How Can I Get an Agriculture Loan? (Solved & Explained!)

You can get an agricultural loan through the Farm Service Agency by submitting all the proper forms and documents if you meet their requirements. They have different types of loans like guaranteed loans, direct loans, and land contract guarantees.

Do you need an agricultural loan? Read on to learn about the Farm Service Agency’s loan programs!

What are the basics of the Farm Service Agency’s Farm Loan Program?

FSA is an agency that is part of the USDA. You might be able to get a loan through them if you’re a farmer or rancher who can’t obtain credit anywhere else and are looking to start, expand, sustain, or purchase your family farm.

FSA loans are temporary and their goal is to help you upgrade to commercial credit. Once you can get credit from a commercial lender, the temporary and supervised credit is completed.

What questions should you ask yourself if you’re considering an FSA loan?

According to the USDA, here are some questions to think about if you want to get an FSA loan.

  • Do you want to buy or lease a ranch or farm?
  • Do you need to buy things like a greenhouse, irrigation pipes, livestock, or tractors for your ranch or farm?
  • Do you rent or own farmland or ranchland and are looking to expand your business?
  • Has a natural disaster, like a bad storm, flooding, or a drought ruined your crops or damaged your equipment or your farm buildings?

What are the different programs offered by FSA?

Guaranteed Loans are created and serviced by credit unions, the Farm Credit System, banks, or commercial lenders. FSA will guarantee the loan up to 95% against loss. FSA approves and provides oversight of the lender’s activities.

Direct Loans are created and serviced by FSA by using Government money. FSA provides credit counseling and supervision to its borrowers by helping evaluate the adequacy of goals, financial and production management, machinery and equipment, and real estate and facilities.

Land contract guarantees are given to the owner of a ranch or farm who wants to sell real estate via a land contract to a socially disadvantaged or beginning rancher or farmer.

What is a chart of the Farm Loan Programs?

Below is a helpful chart explaining the Farm Loan Programs.

Type of LoanMaximum Loan AmountRates and Terms
Direct Farm Ownership$300,000Term: Up to 40 years Interest rate: fixed
Direct Down PaymentThe lowest of the following: 45% of the farm or ranch purchase price 45% of the appraised value $225,000Term: Up to 20 years Interest rate: fixed
Direct Operating$300,000Term: 1 to 7 years Interest rate: fixed
Direct EmergencyThe lowest of the following: 100% actual or physical losses $500,000Term: 1 to 7 years (possibly up to 20 years) for non-real estate purposes Up to 40 years for physical losses on real estate Interest rate: fixed
Guaranteed Farm OwnershipThe maximum loan amount is adjusted annually for inflationTerm: Up to 40 years The interest rate is negotiated by you and your lender
Guaranteed OperatingThe maximum loan amount is adjusted annually for inflationTerm: 1 to 7 years The interest rate is negotiated by you and your lender
Guaranteed ConservationThe maximum loan amount is adjusted annually for inflationTerm: up to 20 years The interest rate is negotiated by you and your lender
Land Contract GuaranteeA maximum purchase price of $500,000 on a new land contractTerm: Contract payments must be amortized for a minimum of 20 years with equal payments during the term of the guarantee. The guarantee period is 10 years. Interest rates must be fixed and cannot exceed the direct farm ownership interest rate plus 3% points

What are the programs for beginning and socially disadvantaged ranchers and farmers?

FSA is known as the Lender of First Opportunity because it targets some of its guaranteed and direct loan funds towards socially disadvantaged and beginning ranchers or farmers. 

FSA sets money aside specifically for beginning ranchers or farmers, as well as minority groups.

You might qualify for a guaranteed or direct loan fund as a rancher or farmer if you began under 10 years ago. You are considered socially disadvantaged if you are:

  • A woman
  • Hispanic
  • Native Hawaiian or other Pacific Islander
  • Black or African American
  • Asian
  • Native American or Alaskan Native

Why do you need a business plan as a first step to being approved for an FSA loan?

A complete, thorough business plan is a vital first step for any business, regardless of how complex or simple your business is going to be.

Your business plan will:

  • Help organize your thoughts and make sure you are taking all of your necessary steps and remember all of the details you need.
  • Act as your guide. It will help you consider why you want a ranch or farm and what you want to achieve. 
  • It is required to achieve a loan. Lenders look very closely at your business plan to see if you will be able to repay your loan. 

What do you need to include in your business plan?

You need a detailed business plan describing your mission and goals, your current assets and liabilities, a marketing plan, and whether your income will be enough to pay for your living expenses and family.

How do you apply for a guaranteed loan?

First you have to prepare your guaranteed loan application. To begin, contact your lender and they will help you get ready with all the forms you need. You can find these forms online at the FSA website.

Next, your lender will submit your guaranteed loan to the FSA.

What does the FSA do once you submit your application?

After the FSA gets your application, they will:

  • Make sure you submitted all the required documents and forms. Within 5 days they will notify you of any missing items.
  • Notify the lender within 5 days that your application is complete.
  • Review your application for compliance with program requirements, security, repayment ability, and eligibility.

How do you apply for other loans through the FSA?

The process is similar for all FSA loans. Your FSA loan officer will help you complete all necessary forms in preparation for the FSA to review.