How are they structured differently?
A commercial bank is generally owned by shareholders or a holding company and serves many types of customers: consumers, small businesses, municipalities and farms. A Farm Credit association is a cooperative lender that serves agriculture and rural borrowers, and borrowers often hold an ownership stake.
The Farm Credit Administration oversees the Farm Credit System, while banks are overseen by federal and state banking regulators.
Neither system is a substitute for your own planning. A lender's structure is only as good as your cash flow, so start with your own numbers.
What can each type do well?
Commercial banks often offer a full range of deposit accounts, payroll, cash management and consumer products, which is convenient if you want one place for farm and family banking. Some banks have strong agricultural departments, and others lend to farms only occasionally.
Farm Credit lenders focus on agriculture, so staff generally know crop and livestock cycles well. They also tend to offer specialized products, such as leasing and farm record services, though availability varies.
Ask any lender to describe a typical farm customer. If they describe operations like yours, you are likely to be understood. If they do not, keep asking around.
Does ownership make a difference?
Cooperative ownership means borrowers can vote for directors, and some associations return part of their earnings to borrowers. That feature can matter to people who value a say in their lender, but patronage depends on results and is never guaranteed.
Banks do not usually offer ownership or patronage to borrowers, though a relationship can bring other advantages such as flexibility from someone who knows you.
Remember that patronage, where it exists, should be treated as a possible bonus and not as a reason to accept higher costs elsewhere in the loan.
How do I compare offers fairly?
Ask each lender for the same information and write it down.
Put the answers side by side in a table. Seeing the full terms of two or three offers on one page often changes which one looks best.
Ask each lender to explain a bad year. What happens if you miss a payment, if your yields drop, or if a key customer fails? The answer shows the lender's attitude toward risk. Also compare the process. One lender may need weeks and extra documents, while another decides quickly. Timing matters when equipment, land or seed needs to be bought on a schedule.
- Total cost, including interest method, fees and any stock purchase.
- Loan term, payment schedule and whether payments match your income.
- Collateral, guarantees and any financial covenants.
- Prepayment rules and how renewals are handled.
- How decisions are made and how quickly.
What about service and relationships?
Service varies more by person than by institution type. A loan officer who understands your operation, returns calls and explains options is worth a lot. Ask how long the officer has worked with farms and how many farm customers the office serves.
Also ask what happens when an officer leaves. Continuity matters in a business that depends on trust over many years.
Visit in person if you can. A conversation at a kitchen table or in an office tells you more about how a lender will treat you than a phone menu does.
Can I use both?
Many farms do. You might finance land with one lender and operating credit with another, or move equipment financing to a third source. Splitting can offer flexibility but also complexity: security interests, cross-collateral and who holds first position on assets all need attention.
Tell each lender about the others and ask an attorney to review documents when collateral overlaps.
Keep a copy of every document and a list of which assets secure which loan. Clean records make future refinancing or a sale far easier.
What should I avoid?
Do not choose based on one low number without understanding the whole package, and do not borrow because a salesperson is friendly. This article does not recommend either type, and it gives no rates, which change often. Ask each lender for current terms in writing.
If you are a beginning farmer or have been turned down, FSA loans may also be an option, and your local FSA office can explain them.
Key takeaways
- Farm Credit associations are agricultural cooperatives, banks serve many customer types.
- Both can be good fits, depending on your needs and the individual officer.
- Compare total cost, structure and flexibility, not one number.
- Using more than one lender is common but needs care with collateral.
- Get terms in writing from every lender you consider.
Sources and official links
Last reviewed: November 12, 2026. Written by the Farm Money & Grants Editorial Team. Educational only, not tax, legal or financial advice. See our editorial policy.