What must be confirmed before a subordination can be granted?

For a subordination to be granted, it is essential to confirm that it serves a valid agricultural purpose. Subordination in this context refers to a situation where the lender agrees that their claim or lien on a property will be secondary to another claim. When considering this, financial institutions typically require that the purpose of the loan aligns with agricultural needs, ensuring that the funds are used to support the farming operation effectively.

This focus on agricultural purpose is critical because the primary goal of the financing is to support the agricultural economy and the viability of farming operations. If the purpose does not align with agriculture, it could jeopardize the intended use of the funds and diminish the agricultural enterprise's potential, thereby affecting the lender's investment and overall objectives.

While assessing the value of the land, reviewing a business plan, or checking the debt-to-equity ratio might also be part of the broader evaluation process for loan applications, they are not specifically required to confirm the validity of the agricultural purpose linked to subordination. The primary concern here is ensuring that the funds are allocated toward a legitimate agricultural endeavor.