What are FSA Loans?

The Farm Service Agency (FSA) provides direct and guaranteed farm ownership loans to family farmers and ranchers. These loans can assist individuals who are momentarily unable to secure private, commercial credit on their own at fair rates and terms. Farm Ownership Loans can be used to:

  • Buy or expand an existing farm.
  • Build new agricultural structures or upgrade existing ones.
  • Pay for the closing charges.
  • Pay for the conservation and protection of soil and water.
  • Refinance a portion of your agricultural loan.

A Direct Farm Ownership Loan has a potential loan amount of $600,000. There is no down payment necessary; however, other terms and restrictions apply. You apply to an agricultural lender for an FSA-guaranteed loan. The loan is made and serviced by the lender, and the FSA insures it against losses up to a maximum of 95%. The FSA guarantee allows lenders to extend credit to farmers who do not meet the standard requirements; however, specific terms and conditions apply.

A Guaranteed Farm Ownership Loan has a maximum loan amount of $1,750,000.

FSA also provides the following services to satisfy the needs of smaller, non-traditional, and specific market operations:

  • Owning a farm directly Microloans (maximum loan amount of $50,000 for direct operations and direct farm ownership loans). These are FSA direct loans that have a streamlined application process and minimal paperwork.
  • Guarantees EZ Guarantee loans up to $100,000. These are for private lender loans.

The FSA's purpose is to give controlled credit, not just credit. This means that the FSA collaborates with you to identify your farm's strengths and potential for improvement. You can improve your business and financial planning skills, which will help you succeed. The purpose of the FSA's agricultural loan programs is to assist you in obtaining commercial credit in the future. The agency's farm loan goal is complete whenever you, as a farmer or rancher, can obtain credit from a commercial lender on your own.

What are the general requirements of the program?

To be eligible, you must meet all loan requirements, including those listed below; additional terms and conditions apply:

  • Be a family farmer.
  • Possess a good credit history.
  • For direct loans, you must have participated in farm business operations for at least three of the previous ten years.
  • You must be a US citizen, a noncitizen national, or a legal resident alien. Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, and certain former Pacific Trust Territories are included.
  • You are unable to obtain credit elsewhere at fair rates and terms to fulfill your genuine needs.
  • Possess the legal capacity to assume debt obligations.
  • Have no outstanding federal debts and have generated no FSA loss through debt forgiveness (with some restrictions), and
  • After the loan is closed, you will be the owner-operator of the family farm.

Examples of Farm Loans

Guaranteed Loans

FSA-insured loans provide up to a 95 percent guarantee of the principal loan amount to conventional agricultural lenders. For the duration of the loan, the lender is responsible for servicing the borrower's account. To be eligible for guarantees, all loans must meet particular qualifying requirements, and the FSA has the authority and responsibility to monitor the lender's servicing actions. Farmers interested in these loans must apply to a traditional lender, who will then arrange for the FSA guarantee.

Direct Loans

Direct FO and OL loans are made and serviced by the FSA. We offer credit counseling and loan supervision to our direct loan customers to have a higher chance of success in their farming enterprise. The FSA receives a limited amount of financing for direct loans; therefore, applicants may have to wait for funds to become available. To be eligible for a direct loan, the applicant must be able to demonstrate sufficient repayment capabilities as well as pledge adequate capital to secure the loan completely

Benefits of FSA Loans

Reserved Funding for Specified Groups

Each year, the government sets aside a large budget for specific groups of farmers and ranchers to use to pay their businesses' requirements and purchase acreage. These set aside payments are only granted to eligible beginning farmers and socially disadvantaged (SDA) groups involved in agricultural production. The percentage of allocated funds for each fiscal year for farm or ranch owners designated as starters is as follows: 50% for direct operating loans, 75% for direct farm ownership loans, 40% for guaranteed operating loans, and 40% for assured farm ownership loans.

Funding Availability for Disaster or Emergency Needs

A farmer or rancher whose business is harmed by natural disasters such as floods, drought, or hurricanes might apply for disaster funding. This FSA loan, known as an "emergency loan," is intended to assist in the recovery of agricultural production losses and damages caused by catastrophic disasters. The availability of emergency financing assists in restoring or replacing critical farming properties, machinery, and equipment. It can also cover the living expenditures of family members while they are waiting for their income to be restored.

Private Lenders Provide Quick Approval

Guaranteed FSA loans using money from commercial and private lending institutions such as credit unions, banks, and farm credit system organizations can be handled and authorized promptly. The federal government guarantees up to 95% of the loan and interest paid by an eligible borrower. Because the government's loan program backs the majority of the grant, private lenders are more eager to authorize and support FSA loan borrowers.

Lower Interest Rates

Compared to small business agricultural loans received through private lending companies, FSA loans, whether direct or guaranteed, have lower interest rates. The goal of each lending program is not to make income, as commercial lenders do, but to help members in need.

Down Payment Program

The creation of a "down payment program" allows beginning and SDA farmers to purchase lands. With this scheme, a retired farmer may seek to transfer farm ownership to younger family members who will take care of the farming business in the future. The loan duration is up to 20 years, which is long enough to repay the borrowed funds.