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Loan Qualifications 

There are two arenas of qualifications for all loans; the first is qualifying the collateral property, the second is qualifying the applicant. 

Collateral property qualification:   

We ONLY take Agriculture Real Estate (and affixed improvements) for collateral. 

We do NOT utilize other valid assets such as equipment, livestock, crops, or separate residential real estate for collateral.  If your farm or ranch has a residence located on the property, that’s ok, but if your residence is in town and the farm is a separate tract, then only the farm is considered for collateral. 

The collateral property needs to be a viable commercial enterprise, with sustainable and historically proven commodity production.  We don’t care what legal commodity is produced, it can be as simple as hay or livestock – but production is required.  This is normally proven by the revenue indicated on tax returns (schedule C, F, or E). 

The collateral property must appraise as agricultural property (Highest and Best Use). If the property is located where it is or will be imminently utilized for development, then it’s not agricultural property and does not qualify for our programs. 

We are commercial lenders providing mortgage loans for commercial AG land. 

Applicant qualifications: 

We offer two basic programs; the first is Secondary Market Agriculture Mortgages, the second is Poultry Facility Mortgage Loans.

We lend to qualified applicants who have demonstrated good management skills, we are not in the business to lend to applicants who pose greater than average risk.

Secondary Market Agriculture Mortgage qualifications:

  • Loan size – $500,000 minimum, no maximum.
  • Loan to Value (LTV) – Maximum is 65%; there are rare exceptions to this if the applicant has significant offsetting strengths.
  • Debt to Asset – Maximum is 50%, in simple terms at close of your loan - your net worth must exceed the total of all debts.
  • Consumer Credit Score – For the most part a minimum score of 660 is desired, if compensating strengths and justifiable reasons exist some exceptions can be made.  If you have recent bankruptcy, outstanding judgments, tax liens, or other significant adverse public records, then you will not qualify.
  • Debt payment Coverage – we expect that the history of static operations will indicate sufficient cash flow to cover all payments with a reasonable margin of safety. For expanding operations, the net additional cash flow will be based on the history of: (a) your existing operation, and (b) the history of the property you are buying. For new operations, projections will be supported by third party information, such as operational budgets from the state extension office.
  • Use of Funds – any use that is not directly connected to the AG real estate is considered “cash out”; we do allow cash out but in certain cases may impose restrictions.

Poultry Facility Mortgage loan qualifications:

  • Minimum loan size is $500,000 – there is no upper limit on loan size.
  • We require a First Lien position, but we do allow subordinate liens.
  • Maximum loan term is 15 years (fully amortized), no balloon payments or calls on the note.  Exceptions to the 15 year term limit may be made when the depreciable assets comprise less than 50% of the initial value of the collateral.
  • Maximum Loan to Value (for our lien) is 75% on newly constructed facilities (in service one year or less).  The total of all liens (including subordinate liens) can not exceed 90%.
  • Total Debt Service coverage must be 125% or greater after closing of all loans related to the construction and/or purchase.
  • Pro Forma Debt to Asset ratio must not exceed 65% including all debts at close.
  • Borrower must demonstrate positive historical credit management with a supporting consumer credit report.
  • Borrower must have an approved and valid contract with a major integrator. 
  • An assignment of the marketing agreement from the integrator is required.
  • Adequate insurance coverage on collateral property.
  • The Integrator must have sufficient financial strength to ensure the ability to perform on the contract/agreement.
  • Construction financing currently available in Texas.

 

For additional detailed information on how agricultural credit is underwritten and how to maintain good standing with agriculture lenders, see our credit analysis page.