Lending against a tract where most of the value is growing on it

A borrower brings you 300 acres, appraised at 1.6 million, and the appraiser splits it into 900k of land and 700k of standing timber. Underwriting question that I keep going back and forth on: do you lend against the whole number or only the dirt?

The conservative position is dirt only. Standing timber is collateral that can walk off the property in three weeks with a crew and a logging deck, and unlike a roof, its absence isn't obvious from a drive-by. If you advance against it and the borrower cuts, your loan-to-value moved and nobody told you. Lending on land value keeps the collateral where you can see it.

The other position is that dirt-only pricing ignores the actual asset and pushes every timber buyer into cash or seller paper, which is why so many small tracts trade on land value alone. You can advance against inventory if you control it. Cutting covenants requiring lender consent, assignment of harvest proceeds with a paydown schedule, periodic cruises at borrower expense, and a UCC filing on the severed timber. Mechanically the timber becomes goods once it's cut, and how a security interest attaches and gets perfected varies by state, so anything here needs a licensed attorney in the state where the land sits.

Monitoring cost is the real problem. A cruise every two years on a small loan eats the margin.