Farming Loans
Whether you are a beginning farmer or running an already established operation, the need for farming loans in order to have access to land and capital is of primary importance.
Sources for money are needed to purchase acreage, start or transform a farm or ranch, and purchase supplies from seed and feed to combines and dairy machines.
Agriculture is big business in the Unites States, supporting one out of every eleven jobs. Not only does it provide 80 percent of the food Americans consume, it provides raw materials used in the manufacture of other finished goods such as cotton and wool for textiles, hops for beer and corn for ethanol.
America exports products for consumption and manufacturing globally. The main consumers of our exports are typically Canada, Mexico and China. In 2016 alone, American agriculture exported over 129 billion dollars of ag products like beef, wheat, cotton and soybeans across the globe. Between 2009 and 2016 U.S. agricultural exports reached its highest level in history with over a Trillion dollars of shipped product.
The American farm is still a family or individually owned operation. Most of the 2.1 million farms and ranches in the U.S. are run by an owner-operator managing an average of 434 acres.
With its rich history of providing food for our nation and stoking our economy, this is a job many men and women take pride in. It takes not only a love of the land, but hard work and determination. With their unparalleled work ethic, the American farmer and rancher have reached iconic status in U.S. lore.
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Supporting Farmers
Like all businesses, farming and ranching take capital. Farming loans are available from a variety of sources, with loan types covering needs that range from purchasing acreage and the farm dwelling, to paying for seed and feed.
The U.S. government is committed to supporting current farmers and nurturing the farmers of the future. That commitment is embodied in the United States Department of Agriculture (USDA). The cabinet department’s main focus is agriculture, but it also fosters and assists farmers and their communities through its department, the Farm Service Administration (FSA).
Not only do they assist farmers, but they touch the lives of all citizens with education and research; ensuring the safety of meat, poultry and eggs for consumption; and through land and water conservation.
The USDA, through FSA, uses a portion of its yearly budget to fund farming loans. These are available to farmers and ranchers running all sizes of operations. Whether you want to purchase the land needed to get started, want to transform to organic growing methods or need funds to cover supplies and rent, there is a loan type that will serve your needs.
Loan Programs
Another mission of the FSA is to facilitate farming for the traditionally underserved including women or minority groups such as Native Americans, Hispanics, and African Americans.
The FSA also has youth loan programs that enable young people access to farming loans. These funds help enable the setup of small, moneymaking operations such as raising chickens for eggs or for 4H projects.
There are also special programs and farming loans available to provide extra assistance to farmers in their first ten years of business. These programs help train and nurture the future ranchers and farmers we need. Here are some of the loan types available through the USDA FSA.
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Direct Farm Ownership Loans
Direct
Farm Ownership loans allow up to 100 percent financing for purchase or improvement of farms. They are funded, serviced and owned by the Agency. And since there are no requirements for previous or current farm ownership, this is an excellent way for an owner-operator to purchase a farm.
The funds can also be used to make certain types of improvements such as building or repairing dwellings and outbuildings, or installing soil and/or water conservation methods such as a water-monitoring system.
There are three types of farming loans available through this program that can be chosen depending on the needs of the borrower(s):
regular, joint financing and down payment.
Guaranteed Farm Loan Program
The FSA provides the Guaranteed Farm Loan Program to assist with purchase and operating farms. These loans are funded, owned and serviced by a USDA-approved commercial financial institution.
However, they are also reviewed by the Agency Service Center for approval of guarantee. If approved, the lender is notified and after funds are dispersed, the USDA issues the guarantee. Guaranteed loans mean less risk and more business for lenders and more funds at competitive prices for borrowers.
There are two types of Guaranteed Loans: Farm Ownership and Farm Operating. The ownership loans may be used for purchase of a farm or expanding the acreage of an existing farm. Operating loan funds can be used for purchases or expenditures that are essential to the running of the farm.
EZ Loan
A newer version of the Guaranteed Farm Loan Program is the EZ loan. This is much the same as the Guaranteed Farm Loan Program, but these are smaller farming loans with the borrowing amount capped at 100,000 dollars.
They are also used towards either the purchase of a farm or essential expenditures for running the farm. However, it has a streamlined application process.
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Microloan Program
In keeping with its mission to promote and assist non-traditional farmers, the FSA offers the Microloan Program. The maximum borrowing amount for these loans is 50,000 dollars.
However, there is no minimum borrowing amount. They are also available in two types, Farm Ownership and Farm Operating. The FSA owns and services these loans. The funds from these farming loans are available to alternative farmers such as those working in hydroponics, aquaponics, vertical gardening or urban gardening. It can also be used by organic farmers or those in niche farming such as growing shiitake mushrooms.
Targeted Loan Programs
The FSA also has targeted loan programs to assist traditionally underserved groups such as youth, minorities and women. These are the Minority and Women Farmers Loan, Youth Loans, and Beginning Farmers and Ranchers Loan. There are also other specialty loans such as emergency loans.
Commercial Banks
Commercial banks are another source of farming loans to operations of all sizes. Most banks that were lending to agriculture came through the recent financial crisis in good shape keeping lines of credit open to farmers and ranchers during and after the crisis.
Banks whether large or small, credit unions and lending institutions offer a large portfolio of products to meet the needs of their clients. They range from traditional mortgages to secured and unsecured lines of credit.
Large commercial financial institutions serving the agricultural market typically have departments and loan officers that have an understanding of the business climate of farming and ranching – either broad-based or as a specialist in certain ag areas.
Local banks that primarily serve smaller agricultural areas understand the needs of the communities they serve. Many of these employees live with and understand the challenges and benefits faced by the farmers in their area.
By taking advantage of private enterprises such as Federal Agricultural Mortgage Corp. (Farmer Mac) they are able to access money at competitive rates that they can pass on to the borrower. This allows smaller banks to compete with larger lenders in the overall costs their customers pay for borrowed money.
Large or small, commercial institutions are equipped to make loans for acreage and large equipment purchases, as well as expansion, operating and emergency expenses. Farming loans from one of these institutions, the FSA, or a combination of loans from both sources will help provide the money you need for your
farming venture.
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