USDA Farm Loans

The US Department of Agriculture gives direct and guaranteed loans to both beginning and seasoned farmers and ranchers. These loans can be used to purchase or expand a farm and farm operation needs. The USDA is also devoted to lending to historically underserved groups like minorities, women, youth, and first-time farmers.

What Exactly Are USDA Farm Loans?

The Farm Service Agency (FSA) of the United States Department of Agriculture (USDA) offers several credit programs to new and seasoned farmers and ranchers. Some of these loans are made directly by the USDA, while third-party lenders make others with a portion of the loan guaranteed by the USDA (similar to an SBA loan). The USDA also offers guaranteed loans to rural companies.

The USDA farm loan programs are designed to help farmers and ranchers start, improve, expand, or strengthen family farming and ranching operations and provide credit possibilities to underrepresented or diverse populations.

Minority and women farmers, urban and rooftop farmers, youth farmers, alternative farms (i.e., hydroponics, vertical farming, etc.), specialty crops, and organic crops are underserved and diverse populations.

The FSA offers four main farm lending programs: farm operating loans, farm ownership loans, microloans, and guaranteed farm loans. Farm Operating Loans can be used to cover any cost linked with farm or ranch operations. Farm Ownership Loans are used to purchase an agricultural or build, improve, or repair farm structures.

Microloans and Guaranteed Farm Loans can be used to fund operations or to purchase a farm. Guaranteed loans are made by a third-party lender, with the FSA guaranteeing a portion of the loan. We believe that all of these loan programs are fantastic choices for any farmer or rancher wishing to start or develop their business because they feature very competitive interest rates and extended repayment terms.

Interest Rates and Terms for USDA Farm Loans

For the direct loan programs, the USDA FSA determines loan amounts, periods, and interest rates. The USDA FSA specifies a maximum interest rate that lenders cannot exceed for the guaranteed loan program, but the actual rate is negotiated between you and your lender.

How Can I Get a USDA Farm Loan?

The qualifications for a USDA farm loan vary depending on whatever program you apply for. However, for the direct loan programs, you must meet the following essential eligibility criteria:

  • The farm must be a legal operation (ineligible operations include dogs, exotic birds, tropical fish, or horses used for nonfarm purposes, such as racing, show, or pleasure)
  • There have been no federal or state convictions for planting, cultivating, growing, producing, harvesting, storing, trafficking, or possessing illegal narcotics.
  • Possess the legal capacity to assume responsibility for the debt.
  • Have a good credit history
  • You must be a US citizen, a non-citizen national, or a legal resident alien.
  • I have never had a debt canceled by the Farm Service Agency.
  • Must be unable to acquire adequate financing elsewhere, with or without the FSA loan guarantee.
  • You were not delinquent on any federal debt (except tax debt).
  • Not be ineligible due to violations of Federal Crop Insurance.
  • Have adequate farm management experience (maybe through education, on-the-job training, or farming experience)
  • After the loan is closed, you may need to be the farm's owner-operator.

While the Farm Service Agency requires applicants to have a good credit history, your credit score is not significant in loan approval. According to the organization, loan applicants are not automatically disqualified if they have a few instances of late payments, no credit history, or recent temporary credit problems beyond their control.

Instead, the agency seeks candidates with actual agricultural management expertise. Working on a farm, post-secondary education in an agriculturally related field, participation in an agriculturally associated club (FFA, 4-H, etc.), or agricultural internships and apprenticeships are all ways to get started. The FSA expects applicants for farm ownership loans to have extensive experience in all elements of farm production and day-to-day management.

The eligibility conditions for the guaranteed loan program are fairly similar; however, the lender will determine what constitutes a good credit history. As a result, applicants with a poor or limited credit history may have a more difficult time getting authorized.

The Application Procedure

When applying for ownership or operational direct loan, you must fill out up to nine different applications. These forms are the same for both types of loans, and you only need to fill out one application if you're applying for multiple loans.

The application process for the microloan program is simplified, with only one form required. You must mail a paper copy of your application to your local FSA office (though some borrowers may be allowed to submit their applications electronically).

The FSA will request the following sorts of information and documents:

  • Contact and personal information
  • Business data and a business plan
  • Loan details, such as the amount requested, the purpose of the loan, and a description of your agricultural operation
  • Three years' worth of financial records, including tax returns
  • Three years of manufacturing experience
  • Current Creditors List
  • List of owned or leased property, including land and animals
  • Other financial statements and the current balance sheet
  • Income and costs forecasted for the following manufacturing cycle
  • Farm training, education, and experience are described.

After you submit your application, the FSA will notify you within ten days if it is complete. If this is the case, the FSA will decide on loan approval within 60 days. If your application is declined, the FSA will notify you of the reason for the denial.

You will generally need to give your lender the same information and papers for the guaranteed loan programs. The EZ Guaranteed Loan is a streamlined guaranteed loan that allows borrowers to apply for up to $100,000 using a shortened application form. We encourage that farmers and ranchers contact their lenders to learn more about how to qualify for and apply for a guaranteed loan.