Ranch Loans

Ranch Loans

Farming and ranching are iconic occupations associated with the founding and development of the United States. And agriculture continues to be one of the largest and most important industries in the country.

Every five years, the U.S. Department of Agriculture’s National Agricultural Statistics Service (NASS) conducts an agriculture survey. In 2012, there were over 2.2 million farms in America; over half of these farms are ranches. And, as was true in the past, the majority of these farms and ranches are family-owned.

Types Of Ranches

Many types of ranches flourish in the U.S. raising types of livestock such as horses, goats, sheep and even emus! But with over 903,000 of these ranches raising cattle, cattle represent the largest segment.

The U.S. is the largest beef producer in the world, producing over 25.2 billion pounds of beef in 2016.  Worldwide demand for beef continues to rise, providing a growing market that is placing more pressure on beef producers. Every year, American farmers and ranchers continue to face – and meet – the challenge of putting food on not only the tables of America, but also, the world.

Time and technology have changed ranching in the United States. Owner-operators still represent the norm, but increasingly, this owner-operator will be a woman or a minority such as African American or Hispanic.

Technology – especially the introduction of computers – has also had an impact on modern ranching techniques and profitability. And time has also increased the number of financial sources for ranch loans available to the modern rancher.

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FSA & Ranch Loans

The most commonly known source of ranch loans comes from through the USDA’s Farm Service Agency, known as the FSA. The United States Department of Agriculture (USDA) was established in 1862 through an act of Congress and signed into law by President Lincoln, who referred to it as “the people’s department”.

At that time 50 percent of Americans lived on farms compared to 2 percent today. However, the work the USDA performs in research and support in the areas of agriculture, economic development, science, and natural resource conservation still benefits all Americans, while the department continues to serve the farmers and ranchers it was established to assist.

FSA Farm Loan Program

The FSA Farm Loan program ensures that small and medium-sized ranchers have a source of credit that can be used for ranch loans.  Whether the rancher is looking to purchase more acreage, purchase more livestock or equipment, make improvements to increase the efficiency of their operation, or has a short-term need for an influx of capital there are loans available for those purposes. They can also obtain ranch loans for modernization of buildings on the ranch – including the house and for advertising.

And while the FSA is set up to assist all ranchers, it is a particularly important source for small to mid-sized ranches and for minority ranchers. The FSA recognizes the needs of the historically underserved market of women and minority ranchers.

Minorities would include African Americans, Hispanics, Alaskan Natives, and Asians as well as others who have traditionally been challenged in obtaining ranch loans. Nurturing this growing segment of ranch owner-operators is part of the mission of the USDA. They provide this support through education and financial assistance. This has helped increase the number of minority ranchers.

It also sets aside part of its monies to provide ranch loans and extra assistance to new ranchers during their first ten years of operation. This targeted source of funds – referred to by the name Beginning Farmer – provides loans to new ranchers.

There are various types of loans available through the fund including Farm Ownership loans that enable a rancher to get started by obtaining land and capital. There are also Operating Loans that assist with profitability by helping with operating and living expenses.

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Another large project a rancher may undertake that requires extra capital would be changing the operation’s production to embrace the holistic, ecological and ethical approach that is the hallmark of biodynamic farming and production practices.

With the growing consumer demand for organic food and ethical ranching practices, many farmers and ranchers are actively seeking certification from recognized organizations such as, USDA Organic, TILTH or CCOF. Besides ranch loans to assist with the costs of the transition, the FSA provides support from its trained agricultural agents and education programs that play a vital role in the success of the rancher making these conversions.

The Future Of Ranching

The future of ranching is also a concern of the FSA which supports future generations with programs providing ranch loans to young students. Training in the practical day-to-day aspects of agriculture is provided by starting and running small, money-making ventures funded by these loans.  

This experience provides the hands-on agricultural knowledge and business acumen young people need to become successful farmers and ranchers.  Organizations such as Future Farmers of America (FFA) and 4H also help to provide the education needed to ensure America’s need for well-trained farmers and ranchers is met.

Commercial Banks

Commercial banks are another source of ranch loans to operations of all sizes. Most banks that were lending to agriculture came through the recent financial crisis in good shape. This was an advantage for farmers and ranchers since credit from these banks was still available to the agricultural community during and after the crisis.  

Local banks that serve primarily agricultural communities understand the needs of the people they live and work with every day and have a deeper knowledge of the local ranching industry.

Larger commercial banks may have specialty departments educated in the needs of agricultural clients of all sizes. These financial specialists understand the business of ranching. Both of these types of banks are equipped to make ranch loans for acreage purchases, large equipment purchases, as well as expansion, operating and emergency expenses.

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Loan Types 

There is a large variety of loan types available. Real estate loans – either from commercial banks or a backed by a government source are some of the largest ranching loans an owner-operator will seek.

Acreage is important to the rancher. Each type of livestock has its own requirements as to how many animals an acre will support. Even if a rancher wants to start with a smaller number, acreage to expand will be vital.  

Ranch loans in the form of a traditional loan or a line of credit can be used to help finance other needs including building and repair of outbuildings, building and repair of the ranch house, maintenance and repair of machinery, and the purchasing of feed, seed, herbicides, pesticides, and medical care for the health of livestock.

There are also long- and short-term loans that can be used to take advantage of an unexpected opportunity that may present itself.

Family ranchers provide a vital contribution to the wealth of our nation and to feeding the world.  It is a challenging job that takes practical knowledge, an understanding of your livestock and land, and savvy business acumen in order to make a profit.

The variety of financial resources available can be a bit overwhelming. But loans play a vital part in assisting the rancher in using capital to help achieve his or her goals. Reviewing the lines of credit available, cost of the money, and repayment terms will help enable you to decide what role ranch loans will play in the profitability of your operation.

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