In the credit process for agricultural leasing, what is often required?

• A. Additional collateral
• B. Reduced collateral
• C. No collateral
• D. Insurance only

Answer: (A)

Credit risk in agricultural leasing is driven by seasonal cash flows and variability in yields and prices, so lenders often seek extra security beyond the primary leased asset. This additional collateral helps protect the lender if crops fail, prices drop, or production faces disruption, making it easier to recover funds by selling secured assets. Common forms include liens on other farm assets, equipment, stored crops, or additional property, sometimes supported by personal guarantees. Insurance may be required, but it doesn’t replace collateral. So, additional collateral is the typical risk-mitigating requirement in agricultural leasing credit.