Farming is tough job, with many rewards. Farmers are some of the greatest stewards of our ecological resources and are the backbone on which the American economy is built.
In settler times, farming was a necessity in order to put food on your families table and keep the community from going hungry. Homesteads were not single-product producers. They not only grew their fruits and vegetables, but oftentimes raised their own livestock as well.
Nowadays, with the advancement in farming machinery and tools, as well as the advancement in shipping and moving of goods, farming is no longer relegated to being an all-encompassing venture.
This means there are now specialty farms. On these specialty farms, like dairy farms, the primary output is one product. However, ranchers may have complimentary livestock and crops to aid their business and the health of their animals or land.
On these specialty farms and in general, the average age of farmers is increasing. Farms are oftentimes passed down through families, but with the average age increase, there will be more opportunities to get into farming and purchase farmland.
This means that there will be acreage available with outbuildings and shelters for livestock, as well as acreage that will be raw, in which you can design your farm from the ground up. In order to purchase farmland, however, you may need farm loans.
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Farm Agricultural Mortgages
farm agricultural mortgages, are directly related to the purchase of farms, unlike farm loans. However, in some cases these can be used to purchase residential or other properties within rural areas.
Farm loans, in general, are typically a line of credit, or capital, that is applied to the obtaining of farming implements and labor. This includes machinery and tools needed to work the farm itself.
The United States Department of Agriculture (USDA) through their Farm Service Agency (FSA) is a lender of farm loans. These loans provide access to credit, offering opportunities to ranchers and family-sized farmers.
These farm loans are intended for people begin, improve, expand transition, market and strengthen ranching operations and family farming. These loans are designed to attract young people who are involved in youth organizations that are geared towards agricultural, like 4-H.
They allow them to get the financial assistance they need for education, agricultural projects, that are income producing.
These farm loans from the FSA are now available for roof-top and urban farmers. They are available for beginning farmers, and farmers who are racial and ethnic minorities. They also reserve some of these farm loans for women producers.
Farm Loans For Operations
The FSA also has farm loans for operations that are direct sale, organic, and specialty crop. They are also looking for farms that use alternative and technologically advanced farming methods like vertical farming, freight container farming, hydroponics (farming in water), and aeroponics (the science of growing plants in air or mist without the use of soil or any type of aggregate).
Interest rates are one of the biggest concerns for most farmers when borrowing capital. Knowing what types of rates you qualify for can help you determine what principal amount you can afford to borrow outright.
In the beginning of July of 2017, the FSA lists their current interest rates ranging between 1.5% and 3.85%. They also have several different type of farm loans available.
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Direct Operating Loans
Direct operating loans are those that are used to help further your farm. They are intended for the borrower to use them to purchase farm equipment and machinery, farm chemicals, livestock and feed, and insurance. They can also be used to make repairs or minor improvements to fencing and buildings, or be used for general operating costs.
Guaranteed loans are farm loans that allow lenders to extend credit to family farm owners and operators who may not currently qualify for standard commercial loans.
These farmers or ranchers finance their current operations or expand their business with reasonable terms. The lenders, or financial institutions, receive protection from loss, as well as other benefits, including servicing fees and additional loan business.
Farm loans that are used to expand or enlarge a farm are called Direct Farm Ownership Loans. They can also be used to improve an existing farm or ranch as well as construct a new farm or ranch. Lastly, they can be used for ecological protection such as soil and water conservation.
Another type of loan the FSA offers are Microloans. These are farm loans that are geared towards a less traditional type of farmer. These farmers are usually beginning farmers or ranchers, and are small. They oftentimes are specialty crop farmers and niche operations. These loans ease some of the requirements and offer less paperwork.
For specific groups, the FSA offers a couple targeted loans. This means that they are intended and reserved for a predetermined segment of the population that may have a harder time getting loans.
There are many young people in the United States involved in agricultural organizations such as the
Future Farmers of America (FFA) or 4-H clubs. For them, there are FSA farm loans available to finance educational, income-producing, and agriculture-related projects.
Women and minority farmers and ranchers also have farm loans that are geared and reserved for them. These loans target a portion of their Guaranteed Loans and their Direct Farm Ownership Loans to in order for women and minorities to be able to own and operate farms and ranches.
Lastly, the FSA also offers specialty loans. These are farm loans set aside for specific instances. For one, Emergency Loans are available to help farmers and ranchers who need capital to help them recover physical or production losses. These losses typically stem from flooding or drought, natural disasters, or quarantine.
Native American Tribal Loans
Lastly, the FSA offers Native American Tribal Loans. Beyond the minority and women’s loans, these loans are available to Tribes within reservations. They are designed to help them obtain land interests within tribal reservations or Alaskan communities.
They can use these to increase or advance their current farming operations and they provide financial prospects for Native American Communities while saving cultural farmland for future generations.
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USDA FSA Program
As a current or potential farmer if you choose not to utilize the USDA FSA program for your farm loan you can also obtain financing and capital from banks or brokers. Oftentimes these entities work directly with the FSA in order to provide lending to borrowers.
Regardless of who you borrow from, consider using a ranch loan calculator to help you determine what your approximate monthly payment will be for the capital you have borrowed. It will allow you set several financial scenarios and arm you with great information when you apply for your loan.
Remember, with the aging population, opportunities in farming for women, minorities, and youth are growing rapidly, and with help from the FSA it is easier to obtain farm loans than ever. These loans can help you get your farm off the ground, building from scratch, or help you purchase pre-existing farm acreage with all of the outbuildings ready to go. Whichever route you choose there are several options available to you when
choosing farm loans.
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