If you don’t qualify for financing for a farm the traditional way, you may be eligible for the FSA guaranteed farm loan program. The guaranteed program helps lenders provide funding to ‘risky’ borrowers that don’t qualify for financing any other way. The
FSA guarantees up to 95% of the funds for the lender. If you were to default, the lender would receive the funds from the FSA, putting the lender at very little risk.
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How it Works
You apply for the FSA guaranteed farm loan through your lender of choice. The lender must be an approved FSA lender. There are
different levels of FSA lenders, if you are up to the task, you can find out the level a lender is approved for as it can affect the speed of which your loan gets approved. You want a Preferred FSA lender as they have the most pull with the FSA and have the most experience with their loans.
You can secure financing of up to $1,399,000 for your farm. You apply for the loan with the lender, just like you would for any other loan. After you complete your application and send in your income documentation, the lender underwrites the loan. Once the bank is satisfied with your documentation and approves the loan, they send it on to the USDA for final approval. This is where the preferred lender comes in handy as their loans are the first to be processed by the USDA/FSA.
The Types of Loans Available
You can apply for several types of loans from the FSA. The most common is the farm ownership loan or the loan that helps you buy the farm. You can use this program if you are a first-time farm buyer or if you are a subsequent farm buyer. You can also apply for loans to help with
operating your farm or for emergency funds, which help if you faced any type of natural disaster that wiped your farm out, leaving you to start from scratch.
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How to Get Approved
The requirements to qualify for the FSA guaranteed loan program are fairly simple:
- You must be a United States citizen
- You must prove that you have viable credit history with a decent score
- If you don’t have a credit history, you must have at least 3 non-traditional trade lines
- You must prove that you cannot secure financing from any other program
- You must not have defaulted on any FSA loans in the past
- You must own and operate the farm
Your farm will also have to meet a few qualifications in order to secure the loan:
- You must provide a majority of the farm’s operations
- You must make a majority of the operational decisions for the farm
If you borrow the money to purchase farmland, you can generally secure a loan for up to 40 years. If you borrow the money for farm operations, though, you can usually secure a term of up to 7 years. You should shop around with different lenders to make sure the terms you get are the best available to you.
The FSA guaranteed program is a great way to get the funds you need to buy a farm or operate it. There are many FSA approved lenders out there that can help you with your dream to buy a farm. Make sure to get quotes from at least 3 lenders to make sure you get the best deal that is available to you.
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