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Why the Crop-Lien Was No Good for Merchants

High risk businesses have had a long tradition of discrimination by traditional lenders. As a result, those in the high risk industry have turned to less than reliable sources of credit for funding, or pay high interest loans from banks. This trend can be traced all the way back the Post- Civil War era. The crop-lien system was a credit system used by sharecroppers and tenant farmers who didn’t own the land they worked. Some might wonder exactly why was the crop lien system bad for merchants and farmers? Farmers got credit before the planting season that required them to borrow against the value of their anticipated harvests. In exchange, local merchants gave farmers food and supplies throughout the year on credit. Once the crops were harvested, farmers turned over what they made on the crops to the merchants to pay back their loan. If it was a good year for the farmer, the merchant’s loan was paid off. However, when it was a bad year, the merchant was unable to pay off the loan and the farmer started the next year in the red.

The crop-lien system was finally abolished in the 1940’s once America became prosperous again, and better means of lending were established that were beneficial to farmers and merchants. From a merchant standpoint, the crop-lien system was a risky proposition, as most merchants borrowed money to buy supplies, then charged the farmer interest and a higher price for merchandise bought on credit. If the farmer didn’t make enough to cover the credit borrowed from the merchant, the merchant would not have the funds necessary to repay their loan for equipment and other items purchased by the farmers.

Farming and other agricultural businesses are still a high risk venture. Merchants who work in this field need and deserve fair borrowing procedures to secure their credit and financial futures. First American Merchant Cash Advance (FAM) provides agricultural merchants with critical merchant financing, regardless of credit. FAM provides no credit check financing along with flexible programs designed to deliver financing within 72 hours. You won’t have to submit any financials or tax returns to qualify. Get the funding your business needs today.