With stricter bank lending and economic uncertainty, farmers are looking beyond traditional loans to fuel their operations.

Policies from the new U.S. administration are creating uncertainty in the agriculture sector. Trade disputes, stalled tax reform, delays to the farm bill, and reduced funding have all taken a toll. Add in stricter lending requirements from traditional banks, and the result could be devastating for farmers looking to renew loans or fund future operations.

And it’s not just speculation. According to the 2024 ABA-Farmer Mac Agricultural Lenders Survey, 58% of lenders anticipate further tightening of underwriting standards for ag loans. Even loan terms are expected to shrink, with 63% predicting continued tightening.

That means fewer farmers may qualify for traditional loans in the year ahead — even as many face growing financial pressures.

The Working Capital Crunch

Many areas of production agriculture have faced years of significant headwinds. For many farms, this has eroded working capital to the point that traditional lenders are saying “no” to renewing operating lines of credit.

That’s where alternative lending comes in.

“Alternative lenders give growers the flexibility to overcome financial challenges or grow faster than traditional lending would allow,” said Peter Martin, Pinion finance and growth advisor.

Alternative lenders can provide both operating capital and new term debt that helps farmers correct their working capital shortfalls. Instead of focusing solely on real estate, many of these lenders are willing to get creative — using land equity, production history, or even management practices to structure financing.

A Growing Trend

This shift isn’t hypothetical. It’s already happening.

A recent AgWeb poll revealed that 36% of producers plan to use alternative financing options in 2025. That’s a significant uptick — and a signal that the lending landscape in agriculture is evolving fast.

The number of alternative lenders offering farm-focused products is also rising, driven by growing demand and a need for more flexible solutions.

Why Farmers Choose Alternative Financing

There are several reasons producers turn to non-traditional financing sources:

  • Flexible underwriting criteria
  • Faster approval times
  • Shorter repayment terms
  • Easier access to lines of credit
  • More personalized service

“It’s not a new concept — but it’s an important one: Focus on keeping your working capital strong and your operating line self-liquidating,” stated Martin.

Community Development Financial Institutions (CDFIs), private lenders, and fintech platforms are just a few of the players offering these options.

And importantly, some alternative lenders are shifting away from relying solely on land equity — a hurdle for renters — and instead evaluating a producer’s full financial picture: cash flow, debt-to-asset ratio, risk management strategy, and more.

What to Watch For

Of course, alternative lending isn’t without drawbacks.

Most notably: higher interest rates. The trade-off for speed and flexibility is usually a premium on cost. That’s why it’s essential to use alternative financing strategically.

Martin advised, “If your crop sale won’t repay your operating line in full, it’s no longer self-liquidating — and that shortfall needs to be termed out.”

Producers should avoid using operating lines for non-operating expenses like equipment purchases or excess distributions. These should be financed differently to preserve the health of working capital.

Be Strategic, Stay Resilient

Alternative lending isn’t a magic bullet — but it can be a lifeline, especially in uncertain times.

The key is to choose the right financing mix for your farm, maintain strong financial discipline, and work with lenders who understand the realities of production agriculture.

Because when traditional lending falls short, innovation in finance can help farms stay strong, grow smart, and weather whatever comes next.

Contact a Pinion advisor for expert help on preparing for the loan process, strengthening your borrowing position, or for more information on alternative lenders.