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New Lender for Farmers who Rent

FarmOp Capital, St. Paul, Minnesota, is focusing on your ability to produce a crop, not how much land you own.

If you rent more land than you own, you may struggle to get traditional financing in 2019 due to light balance sheets. There is a new ag lender that wants to work with you. FarmOp Capital, St. Paul, Minnesota, launched in November 2018 and is focusing on your ability to produce a crop, instead of focusing on hard assets like land and machinery. FarmOp Capital supplies operating capital to producers who have lighter balance sheets but have a proven track record of production efficiency and profitability.

Bill York is CEO and founding partner of FarmOp Capital and has 40 years of ag lending experience, including serving as CEO of AgriBank. Darwin Melnyk is cofounder and chief technology officer with 20 years of experience in ag data and risk management. They answered a few questions for Successful Farming magazine about their new product.

SF: Why did you launch this product?

BY: The current economic environment opens the door for discussion, but we are responding to needs caused by trends over the last several decades. As operations have become larger and the majority of their land is rented, not owned, access to operating capital has become more limited for this type of farmer. Traditional lenders look to real estate equity as collateral for operating loans, which leaves a gap for these farmers. FarmOp Capital is targeting this underserved but growing customer segment with loans that use the crop as collateral rather than real estate.

SF: Is this available right now?

BY: Yes, we started taking applications for the 2019 crop year in November, and there's significant interest.

SF: How many farmers do you hope to work with the first year?

BY: We'll plan to fund hundreds of farmers in the 1,500+-acre range. We expect that most of our applications, given the structure of operations, will be farmers that rent more land than they own. We also see an opportunity with operations that are having succession planning conversations and preparing for the next generation to step up. We believe our products help fill the need for that next generation to get an operating loan where they may not have significant equity in farm real estate.

SF: What makes you different?

BY: We're looking at the farmers' ability to produce crops and their track record. Our loan is secured by the crop and crop insurance. It’s a new concept in ag lending to look at the production history of the operations to structure operating loans. We can do this because of advances in ag technology that farmers use to produce the crop, which also help us understand what's happening in the field. That definitely makes our model unique.

SF: So your collateral is the crop and crop insurance, and for other lenders it might be land?

BY: Land and machinery.        

SF:  What is required for farmers to be successful under this program?

BY: FarmOp customers will produce an efficient crop and be effective in marketing that crop. They excel at production and manage risk through crop insurance and price hedging. FarmOp products enable these customers to concentrate on return on their investment, instead of managing multiple capital sources.

SF: What do you look at on their applications?

BY: We look at their history, their efficiency at producing crops, yields, and sales history, and really focus on the efficiency of the operations. The yield of the crop is only part of the equation, and we recognize that maximizing yields may not be optimizing the return on their investment.

SF: Is there a deadline for applications?

BY: We are taking and processing applications now and up until the crops are put in the field next spring.

SF: What crops?

BY: We’re primarily focusing on corn, soybeans, and wheat for the 2019 crop year.

SF: Is there anything else you feel like our readers should understand or know about this product?

DM: As a new lender, FarmOp Capital is focused on helping farmers achieve healthy margins. We provide high advance rate operating loans – up to 85% of the cash required to produce a crop – so our customers can shop and purchase their inputs as cash buyers, and benefit from the most competitive prices possible. At FarmOp, we want cash renters to be cash buyers. We align operational financing with operational outcomes.

It’s important to note that we are not trying to disrupt retailers or the lending community. We're focusing on underserved producers and their unique operating capital needs. FarmOp customers can still buy from their traditional sources. They're just going to have buying power to pay a different price because they're cash buyers.

Learn More

Producers interested in learning more about FarmOp Capital can visit, email, or call FarmOp at 833/FARMOPS (833/327-6677) to start a direct conversation.

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