April 23

Small farms are receiving more loan dollars from banks but the banks are making fewer loans, a new study shows.  The state-by-state study was published by the Office of Advocacy of the U.S. Small Business Administration and ranks the "small farm friendliness" of banks, offering an overview of small farm lending nationwide.

The study finds that while the stock of small farm loans under $250,000 increased by 3.9% -- from $48.4 billion in June 1997 to $50.3 billion a year later -- the number of loans declined by 4.6%.  Either the average loan size is increasing or many small loans have been repaid, the study concludes.

Those banks with less than $100 million in assets have the largest share of small farm loan dollars as a percentage of total assets (9.9%).  The largest banks have a small farm loan share of only 0.1%.

More than half (51.1% of dollar value) of small farm loans are made by the smallest banks, although these banks own less than 6% of total bank assets.  Conversely, the study found, the largest banks, that own 56.7% of bank assets, make only about 5% of small farm loans.

Recent consolidations in banking have hit the smallest banks the hardest, reducing their number by 6.7%, from 6,047 to 5,644.  That means there are fewer small banks to lend to small farms.

"The small farmer can take little comfort from growth in farm lending that is concentrated in large loans over $1 million," said SBA Chief Counsel for Advocacy Jere W. Glover.  "Such loans increased at more than six times the rate of small loans in 1998."