All About FSA’s Direct Farm Operating Loans

Sprouting plants

The FSA offers Direct Farm Operating Loans for farmers starting or expanding a farm. This loan program is a great way for new farmers to get started as the funding comes from the government and has more forgiving guidelines than standard loans.

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The Uses for the FSA Direct Farm Operating Loan

Farmers can use the FSA Direct Farm Operating Loan for a variety of purposes including:

  • Purchasing equipment
  • Purchasing livestock
  • Paying for farm operations
  • Making repairs to the buildings on the farm
  • Consolidate farm-related debt
  • Water conservation

Loan Terms

Farmers can borrow up to $300,000 for the Direct Farm Operating Loan. Different farmers will secure different terms for the loan. It depends on the loan’s purpose and your ability to repay the loan. The FSA determines this based on your cash flow and projected income for your farm operations.

In general, farmers obtain terms of 12 months for money borrowed for standard operating expenses. Any money borrowed for equipment or livestock purchase can have a term of up to 7 years depending on the circumstances.

Qualifying for the FSA Direct Farm Operating Loan

First and foremost, you must have an eligible farm in order to be eligible. The funds you receive must be used directly for the farm’s purpose too. Any livestock or machinery used for non-farm purposes cannot utilize the funds from the Direct Farm Loan.

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As far as qualifying as an individual, you must meet the following requirements:

  • You must have a decent credit history
  • You must not have any previously defaulted FSA loans
  • You must not be eligible for any other type of farm financing
  • You must not have any previous delinquencies on any other federal debt (not farm related)
  • You must prove that you have the ability to run a farm effectively to have the means to pay back the loan

Aside from your personal qualifying factors, you must be able to convince the FSA that you are a good risk. The only way to do this is to have a plan in place for your farm. How do you plan to use the funds? What are your future plans for the farm? What type of experience do you have? These are things the FSA will want to hear from you to determine if you are a good risk for the Direct Farm Operating Loan.

The more proof of your ability to run the farm as well as pay back the loan, the better off your chances of approval will be. While it’s a great idea to have formal business documentation to show lenders that you can operate a business successfully, it doesn’t have to be that way. As long as you can show income, expenses, and cash flow along with the experience you have managing a farm, you can prove to the FSA that you deserve the loan. Obviously the more organized you are the better your chances of approval, but even the greenest farmer can get approved with the right steps.

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