FSA Farm Loans

The Farm Service Agency (FSA) of the United States Department of Agriculture (USDA) makes and guarantees loans to beginning farmers who are struggling to secure funding from private lenders. FSA allocates a part of its direct and guaranteed farm ownership (FO) and operating loan (OL) monies to new farmers each fiscal year.

A beginning farmer is defined as an individual or company who:

  • has not worked a farm for more than ten years.
  • fulfills the loan eligibility requirements of the program to which they are applying.
  • actively participates in the procedure.
  • does not own more than 30% of the average size farm in the county.

Maximum Loan Amounts

  • $300,000 direct FO
  • $300,000 in direct OL; $35,000 in microloans
  • $1,776,000 FO or OL guaranteed (Amount varies annually based on inflation)

Down Payment Program

The Farm Service Agency (FSA) provides a specific lending program to help the socially disadvantaged (SDA) and beginning farmers purchase a farm. Retired farmers can use this method to pass down their land to coming generations.

To be eligible, you must:

  • The applicant must put down a cash deposit of at least 5% of the buying price.
  • The maximum loan amount is 45 percent of the lower of:
    a) the acquisition price of the farm to be obtained.
    b) the appraised value of the farm to be procured; or
    c) $667,000. (Please keep in mind that this amounts to a maximum loan amount of $300,000.)
  • The loan has a 20-year term. The interest rate is 4% lower than the direct FO rate, but it cannot fall below 1.5 percent.
  • The remainder of the loan may be received from a commercial lender or a private entity. If finance is obtained from a commercial lender, the FSA can issue a 95% guarantee. A guarantee fee is not required of participating lenders.
  • Participating lender financing must have a minimum amortization length of 30 years and cannot include a balloon payment due within the first 20 years of the loan.

Joint Financing Arrangement

Beginning farmers may decide to join a joint finance arrangement. In this agreement, the FSA loans up to 50% of the total amount financed, while another lender contributes 50% or more. The applicant will utilize funds from the joint financing arrangement and monies from the FSA for any allowed FO objective. The interest rate is 2% lower than the direct FO rate but not lower than 2.5%. The loan period will not be longer than 40 years or the useful life of the security.

The United States Department of Agriculture (USDA) protects people from discrimination against its clients, employees, and job applicants based on race, color, national origin, age, disability, sex, gender identity, religion, reprisal, and, where applicable, political beliefs, marital status, familial or parental status, sexual orientation, or any other factor.

Eligibility Requirements

The following are the general eligibility conditions you must meet.

The following are general eligibility requirements:

  • No federal or state convictions for planting, cultivating, growing, producing, harvesting, storing, trafficking, or possessing controlled substances
  • Legal capacity to accept legal responsibility for the debt obligation.
  • A good credit history.
  • Be a US citizen, non-citizen national, or lawful resident alien of the US, including Puerto Rico, the US Virgin Islands, Guam, American Samoa, and some former US territories.
  • Inability to secure adequate credit elsewhere, with or without an FSA loan guarantee.
  • There is no delinquency on a federal obligation other than IRS tax debt when the loan is closed.
  • Not being ineligible owing to a disqualification stemming from a violation of federal crop insurance.
  • Possess appropriate managerial skills to ensure a realistic expectation of loan repayment.

Develop your Business Plan

A thorough business plan is required to obtain an FSA loan. A business plan describes:

  • Your farm firm's mission, vision, and goals.
  • Your existing assets (value items or investments you own); and liabilities (debts, loans, or payments you owe)
  • What your farm business will generate, and what makes your products unique, valuable, or distinct from other farmers' products.
  • How/where you will advertise and market your stuff, and establish your farm business; and
  • How you will earn enough money to pay your business expenses while also supporting your personal family's living expenses.

You may feel overwhelmed when you consider all of these distinct difficulties. "Do I need to write a detailed business plan?" you may wonder. It appears to be a lot of effort, and all I want to do is sell my items at farmers' markets, local shops, and restaurants. "How difficult can that be?" The correct answer is: Yes, you should develop a well-thought-out company plan.

Reasons to Write a Business Plan

  • An excellent business plan is essential to obtain a loan. Lenders carefully examine company plans to see whether they believe your venture will succeed.
  • A business strategy will assist you in being more organized. A business plan can assist you in ensuring that you are following all of the necessary stages and remembering all of the specifics.
  • The business strategy will serve as a guide for you. You may go back and look at it later to see how far you've come.
  • A business strategy will assist you in carefully considering why you want to farm.

Is it because you prefer working for yourself, or because you value being outside, or because growing food is your passion, or because it creates a stable atmosphere for your family? As your company expands, you can revisit your business strategy and consider serving those values. Your business plan is critical. It demonstrates that you have given considerable attention to your future goals and aspirations. It demonstrates that you are knowledgeable about all aspects of your agricultural business. This means you've considered all of the probable expenses you'll have to pay, as well as how much you'll need to generate from sales to cover those expenses.

It also demonstrates why you believe you can succeed and how you intend to achieve your objectives. Your business plan serves as a road map for getting from where you are now to where you want your farm business to be in the future. Finally, a comprehensive business strategy that specifies your financial and lifestyle objectives can assist you in evaluating your performance as you develop your new farm business.