First lien against 320 acres of cropland paid off at month 26, here is what almost sank it
I lend rather than own, and this was the first farm loan I did on my own paper instead of through a fund. It closed and it paid off, so numbers.
Borrower was an operator with 640 acres already, buying an adjoining 80 acre piece plus refinancing a short term note he'd taken to cover it. Appraisal came in at $1,080,000 on the security, which was 320 acres of the existing ground, not the new piece. I lent $410,000, so 38 percent loan to value, three year term, interest only at 8.5 percent with a full year of prepayment protection. Origination point and a half. He paid off in month 26 by moving to a farm lender at a lower rate once his tax returns showed two good years.
Total collected was about $81,700 of interest and fees on $410,000 out for 26 months. No missed payments, one late by nine days in a wet spring.
The part that nearly killed it was priority. His operating lender had a blanket lien on crops and equipment already recorded, and my title work came back showing an old unreleased mortgage from a 1990s equipment purchase that the lender had been merged out of twice. Getting a release took seven weeks and a lot of phone calls, and the seller of the 80 acres nearly walked. I also learned that landlord and supplier lien rules on growing crops, and how recording and priority actually work, differ by state, which is why I now have counsel in that state read the title commitment rather than reading it myself.
What I'd keep: lending against the land value only, ignoring crop revenue entirely in the underwriting, and sizing the loan so a 25 percent drop in cropland values still leaves me covered. Cropland values rose 4 to 5 percent last year, but they printed a negative year on the institutional index in 2024, and 38 percent LTV is what let me sleep.