Risk Management for Lenders: Building Resilient Rural Loan Portfolios

The rural economy is no stranger to volatility. Prices swing, weather events hit at the worst moments, and supply chain disruptions can knock a farm off its feet with little warning. Commercial banks and other financial institutions serving the agricultural sector know the reality well. Some years feel like a smooth ride, and others feel like trying to sort out your balance sheet during a windstorm with a broken clipboard.

In 2025, the challenge is even sharper. Agricultural lenders across the country are seeing tighter margins, increased risk exposure, and greater pressure to fine-tune risk management practices. The 2025 AgLender Survey confirms it clearly. Agricultural lenders report signs of tighter conditions in farm profitability and credit quality in 2025, although the agricultural sector remains fundamentally strong and lenders are prepared to meet producers’ evolving credit needs.

For lenders, farmers, ranchers, and rural communities to stay resilient, stronger tools and smarter partnerships are essential. This is exactly where FarmRaise comes in, especially through partnerships like the FarmRaise and BTC Bank collaboration. These partnerships give lenders better visibility into borrower cash flow and financial risk while helping producers meet creditworthiness expectations with confidence.

Below is a practical breakdown of what lenders are facing, why risk management matters now more than ever, and how FarmRaise partnerships can strengthen any rural loan portfolio.

The 2025 Landscape: More Risk, More Need for Insight

The 2025 AgLender Survey highlights several pressure points that lenders simply cannot ignore.

Key findings from the survey

1. Profitability is slipping. Only 52 percent of agricultural borrowers are expected to remain profitable in 2025, with that number projected to fall below 50 percent in 2026, the lowest since 2020 .
2. Farm debt is climbing. Nearly 93 percent of lenders expect farm debt to increase over the next year due to tighter working capital and increased reliance on credit .
3. Credit risk is rising. Lenders expect further deterioration in credit quality, increased delinquency risk, and more volatility in borrower repayment capacity.
4. Commodity prices remain uneven. Grain and cotton borrowers face major vulnerability.
5. Interest rates continue to influence loan program decisions. Even small shifts affect loan terms, liquidity, and borrower solvency.

When you put all of this together, one thing becomes obvious. Traditional agricultural lending practices are not enough to manage today’s increased risk.

Why Strong Risk Management Matters

A rural loan portfolio touches everything from family farm succession planning to regional economic activity. That means lenders need airtight systems for risk assessment and creditworthiness evaluation.

A solid agricultural lending strategy must consider:

1. Financial risk

Borrowers are facing higher input costs and lower commodity prices. That pressure lands directly on lender balance sheets when repayment becomes harder to sustain.

2. Volatility

Extreme weather, climate-related disasters, and disruptions in supply chain logistics all intensify risk exposure.

3. Liquidity and working capital

Lower cash flow and reduced liquidity increase the chance of loan repayment problems. Without real-time insight, lenders fly blind.

4. Ratios and solvency metrics

Agricultural finance depends on accurate ratios, balance sheet reporting, and valuations. Messy or outdated records turn risk assessment into guesswork.

5. Loan structures

Short-term shocks can ripple into long-term repayment challenges if loan origination lacks accurate borrower data.

6. Increased risk across small businesses and family farms

Smaller operations often experience the hardest downturns first.

Lenders need more visibility, more accuracy, and more consistency in borrower documentation. And producers need tools that help them deliver that information without drowning in paperwork.

How FarmRaise Strengthens Rural Loan Portfolios

FarmRaise provides lenders with an improved view of borrower financial health, and gives producers the tools to stay ahead of risk factors. The BTC Bank partnership is a prime example. Farmers and ranchers who bank with BTC can use FarmRaise Tracks to organize cash flow, expenses, and valuations so lenders can make informed decisions faster.

How FarmRaise supports lenders

1. Cleaner borrower data. No more guesswork or outdated spreadsheets. Borrowers bring complete, accurate, real-time financial records.
2. Faster underwriting. Lenders get usable balance sheets, Schedule F data, and income statements without chasing paperwork.
3. Better credit risk mitigation. When lenders see the full financial picture early, repayment problems are easier to catch before they worsen.
4. Improved risk assessment. With consistent data, lenders can apply better ratios, evaluate valuations more accurately, and forecast risk exposure more reliably.
5. Supports USDA lending programs. FarmRaise is a USDA partner, which helps borrowers prepare stronger applications for agricultural loans and loan programs.
6. Smoother loan repayment and servicing. Clear records mean fewer surprises on both sides of the desk.

How FarmRaise supports borrowers

• Easier loan repayment planning
• More confident business plans
• Higher creditworthiness
• Better preparation for loan terms, crop insurance claims, or federal reserve reporting expectations
• Reduced vulnerability during downturns and weather events

When both sides have better data, everyone wins. That is the kind of sustainability lenders and rural economies need.

Building a More Resilient Loan Portfolio

Lenders today are managing increased risk, but they have powerful opportunities to build a stronger financial system in rural America. A resilient loan portfolio includes several key practices.

Core risk management practices for agricultural lenders

1. Diversification

Mixing real estate, operating loans, livestock, and crop sectors reduces higher risk concentrations.

2. Stress testing

Running stress scenarios on interest rates, commodity prices, and liquidity improves decision-making and planning.

3. Real-time monitoring

The old annual review cycle is not enough. Borrowers using accurate digital tools make continuous monitoring possible.

4. Strong borrower communication

Consistent conversations reduce misunderstandings and help producers stay aligned with lender expectations.

5. Loan terms tailored for volatility

Flexible structures help farmers weather downturns without compromising financial stability.

6. Active use of safety nets

USDA subsidies, crop insurance, and lending programs help reduce aggregate financial risk.

7. Partnerships that support better data

This one is non-negotiable. Better records equal better decisions. It is that simple.

Why Lenders Should Partner with FarmRaise

If lenders want more reliable metrics and lower credit risk, partnering with FarmRaise is one of the fastest ways to strengthen a rural loan portfolio.

Lender advantages of partnership

• Better cash flow visibility
• More consistent loan origination documents
• Reduced administrative load
• Stronger real estate and agricultural credit evaluation
• Improved risk assessment tools
• Greater confidence in loan repayment projections

FarmRaise also enhances decision-making by improving data accuracy for borrowers who have historically struggled with paperwork, technology access, and financial organization.

And for farmers and ranchers, a FarmRaise-equipped loan appointment feels less like a root canal and more like a routine checkup.

A Call to Action for Lenders

If you are a lender, commercial bank, credit union, or agricultural lending institution, this is the moment to upgrade your system. Risk is rising, but so is the opportunity to build a stronger financial system for rural America.

FarmRaise is here to help lenders:

• reduce increased risk
• improve credit risk visibility
• streamline underwriting
• support more borrowers
• strengthen long-term financial stability

The agricultural sector needs lending institutions that are prepared, adaptable, and equipped with the right tools.

A Call to Action for Farmers and Ranchers

If you are a farmer, rancher, or rural producer, tell your bank or agricultural lender that you want FarmRaise as part of your loan support system. It helps you stay organized, improves your loan applications, and gives your lender what they need to advocate for you during tough seasons.

A strong partnership benefits every borrower in the community. Sometimes the biggest change starts with a simple nudge across a loan officer’s desk.

The Future of Rural Lending Is Collaborative

Risk management is not about avoiding risk. It is about being prepared, staying organized, and giving lenders and borrowers the tools they need to stay resilient through both good years and challenging ones.

FarmRaise partnerships create clarity where there has been confusion, consistency where there has been chaos, and real strength where rural loan portfolios need it most.

If your institution wants to reduce vulnerability, improve agricultural lending outcomes, and build a safer, smarter loan portfolio, reach out today. Your borrowers will thank you, and frankly, your loan officers will too.