Can someone please give me an example of a small business loan to a farmer for commercial or industrial purposes (when farmers operate a business enterprise as well as a farm)? Or how to determine if a loan to a farmer is considered a loan for commercial or industrial purposes? Specifically, if a cattle company has a LOC for short term operating expenses associated with the cattle business is this a small farm or small business loan? The farm exists because of the cattle operation but they make money from the sale of cattle. I'm new to CRA so I am sorry if this seems like a silly question!!

Usually you see this when the farmer owns both the production and processing phases of a commodity. For example: both the timberland/harvesting plus the sawmill, the cattle farm and the processing plant, or the grain fields as well as the packaging facility.

Less often you'll find a trade farmer who runs a loosely related side business, like heavy equipment work or construction.

So in the example above (cattle company selling cattle) this would be considered a small farm loan?

Does the cattle company produce the cattle (i.e. own the feedlots) or are they just a brokerage?

In this particular case, they own and breed the cows and bulls and will sell the calves. The cattle are located on various properties not owned by our borrower. This particular loan is unsecured and is one of several businesses the borrower owns. Their main business is commerial construction and this is a side business for them.

Then I would say they are in the 'production' business of an agricultural commodity and call this a farm loan.

Great. Thanks a lot for your feedback.

I agree with Becca. I usually look into the borrowers primary source of business too on those.

No problem.

FWIW, I explain it to our LO's like this:

It's a question of who produces what. A hog farm is an agricultural loan, a sausage factory is commercial. By the same token: the timber grower is ag, while the logger is commercial; the hay farmer is ag, the broker is commercial.

Horses are trickier - a breeder would be ag, but a boarding stable owner would be commercial. The big argument seems to be where on that spectrum trainers fall.

Okay, what if the purpose is line of credit for the purchase of cattle and equipment? The husband of this loan is a logger, but they own cows to eat their grass and then sell them and what they get from that, they buy more cows and buy equipment. Would this be considered a farm loan for CRA? Sorry if I am being redundant to the previous comments.

Thanks in advance!

sounds like a cow/calf operation, which would be ag-farm.

I'm leaning that way to, pops. In essense, it's the production of cattle, which I view as Ag.

Okay, that's what I was thinking too, but I wanted to get a second opinion....or third.LOL Thanks again!