Farm Loan Options for Small Farmers


Small farmers that are unable to secure financing from a traditional bank, may have luck with one of the FSA programs that are available. The programs are for farmers that are just starting out that don’t have the credit or capital to qualify for financing elsewhere or for farmers that suffered financial ruin due to circumstances outside of their control.

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The FSA programs can help small farmers get the capital they need to get started. The FSA has a variety of programs available, including the following

FSA Guaranteed Loans

The FSA Guaranteed Loans are loans written and funded by private lenders. The difference between this type of loan and a private loan from the lender themselves is the guarantee the FSA provides. Because FSA loans are for borrowers that could not secure financing the traditional way, the FSA guarantees the loans. This means they promise to pay the lender back up to 90% of the funds they lose should you default on the loan.

The FSA does oversee the loan approval and all lender activities to make sure that they act in the best interest of the FSA. But, the FSA does not directly approve, underwrite, or fund the loan.

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FSA Direct Loans

If you are unable to qualify for the FSA Guaranteed program, you can turn to the FSA directly for the FSA Direct Loans. These loans are funded by the FSA themselves. The FSA gets involved in your operations to make sure that you are operating adequately and can afford the loan. The FSA provides evaluations on all of the following aspects of your farming business:

  • The land/buildings
  • Equipment
  • Management (both financial and production)
  • Mission and goals

Finding the Right Loan

No matter the program you fall into, you have a variety of loan options at your disposal:

  • Ownership loans – You can use these funds to buy farm/land. You can borrow as much as $300,000 with a guaranteed loan or $200,000 with a direct loan.
  • Operating loans – If you need funds to start your farm’s operation but already have the land, you can borrow up to $400,000 for a guaranteed loan and $200,000 with a direct loan.
  • Emergency funds – Only direct loan customers can apply for this type of funding which helps farmers that experienced a loss, whether physical or production. You can borrow up to $500,000 for this reason.

If you are unable to secure farm financing using any standard banks and lending methods, contact your local FSA office to see which lenders work with them in your area. You can then apply for either the guaranteed or direct program and see if you can obtain the funds you need that way.

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