How a Specialty Finance Provider Scaled Nationwide with Agros® Finance Solutions

Ag Resource Management LLC (ARM) is an agricultural lender with farmer-friendly options and a total loan portfolio of nearly $1 billion. Their proprietary approach to loan underwriting includes a focus on personal service, quick loan approval and insurance-backed financing, so that farmers are not required to use land as collateral.

In 2021, ARM was seeking partners to help enable them to expand their business, minimize their overhead and lower the cost of capital needed to fund the business. One key driver of all of these needs was risk management, in particular how to better match price (interest rate) to portfolio capital and customer risk. To do so, they needed a technology solution to support their specialty financing operations, including configuring their pricing, crop monitoring, interest rate calculation and customer retention models.

ARM incorporated Agrograph’s risk assessment solutions into its growth business model, with a goal of standardizing risk evaluation for loan applicants across the U.S. The partnership was incredibly successful – ARM has scaled its business by 50% over the last two years.

Challenges to scaling up

ARM occupies a unique position in the agricultural finance market. Unlike a traditional bank or credit union, ARM works as a non-regulated specialty finance vehicle that funds growers not through the collateralization of assets (fields, farm, and equipment), but through revenue and insurance coverage. The reliance on the growers’ ability to raise a crop and carry sufficient crop insurance coverage creates an opportunity for ARM to lend to a growing segment of US ag producers - those with high inputs costs, revenues and risk, or the many heavily leased farms that represent enterprise-level operations.

Few traditional lenders can offer this revenue-based approach, which tackles the challenges of providing sufficient financing to farmers with less waiting and worry. To responsibly scale its reach, a creative approach and solution was paramount to address the following challenges.

Challenge 1: The need for field-level data

ARM needed a way to onboard new and existing clients, while matching their field to farm to loan. While the bank could use existing data like a loan summary and farm address to assess applicants, it did not have access to a database to run field-level monitoring, risk analysis, or portfolio management across 30 U.S. states.

ARM partnered with Agrograph to implement its automated data analytics and risk assessment solutions, which combines satellite imagery and machine learning to deliver field-scale, industry specific insights. With this technology, ARM had the ability to analyze production, climate and global market data for each operation in its book of business and those associated with prospective customers – meaning they could assess new loan applicants and provide financing faster than ever.

Challenge 2: Crop monitoring on a large scale

Given ARM’s large footprint of 28 offices managing 500,000 acres, the bank found it difficult to monitor all fields for each of its clients across all seasons. It was challenging to validate and verify that reported acres and planted crops matched the loan summary documentation. Making the situation even more complex was the fact that ARM had to wait until June and July every year to receive crop confirmation details.

Using Agrograph’s technology, ARM was able to receive insights on field and county level crop production, weather conditions, crop health conditions, and drought conditions across their portfolio. This meant the bank was able to access crop data in real time, so their loan officers had all the information necessary to address areas of concern and customer needs.

Challenge 3: Using data to engage customers

From July to October of every year, once crop verification is complete, ARM focuses on remaining loan approvals, reconciliation, harvest validation and capital markets summaries. The bank needed a data tool that could be used to both better engage their clients and inform lending strategies for the next year.

ARM implemented Agrograph’s solution, which provided data analysis on the bank’s portfolio and its troubled assets. This allowed ARM to focus on providing personalized service to growers the growers that needed the most help with their operations. In addition, the bank used Agrograph’s tool to improve their customer retention efforts. Detailed customer data informed ARM’s strategic decision-making for next year, based on pricing and risk, including where to offer discounts, where to offer additional services, and where to move out.

A custom technology integration made risk assessment easy.

ARM and Agrograph developed a seamless technology integration by which ARM’s existing loan origination system connected to the Agrograph’s automated crop monitoring and risk assessment process. Agrograph developed a database that improves identification and information sharing for new loan applicants, meaning ARM could automatically merge field, farm and loan information to quickly and accurately determine risk levels for each loan. This is a unique capability that most lenders do not have access to.

With this integration, ARM was able to access an accurate and granular view of their portfolio, empowering them to make data-driven decisions about each new loan applicant. This included the ability to identify high risk areas, better match price to risk, use data to determine interest rates and retain more customers through improved loan strategies.

Expanding to 30 states and beyond

ARM was able to successfully grow its business to serve farmers in 30 U.S. states. By implementing Agrograph’s solutions to automate data collection and analysis, the ARM team was free to focus on making confident, data-backed decisions and providing top-notch personal service to farmers.

“We’re incredibly proud to see the growth ARM has achieved,” said Jim O’Brien, CEO of Agrograph. “Our partnership highlighted the ways that automation and access to farm-specific data can help a lender scale up and better match price to risk necessary for portfolio management while staying focused on customer success and engagement.”