The Loan Options for Oklahoma’s Hemp Producers
Hemp has attracted plenty of interest from farmers, and plenty of caution from lenders. The crop is regulated, the markets have moved a lot and the buyer list can be short. If you are thinking about financing a hemp operation in Oklahoma, here is how to approach it.
Why do lenders treat hemp carefully?
A lender wants predictable repayment. Hemp has had volatile prices and buyers, and some past producers had trouble selling what they grew. Because of that, many lenders ask for signed contracts or proof of a buyer before they consider a request.
That does not mean no. It means you should come with more evidence than a corn or wheat grower would need, including a clear market plan.
Keep your own copies of every agreement. Contracts that look firm can have conditions about quality or testing, so read them closely and ask an attorney about anything vague.
What rules apply to growing hemp in Oklahoma?
Hemp production is regulated at the state and federal level, and rules about licensing, testing and handling can change. The Oklahoma Department of Agriculture, Food and Forestry is the place to check current state requirements, and USDA pages cover the federal side. Read them yourself rather than relying on secondhand summaries.
A lender will want to see that you are licensed and compliant. Keep copies of licenses, test results and inspection records in your file.
Penalties for noncompliance can be serious, so ask the agency about anything you do not understand and keep your records current.
What are you actually borrowing for?
Hemp costs differ by use. Fiber, grain and cannabinoid crops need different equipment, labor and processing. A greenhouse or drying facility is a very different loan than seed and operating money.
Be specific about the product, the buyer and the processing path.
Costs also depend on whether you grow outdoors or under cover. A greenhouse adds a building loan to the picture, which changes the term and collateral.
- Seed or planting stock and field preparation
- Irrigation and drying or storage facilities
- Harvest and handling equipment
- Testing and compliance costs
- Operating money until you are paid
Which lenders might consider it?
Start with the lenders that already know your operation. Ask a local bank, credit union or Farm Credit association whether they lend to hemp growers and what they need to see. Some may say no, and that is useful to know early.
The Farm Service Agency has loan programs for producers who qualify, but ask whether a hemp operation is eligible under current rules. The SBA and USDA Rural Development may be options for processing or value-added businesses. Confirm everything directly.
A lender may require additional collateral beyond the crop, because a hemp crop alone is hard to value. Ask what that means for your land and equipment.
How can insurance and risk help?
Ask whether crop insurance is available for hemp where you farm. The USDA Risk Management Agency publishes what it covers, and availability differs by crop and county. A lender may ask about coverage as part of underwriting.
Prepare for the risk that a crop fails a required test or loses its buyer. Know what that would mean for your payments before you borrow.
Weather matters as much for hemp as for anything else. Check the U.S. Drought Monitor and the National Weather Service for conditions before you plant.
How do you test a hemp business plan?
Build the budget with a lower price than the best you have heard, and with some of the crop unsold. If the loan still works, the plan has breathing room. If it fails, adjust the scale.
OSU Extension offers research and crop information that can help you judge yields and practices. For general budgeting ideas, see this crop planning guide and this farm money page. For lighter reading between budget drafts, try farm.FM ranching stories.
Start small if you can. A modest first crop proves the market and your process, and it makes any later loan request more convincing.
Where else can you learn more?
Talk to growers who have been through a few seasons and ask what went wrong. For some perspective, farm.FM farming stories cover the ups and downs of new crops, and a farm.FM story about hemp farming may fit. Also write down who you will call if your buyer disappears, because a plan without a Plan B is incomplete.
Over at farm.FM they like to point out that every new crop arrives with a gold rush and a long hangover. Get a licensed professional to review your plan. This site is for education only, not a lender, and not financial, legal or tax advice.
Sources and further reading
- Oklahoma Dept. of Agriculture, Food and Forestry: state agriculture agency
- USDA: U.S. Department of Agriculture
- Farm Credit: cooperative agricultural lending network
- FSA Farm Loans: FSA direct, guaranteed, microloan and emergency loan information
- SBA: small business loans and counseling
- USDA Rural Development: rural business and community programs
Ask locally: Ask the state agriculture department's hemp program staff about licensing, and an Extension specialist about crop budgets.
General education only, not financial, legal or tax advice, and Oklahoma Rancher Loans is not a lender. Rates, terms and deadlines change, so confirm current details with the lender or agency.