6 Things to Know About Farm Loans

You may be wondering how you can get the cash needed to start a new farming business or how you can expand your existing farm. Obtaining a loan for your farm is a significant financial decision that can have a lasting impact on your livelihood.

Arming yourself with knowledge about what kinds of programs are available will help you make a wise decision, so here are six things you need to know.

1. Most farm loans are best suited for beginnings — According to the National Sustainable Agriculture Coalition, resources of the U.S. Department of Agriculture (USDA) are aimed at helping the next generation of family farmers and those who are not served by commercial credit sources.

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2. Farm loans are made available by the Farm Service Agency (FSA) — The FSA is a collection of agencies that is dedicated to helping farmers just starting out, and it should be the first place new farmers look for financing, the Center for Rural Affairs (CFRA) advises.

3. There are strict criteria for obtaining an FSA loan — According to the CFRA, new farmers must meet the following criteria to be considered for financing: They must have been in farming for more than three years, but fewer than 10; they must not be eligible for financing elsewhere; they must agree to borrower training; and they must not own farmland in excess of 30 percent of the average farm size in their county.

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4. There are guaranteed loans and direct loans — Benefits.gov says guaranteed loans cannot exceed a total indebtedness of $1,392,000. Maximum indebtedness for direct loans is set at $300,000.

5. Application process differs for different types of loans — The National Sustainable Agriculture Coalition says that while both direct and guaranteed loans are serviced by the FSA, farmers should apply for guaranteed loans through their bank, credit union, or other private lender. Direct loans can be applied for directly through the FSA.

6. The FSA has helped many new farmers — In its 75-year history, the National Sustainable Agriculture Coalition says the program has provided more than $60 billion to help new farmers.

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