Due to inflation and market volatility that affect agricultural necessities such as labor, seeds, fertilizers and fuel, many farmers may need to seek external funding to start, grow or maintain their business.
Farm debt for farm-specific lenders increased 7% in 2024 compared to the previous year, according to the Kansas City Federal Reserve. Unrealistic real estate loans rose 10% with farm lenders. These figures suggest that farmers will need funding to keep their businesses running.
Let’s take a closer look at farm loan options and how to get a farm loan that’s right for your business.
Farm Service Agency (FSA) Loans
Farm Service Agency (FSA) loans are government-supported loans to help farmers begin or expand their farm growth. Farmers may be approved if they do not receive traditional funds elsewhere or are eligible as socially disadvantaged business owners.
FSA loans are provided in the form of guaranteed or direct loans. Guaranteed FSA loans are issued through a commercial lender and the FSA is guaranteed at up to 95% of the loan amount. Direct loans are directly funded and overseen by the Farm Services Agency.
FSA Farm Loan Type
The FSA offers multiple farm loan programs to support a variety of funding purposes. They include:
Current FSA loan interest rate
If you are planning to apply for an FSA loan, please see the current FSA farm loan fees updated on the FSA website. The current fees for various FSA loans are as follows:
| FSA Loan Program | Maximum FSA loan rate |
|---|---|
| Directly owned by the farm | 5.75% |
| Direct farm place rights down payment | 1.75% |
| Direct farm management | 5.00% |
| Operating Micro Loan | 5.00% |
| Young people | 5.00% |
| emergency | 3.75% |
| Guaranteed FSA Loan | Up to 11.03% |
*These prices are as of June 5, 2024
Other farm loans to consider
Apart from FSA loans, you can also get a farm loan from a lending agency that specializes in this type of loan. Compare the following farm loans with their features to determine which is more appropriate.
Farm Credit
Farm Credit is a network of lending institutions that provide loans to all 50 states and Puerto Rico. As borrowers become owners, these cooperatively owned institutions prioritize clients over profits, supporting farm credit, becoming the largest single farm lender in the United States in 2024, farm credit exceeding $3 billion for clients, and has continued to do so since 2012.
Farm Credit has over 600,000 customers in four districts. Each district has wholesale banks that fund cooperative institutions. Home buyers and infrastructure providers in farmers, farmer-owned cooperatives, agribusinesses and rural communities may qualify for farm credit loans. Depending on the lender you choose, there are several types of loans and services.
Farms and finance
Farm Plus Financial is a national farm and land lender that provides service suites to the farmers’ freedom. Those seven loan options include term loans and a credit line. Loans range from $200,000 to $50 million, and it can usually take one to three months to fund them. Lenders have several rapid lending programs that allow you to approve your loan in just 72 hours.
That basic loan requirements include:
- 660 Personal Credit Score
- 75% loan to value ratio
- 50% LTV on the credit line
- At least 5 acres of property
American Farm Mortgage & Financial Services
American Farm Mortgage & Financial Services was founded in 1989 and is a subsidiary of Legence Bank, which has been around since 1906. The lender offers six different loan products, including agricultural real estate loans, recreational land loans, and FSA guaranteed loans. If you need quick funding and have a credit score of at least 720, you can qualify for an AGXPress loan. This can be approved on less than one business day. Lenders also offer farm leases to help farmers cover the costs of their machines and equipment.
What is a farm loan?
Farm Loans are business loans specifically designed to meet the unique needs of the farming community. Loans can be used to purchase, operate and expand farms and farm businesses. Farm loans can be obtained through traditional banks and credit unions, but some people specialize in farm loans and offer professionals, appraisers, or other services.
Farm loans can come in the form of term loans, real estate loans, or business lines for farms, land, or business lines. Professional lenders may offer loans designed for beginner farmers.
What can I use farm loans for?
Lenders offer a variety of agricultural loans to meet a variety of purposes, but they can design several loans for specific uses. You can use farm loans.
- Buy farms and land
- Supports down purchase or closure costs
- Purchase equipment, livestock or seeds
- Expanding business operations
- Build new buildings on existing land
- Irrigation or Conservation Project
- Crop loss and natural disasters
- Marketing and other operating expenses
How to get a farm loan
To get a farm loan, you need to research all your options to find the best funding options to meet your needs. Where to start when comparing farm loans:
1. Determine the amount of funds you need
Before searching for a farm loan, stock up on the type of purchase you need and the capital you have on hand. Lenders may require a down payment. The amount applied to the loan reduces the amount and payment of the loan. Total purchases (or emergency loan losses) must be tallied to determine the amount of loan you need.
2. Compare farm funding options
Lenders who provide farm loans may provide specialized products and services to support farmers. As each lender has a different exact product, it is recommended to carefully compare each lender’s options.
For example, some lenders offer FSA guaranteed farm loans, farm real estate loans, or farm leases. Lenders may also offer explicit loans to speed up approval for eligible applicants.
3. Select a farm loan and apply
You can then select a funding option that matches your business growth strategy and apply for a loan. You may want to overcome the complexities of your business and rely on a loan expert or FSA representative.
You can then gather the information you need to complete the application. Each lender often provides its own document list on its website.
Farm loan replacement
Farm loans are not your only option to fund farm operations and costs. If you don’t qualify for a farm loan, or if a professional loan isn’t ideal for you, you may consider these sources.
SBA Loan
Like FSA loans, you can earn funds through a loan programme overseen by Small Business Management (SBA). The SBA loan is provided through an approved lender and is partially guaranteed by the SBA.
Lenders can offer many SBA loans, including:
- 7(a) Loan: The most commonly used program, SBA 7(a) loans, offer a high of up to $5 million to help small businesses obtain the working capital they need for growth.
- 504 Loan: The SBA 504 loan helps small businesses earn funding for new equipment or real estate or building construction projects of up to $5.5 million. The loan must be used for property that expands your business.
- SBA Micro Loan: Like FSA microloans, these loans offer loans of up to $50,000 through microlenders. Lenders are often nonprofit organizations that work with underprivileged business owners. They may ease applicable requirements, such as accepting bad individual credit scores and startups.
Business grants
If you are not entitled or the business you are paying back your loan is not stable, we recommend applying for a business grant. The federal government, including the US Department of Agriculture, offers a variety of agricultural grants and support programs.
These grants can meet the funding needs of beginner farmers, farmers’ markets, organic producers and more. Farmers can also search for grants through state or local governments. You can find Grand Tristing and requirements online through the state’s agricultural sector. Alternatively, you can learn about local funding resources through our local small business development centre.
Small business loans from banks and credit unions
Typically, if you have strong credit, multi-year business and revenue established, you can qualify for a traditional business loan. Through traditional banks and credit unions, farmers can usually meet representatives of mortgage guidance in brick-and-mortar stores. Banks and credit unions tend to offer multiple loan products to suit the needs of different lenders.
Small and Medium Business Loans from Alternative Lenders
Small businesses that are not eligible for loans from traditional lenders can rely on alternative lenders to receive the funds. Alternative lenders can include lenders who offer non-traditional business loans, such as online lenders, loan markets, and bill financing. These lenders tend to ease loan requirements, accept poor credit, and offer quick or short-term business loans. However, these lenders can pay interest and fees.
Conclusion
The agricultural industry faces a variety of challenges that require business loans to purchase land and equipment, build buildings, or compensate for cash shortages. Farm loans provide the ability to narrow down to a variety of agricultural needs through loans specialized for these regions.
However, all lenders and farm loans offer unique requirements, including farm management experience and financial stability for individuals and businesses. Farmers are good for comparing loan types with different lenders, including government-supported FSA loans.
