A first lien against cropland that paid off at month 26, and what nearly sank it
Consider a private first lien loan on 320 acres of cropland, made by a lender rather than an owner-operator. The borrower already farmed 640 acres and was buying an adjoining 80 acre piece while refinancing a short term note taken to cover it. Appraisal on the security, the existing 320 acres rather than the new piece, came in at 1,080,000. The loan was 410,000, or 38 percent loan to value, three year term, interest only at 8.5 percent with a full year of prepayment protection and a point and a half origination. The borrower paid off in month 26 after moving to a farm lender at a lower rate once two good years of tax returns supported it. Total collected came to about 81,700 of interest and fees on 410,000 outstanding for 26 months, with no missed payments and one payment nine days late in a wet spring. The part that nearly derailed the deal was priority. The borrower's operating lender already held a blanket lien on crops and equipment, and title work turned up an old unreleased mortgage from a 1990s equipment purchase tied to a lender that had since merged out of existence twice. Getting a release took seven weeks and nearly cost the seller of the 80 acres, who almost walked. Landlord and supplier lien rules on growing crops, and how recording and priority actually work, differ by state, which argues for having counsel in that state read the title commitment rather than relying on a general read. What holds up as a pattern worth keeping: lending against land value only, ignoring crop revenue entirely in underwriting, and sizing the loan so a 25 percent drop in cropland values still leaves the lender covered. Cropland values rose 4 to 5 percent last year after a negative print on the institutional index in 2024, and 38 percent LTV is the kind of margin that survives a down year.
