Carlyle Group Inc. is purchasing $250 million of loans from FarmOp Capital, a lender that helps farmers deal with the seasonal flow of funds in agriculture, as the industry faces a wave of bankruptcies.
The deal is structured through a “forward flow agreement,” in which Carlyle commits to buying the loans before they are originated, according to a statement.
The loans go to farmers looking to buy supplies early in the season and sell grain after the harvest, Keir Renick, FarmOp’s chief executive officer, said in an interview.
The deal comes as farmers are struggling to cope with falling crop prices, rising costs and reduced demand from China. In the first half of the year, small-business bankruptcies filed by farmers and fisherman reached a peak not seen since 2020, which was the tail end of a similar cycle of low-prices, Bloomberg reported.
“The industry is going through a tough period,” Renick said. “Farmers can get into trouble when prices go down and they are not hedged.”
The banks that previously extended these kinds of loans to farmers generally considered land ownership in their decisions. But banks have pulled back, creating an opening for specialty finance firms.
FarmOp’s working capital loans, which last an average of 18 months, are usually around $3.5 million and tied to grain crops like corn, soybeans and wheat. The loans are secured by the crops themselves, crop insurance, the forward buying contracts and hedging contracts that FarmOp puts in place to insulate price risk.
The firm primarily lends to farmers who rent their land and lack collateral even if they have strong operational track records — a group often overlooked by traditional banks.
For Carlyle, the deal is part of a bigger push into asset-backed private credit, a market that spans everything from consumer loans to residential mortgages. The firm’s platform, which has $9 billion in assets under management, has expanded over the last two years through deals like one financing loans tied to residential solar cells from Sungage Financial. Carlyle also recently landed a partnership with Citigroup Inc. to provide debt and equity financing to growing financial technology firms, Bloomberg reported.
This is a “very stable but growing asset class as it’s secured with multiple contracts,” said Akhil Bansal, head of asset backed finance at Carlyle, referring to farm lending. “We are looking to partner with companies that respond to a need in the market and that actually solve problems for borrowers.”
Private credit firms that are growing in the market have focused on buying large consumer loan portfolios. Castlelake LP and Blue Owl Capital Inc., for instance, have purchased billions in consumer loans from financial technology firm Pagaya Technologies.
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