Ranch Land Loans
When the subject of ranches come up, most Americans envision vast amounts of acreage, lush with grass and surrounded by mountains or wide, flat expanses of green that seem to go on forever. But no matter where your imaginings of a ranch come from – be it the movies, television, or books – they usually involve thousands of acres and many head of cattle.
But in reality, while there are many ranches that encompass hundreds of thousands of contiguous acres with thousands of head of cattle roaming the pastureland, the average ranch is much smaller and not all ranchers raise cattle, though it is the primary livestock on ranches.
The Cost Of Land
There are many operations that raise other livestock such as poultry, goats and sheep. And all of these ranches face the same need for large expanses of land. The cost for that land can be a significant cost for the startup of a new ranch or expansion of an existing one.
Loans are available to all sizes and types of ranches – from large, commercial enterprises to family-owned ranches – both large and
small. These loans are available through both federally-backed agencies and commercial banks. These loans can cover everything from start-up, expansion, modernization and emergency funds. Here, we will concentrate on ranch land loans.
Agriculture is still a large industry in the United States. And the majority of farms and ranches are still family owned. As the average age of a ranch’s principal operator rises, the need for ranch land loans will rise as ranches transfer to relatives or are sold outright to new operator-owners.
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Operation Size & Livestock
Acreage size and quality is important to a rancher. The amount of land he or she can afford will determine how large an operation is possible, what types of livestock can be raised and whether or not expansion in the future is a viable option. If you have unlimited land you may want to determine how much land you need for a set number of livestock.
If you are like most ranchers and you have a set number of acres, you will want to determine how many head that land can support and if ranch land loans are needed to enable you to expand that number. Rule of thumb is it takes 1.5 – 2.00 acres to support one head of cattle.
A more accurate way to make this determination is by calculation. Calculating acreage needed to support what number of animals varies not only by animal type, but also land type. A rancher needs to know the length of the grazing season and/or the forage needed for the entire year, the average weight of his animals, and the average yield of the pasture-acre per year.
This is just the land to support the livestock. Additional acreage will be needed for the ranch house, outbuildings and general operating areas.
Government Assistance
The Farm Service Administration (FSA), a department of the United States Department of Agriculture (USDA) can not only assist with making helping a rancher determine acreage needed, they can assist with the ranch land loans. The FSA has several loan programs for land ownership and one of these may fit your needs. Here are a few of the programs offered or administered by the FSA.
The FSA’s Direct Farm Ownership loan provides ranch land loans that can cover 100 percent financing of the land purchase and comes in three types based on need: regular, joint financing, and down payment.
These loans are funded by a yearly appropriation from Congress and are part of the USDA’s annual budget. The USDA agency, through local Farm Loan Officers and Farm Loan Managers, services and funds the loans made. Not only can these loans be used to purchase the initial land to start a ranch, but they can be used for expansion, to purchase land easements, to improve outbuildings or dwellings on a ranch or farm and to help preserve the land through soil and water conservation. You may also use the funds from these ranch land loans to make a down payment on or pay closing costs for a land loan.
FSA’s Guaranteed Farm Loan Programs assist with ranch and farm loans made through USDA-approved commercial lending institutions. Unlike the Direct Farm Ownership loans, these loans are owned and serviced by the lender, but the loan is guaranteed by the USDA.
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EZ Guarantee Loans
There is also a ‘sub-program’ under the Guaranteed Farm Loan Program called the
EZ Guarantee Loans. These loans can be made for up to 100,000 dollars and their application process has been simplified for easier processing. Both of these programs provide ranch land loans for land purchases, expansion and improvements.
Microloan Program
The Microloan Program administered by the FSA is focused on the needs of small beginning farmers, non-traditional and niche farmers, as well as others. There are two types of loans – one to assist with ownership and one to assist with operating expenses – each capped at $50,000. There is no minimum loan amount. The Direct Farm Ownership Microloan can be used as a down payment on property.
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Commercial Banks & Ranch Land Loans
Commercial banks are also a source of ranch land loans. These range from a local bank with loan officers that have a deep knowledge of the farm industry in their community to large banks with departments that specialize in agricultural loans.
These specialists are well-versed in the industry of farming and understand the needs of both the large corporate operation and the family- or individually-owned farm, which accounts for 90 percent of U.S. farms and ranches.
Loans from a commercial institution can be a USDA-guaranteed loan, such as those obtained through the FSA Guaranteed Farm Loan Program. Or it can be a more traditional loan funded, serviced and owned by the lending institution. There are banks that serve primarily the farming industry as a whole, as well as lenders that specialize, for example, in cattle ranches.
And as with all loans, interest rates can vary widely. It is beneficial to investigate the ranch land loans offered by different types of institutions in order to find the interest rates, repayment terms and the total cost of the loan that best fits your needs.
Agriculture is still an important industry in the United States. Family ranchers provide a vital contribution to not only the wealth and the health of the country.
Over 80 percent of the food on American tables is produced in America. Besides feeding the country it also provides jobs outside of farming and ranching such as food manufacturing, textile and leather production and food sales. All of these jobs depend on the input from agricultural production.
It is a challenging job that combines business sense with an understanding of your livestock and the practical knowledge of how best to manage your land in order to make a profit.
A ranch land loan is usually the first financial step in owning your own ranch. Securing capital through loans is one of the ways a rancher can meet his or her goals. While the choices may be a bit bewildering, it pays to investigate all the options and weigh the final cost of each one. Only then can you begin to determine how securing capital will help the overall profitability of the ranch.
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