AgAmerica Lending: Precision Data is a Key Factor in Farm Loan Acquisition
Editor’s note: This article originally published in December 2019.
AgAmerica Lending (AgAmerica), one of a few non-bank mortgage providers in the country for growth-minded farm operations, has been helping farmers receive access to capital to scale up operations for more than a decade now. CEO Brian Philpot recently sent out some information regarding research AgAmerica conducted in 2019 on technology use among farmers. Two key takeaways: 85% of U.S. farmers are turning to technology, and 62% are already using apps in their day-to-day farming operations.
The figures aren’t particularly surprising, but I was interested in digging a bit deeper into questions about the value of technology adoption and data to a financial services provider.
AgAmerica is laser-focused on the land aspects of farming, and since it is not a bank it has more flexibility in how it constructs financing packages for the farm operation. “We are regulated, but not by the FDIC, so we have some flexibility on how we focus on the market,” says Philpot.
So, when it comes to farmers demonstrating their business plan and viability when applying for a loan, how does Philpot see the value of technology adoption as a factor? In his view, it’s a key distinction.
“For the operators that are investing in technology, it shows in their cash flow,” he says. “Technology is going to do one of two things — it will increase their yields, or otherwise lower input costs. We have found that borrowers using technology in a more intensive way are smart about the payback. They are using technology because it is demonstrating a payback within one or two years that is also sustainable.”
“I’ve also seen that the operators being more progressive and experimental tend to be good stewards of the balance sheet in their operation,” continues Philpot. “There’s a high correlation there.”
Specifically, when AgAmerica is underwriting credit it is important for them to know what technology is adopted, how it is used, and on how many of the acres. “When we look at an operation, we look at its historical data and how that would proforma out,” says Philpot. “We look to project yield objectively and using historical data during the underwrite provides scope beyond a snap shot in time.”
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