Hobby Farm Loans

Hobby Farm Loans

America’s heartland is getting older and the average age for today’s traditional farmer is slowing going up. Fewer young people are staying in rural areas to live off the land. But in some places across the country, that trend is reversing.

Small agriculture is gaining popularity again and this resurgence in the desire to reap what you sow, has created an uptick in young and old people looking to start their own small or hobby farms.

Recent statistics show a minor increase in small farms for the first time since the Great Depression. After the mid 1930s, the number of farms in America plummeted by 5 million. But for the first time in 80 years, the number of

American small farms is up 4 percent from the numbers in 2002 according to census data.  Many younger couples are looking to a rural setting, siting environmental health and climate changes as factors for their decision.  It also allows them to have a certain amount of control over their food in a way that most millennials did not have growing up.

A hobby farm is an agricultural operation that isn’t traditionally run as an “agribusiness.” Hobby farms can, and usually are, self-sustaining, and most generate a profit but, according to the IRA, are not run as a primary source of income.

Generally, hobby farmlands are small in size – between roughly 40 and 100 acres – and many are pride themselves on being committed to sustainable agriculture, eco-conscious practices, and fair, friendly animal treatment.

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What Is A Hobby Farm?

In the U.S., a high extent of homesteads and urban gardens may be classed as hobby farms. In 2007, more than 40% of farms reported under $2500 in salary and more than 10% of homesteads had under 10 acres of land (4.0 hectares).

More than 50% of farm owners detailed that their fundamental salary was work outside of their homestead; in spite of the fact that, this figure incorporates some farm operators who don’t actually take part in cultivating and some very huge and gainful homesteads.

As homesteads develop in measure, older, more traditional farms turn out to be less financially practical. Some are acquired and the greater part of the land consolidated with bigger close-by ranches, however the extensive homestead has little use for the structures.

These can be sold off with just a building parcel of land, however are a great deal more saleable if an unassuming region, 5 to 15 acres of land (20,000 to 60,000 m²) is sold alongside them. These are normally gobbled up rapidly by individuals with well-paying city occupations who wish to live in the nation, or to retirees, who wish to keep busy as part-time farmers.

Hobby Farm Income

Just because the US Government does not look at hobby farms or part-time farmers as a primary source of income, doesn’t mean that hobby farms are incapable of turning a profit.  With the advent of Etsy, Handmade at Amazon and other online marketplaces directed at helping entrepreneurs bring their goods and products to the masses.

You can create a steady stream of secondary income hobby farming whether it’s by selling produce at a farmers’ market or making soap and other spa products to sell to buyers online or some other venture that has yet to be thought up!

Take a walk through your local farmer’s’ market and you will see what can be accomplished on a “quaint, little hobby farm.”  Though they aren’t full-blown commercial farms, hobby farms still require a lot of preparation, work, and financial support to run successfully.

While most federal funding for farms is directed towards large homestead farms that are used as a primary source of income, there are many competitive loan options available through banks that can help get a new hobby farmer started.

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Guidelines And Parameters

Lower interest rates, a stronger economy, lower energy prices and an emerging ability of workers to work from a home environment are factors that have helped make the dream a larger possibility. A growing number of consumers are willing to live in more rural areas if they are also able to work from home a few days per month.

Hobby farm and ranch loans are for homes that sit on 5+ Acres and cannot be financed through traditional financing. The property and the owner need to be hobby ranch by nature. This is something that a loan office can very easily define while going through the process of applying for one of these loans.

Here are some guidelines and parameters that most banks use when processing a loan application for a hobby farm:

  • Property is considered to be a hobby farm in nature
  • 5 to 165 Acres
  • Loans up to $3,000,000
  • 20% Down Payment or Value in the property
  • Home value should be 30% or more of the overall value (exceptions considered)
  • Loan amount not to exceed $5,000,000 (higher loans considered with special pricing)
  • Properties with moderate outbuildings and larger acreages (greater than 100 acres) may be considered

Resources And Opportunities

The USDA Alternative Farming Systems Information Center lists resources and opportunities for grants and loans for small farmers and other agricultural producers.

There’s also a information on funding sources as well as a Small Farms Funding Resources publication that will help you write a business plan, develop a grant proposal, and find assistance programs that you may be eligible for.  Also, the USDA offers loans to not only established farmers but also beginner farmers and ranchers. The government has allocated a certain amount of funds to beginners wanting to purchase their own land and/or farm.

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What About Loans That Are Not Through The Government?

There lending institutions, ie brokers and banks, that will loan on a myriad of farm-related items. There are many of these companies that an average person can use to get land to call their own.

The following items are just a handful of things they loan on; Hunting property, weekend escapes, Property to retire on and they also loan over the LTV in order to facilitate upgrades or improvements. Many banks and brokers have both conventional and in-house financing.

Conventional is the same program that most banks use, and it can be a little hard for the first time buyer, mainly due to the 20% down required. If you are buying up an acre, for say $5,000 then you only need $1,000.  

However, if you are looking to buy a larger farm it could take a lot of cash out of your savings to qualify. You will also need to have great to excellent credit for this type of financing. The positive side of this is that they offer in-house financing, which means they can make their own rules for a borrower who doesn’t qualify for conventional style loan.

For some time now, there has been a growing trend of starting hobby farms and urban gardens. These ventures start out simple enough, but as they grow, it doesn’t take long to realize that all the irrigation equipment, greenhouse materials, soil additives, etc. really put a dent in the bank account! A great option to help subsidize these costs is to receive additional funding from a small farm loan.

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