With Farmers Taking On More Debt, Wisconsin Officials Warn Against Unregulated Lenders

With farm debt expected to reach a record high this year, some Wisconsin agriculture officials worry more of the state’s farms will turn to unregulated lenders for this year’s operating loans.

Frank Friar is an economic development specialist at the state Department of Agriculture, Trade and Consumer Protection’s Farm Center. He said the center receives calls every year from farmers who have taken out loans from companies that are not regulated by state or federal financial agencies.

“You read an ad in the paper that says, ‘Show this ad now and you can have $200,000 tomorrow morning.’ Any ad that appears to be too good to be true, the old statement, is probably too good to be true,” Friar said. “In some cases, they’re specifically targeting farmers if they’re in a farm publication. In other cases, they may be trying to connect with an everyday consumer that’s looking for credit.”

After several years of low commodity prices, Friar said DATCP officials are especially worried about farmers turning to predatory lending agencies this spring because they’re not be able to secure an operating loan from their community bank or farm credit organizations.

“When you see your neighbors planting corn and beans, when you see your neighbors cutting first crop hay and if you don’t have money to do that, any of us may grab for fast cash,” Friar said. “I’m not worried about how I’m going to pay it back. I just want the money so I can be planting my crops. Because if I don’t plant a crop, I’m definitely out of farming.”

Katie Wantoch is an agriculture agent with University of Wisconsin-Extension and a former ag lender. She said farmers could also be charging up their credit cards, which will likely make their financial situation worse.

“With credit cards or some of these quick access loans, the interest rates are probably going to be more than the traditional banks would be able to provide,” Wantoch said. “There might be some more fees that they didn’t anticipate and that will certainly take a chunk out of their cash flow.”

Wantoch said farmers should communicate with their lenders about current debt and seek help from a local UW-Extension agent or another trusted source to evaluate their financial situation.

“Is there a way they can restructure debt? Farmers are very efficient but is there a way to generate additional cash flow? And after they have gone through that exercise and really looked at all of their options, sometimes the best option may be to exit the business,” Wantoch said.

Friar said farmers should contact the Farm Center to get help evaluating an unregulated lender. He said calls have already increased by 10 percent over the last year and more farmers are seeking advice on farm financials.