How Farmers Can Best Protect Their Credit
Much like the ebbs and flows of the growing season, there is a typical cycle to how growers manage their finances. Costs build steadily from winter through harvest, while income often arrives only after the crop is sold. In the long stretch between the two, many growers are using credit as a fundamental strategy to manage operational costs, equipment, and labor.
For the year ahead, producers must be vigilant in managing their credit to ensure they have options to pay for the things they need. The 2025 Agriculture Lenders survey published by the American Bankers Association reveals key trends in the credit market that are important for growers to be aware of.
- Profitability is a major concern for everyone in the ag industry, including fruit growers. Margins are tight across the entire sector, and demand for loans is high.
- Because profitability is strained — and has been for the past two to three years — growers are more highly leveraged. Debt ratios are high, which causes lenders to take a more conservative approach and limits access to credit for some growers.
- Credit quality is also a top concern for lenders. While loan delinquencies in agriculture seem to be stable, the challenges growers face in earning a profit have lenders on edge.
The survey demonstrates just how tight the credit market is this year, which has important implications for fruit growers. Borrowing from lenders — be it from a traditional bank, farm credit institution, or from a retailer’s line of credit — provides critical access to capital, but a more conservative credit market means loan approvals might be more difficult to secure this year. It’s always a good idea to manage your credit, but especially for the period ahead, growers can respond by making smart, proactive, and regular moves to maintain their credit profile.
The 5 Cs of Credit
Lenders typically evaluate creditworthiness using specific criteria known as the “5 Cs of Credit”:
- Character
- Capacity
- Capital
- Conditions
- Collateral
This provides them with a comprehensive view of a borrower’s financial position so they can determine how much risk they’ll assume when lending money. Growers can use this framework to strengthen their credit profile. Focus on these key areas:
- Credit History — Make payments on time and honor the terms of your loan. This is a foundational element of your credit report and establishes your reputation. Creditworthiness starts with a strong track record of meeting debt obligations.
- Credit Report and Score — Review your credit report at least annually. Close inactive accounts, correct errors if you see them, and monitor the number of active loans so you are maintaining a diverse mix of credit sources without overextending yourself.
- Debt-to-Income Ratio — Keep your debt load manageable relative to your income. Lenders want to see that you’re capable of making payments without falling further into debt.
- Capital and Collateral — Be transparent in sharing a complete list of assets. This might include investments in land, equipment, and other forms of capital.
- Cash Flow and Income Streams — Show all revenue sources, including off-farm income. If you have income that isn’t associated with harvest revenue, it’s a good idea to make lenders aware because it demonstrates more stability and may reduce their risk.
- Business Planning — A solid business plan that details cash flow projections, repayment strategies, and both short- and long-term goals tells lenders the type of person you are and how you think. It demonstrates character and competence, which can go a long way for younger growers who have limited credit history.
- Proactive Communication — Stay in regular contact with lenders about your financial situation. Transparency builds trust. If you can’t make a payment, it’s much better to reach out proactively and work with lenders on a plan rather than making them chase you down.
My last tip doesn’t necessarily tie back to the 5 C’s of credit, but it’s most important: Pay attention to the fine print when you borrow. Most people zero in on interest rates when evaluating financing, but it’s not uncommon for borrowing conditions to negate any savings from a lower rate. For example, imagine an apple grower secures a 0% promotional rate on inputs for four months, but that offer is followed by a trailing rate of 18%. The 0% is attractive, but you have to look at the borrowing costs beyond that four-month term.
The grower might not sell their apples for six to 12 months after harvest. So let’s assume 0% at four months and 18% for another eight months month after that. Total borrowing costs would come out to 12% annualized, which could be costlier than, say, a fixed-rate financing offer at a 2–3% rate.
Here you can see it’s possible to spend less, despite a higher interest rate, so do your due diligence and calculate the total cost to borrow, including repayment terms and other incentives. Make sure you’re shopping for credit options that meet your specific needs.
Strong credit comes with many financial advantages for growers, including access to the best interest rates, more control and flexibility around payment options, and other advantageous terms that can benefit the bottom line. Make it a priority to keep tabs on your credit health all year long.
This piece was original featured on our sister site, Growing Produce. To read the original article, click here.
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