Does Farm Legal Status Affect Interest Rates on Loans?

We examine whether farm legal status affects borrowing costs in the U.S. agricultural sector using USDA Agricultural Resource Management Survey (ARMS) data from 2019 to 2023. Results from matched-sample fixed-effects regressions show that non-family farms with more formal organizational structures, such as C- and S-corporations, generally face lower long-term non-real estate (NRE) interest rates than otherwise comparable family or individual farms. Further evidence shows that S-corporations receive lower short-term rates than C-corporations and also benefit from lower short-term and long-term NRE rates relative to other pass-through entities. However, no such differences are observed between corporations or S-corporations and other pass-through entities for long-term real estate loans. The difference between short-term and long-term NRE rates indicates that the role of legal status varies with loan maturity and collateral. The results also identify several additional determinants of loan pricing. Overall, farm legal status appears to influence lenders’ perceived risk beyond observable financial indicators, with implications for ownership structures and agricultural credit policy.