmland Capital provides critical access to funding, leading to farmers having unprecedented flexibility and numerous lucrative options in managing their operation.”
FBN Farmland Capital participates in farm appreciation and depreciation alongside the farmer. Contracts are 10 years, but the farmer can buy out the co-investment portion or sell the farm at any time. Farmland value is determined by appraised value or sales price.
Farmland Capital helps farmers to:
- Lower debt payments: The cash injection enables growers to improve the financial metrics needed to qualify for a lower interest rate.
- Expand their operation: Growers looking to invest in their existing operation, purchase, or buy new land can use the funds toward a larger down payment.
- Keep the farm in the family: In the event of a family succession, co-owners who want to continue operating the farm can use the funds to buy out other co-owners who don’t.
- Cash out: Growers near retirement can take cash out from their farm’s equity without selling land or paying interest.
All farmers or retired farmers are eligible to participate. Eligible farms include row crop farms, permanent crop farms, and improved pastureland. Farmland Capital provides an opportunity to acquire cash as an option to a bank, Peschiera says.
The application process is simple, he adds.
- Applicants submit an inquiry to firstname.lastname@example.org or click here.
- The farmland is evaluated for quality, and value is based on appraised value or sale price.
- The applicant’s farming methods also is evaluated.
- Within a few days to a few weeks, the applicant will learn whether he or she is preapproved.
- The money will be available within 60 days on average, or as quickly as two weeks.
- The successful applicant will have to pay closing costs, such as title insurance.
- The contract is for a 10-year term, but the landowner can buy out the contract at any time.