Farm loans are agricultural loans designed to strengthen rural economies and communities. Financing for these loans comes from the Farm Credit System – a network of customer-owned financing cooperatives offering loan solutions for farmers, ranchers and rural home buyers.
To be eligible for a farm loan, an operation must meet several criteria. The primary factor is being eligible as an agricultural enterprise – loan funds cannot be used to finance nonfarm enterprises such as exotic birds, tropical fish or outdoor income-generating recreation including dogs or horses.
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The USDA loan system has long been plagued with problems related to application and servicing. Black farmers face higher rejection and withdrawal rates compared to their white counterparts; and language barriers make navigating federal paperwork even more complex.
The agency is taking steps to meet these challenges with new programs and investments, such as providing aid for distressed borrowers and improving its ability to serve its borrowers effectively.
Farm ownership loans provide families with financial assistance for purchasing or expanding existing farms, building new farm buildings and covering closing costs while supporting soil and water conservation and protection efforts. They come in both direct and guaranteed loan forms from both commercial lenders as well as FSA officials; applicants must meet specific qualifications in order to be considered for either type of loan.
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There are various financing options for farm equipment, from traditional loans and lease agreements, to leasing agreements. Some lenders may offer competitive national rates while others specialize in specific agricultural equipment models. It is essential that you thoroughly investigate all available financing solutions to find one best suited to your individual needs.
There are various programs designed to assist new farmers, such as the USDA Farm Service Agency’s guaranteed loan program available through local lenders. This helps mitigate lender risk while making credit more obtainable for beginning farmers. Missouri Beginning Farmer Loan Program and Iowa’s Beginning Farmer and Rancher Loan Program also provide assistance, helping with land acquisition, equipment costs and operating costs; harvest losses or any emergencies they might cover may also fall under their purview.
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An NPR analysis of USDA data found that black farmers have less success securing direct loans from the agency than their white counterparts, with black applicants being rejected, withdrawn or withheld at higher rates than any other racial demographic in 2022.
The agency offers several varieties of farm loans tailored to the diverse needs of farmers and rural communities, such as Direct Farm Ownership loan programs that provide up to 100% financing when purchasing family-size farms. Furthermore, microloans may also be provided based on individual circumstances.
These loans assist small and beginning farmers, nontraditional or specialty operations and disaster relief relief due to coronavirus-related losses. Furthermore, disaster relief payments are offered as well.
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Many traditional and online lenders provide farm equipment financing loans that can be used to buy or lease machinery. These loans often feature short terms with variable interest rates. Some lenders even provide flexible qualification criteria and tailored approaches to lending.
The USDA provides various farm equipment loan programs, such as microloans and guaranteed loans for operating costs. Microloan programs aim to meet the needs of small and beginning farmers alike as well as nontraditional or specialty operations; Youth Loans provide guaranteed operating loans to support educational agricultural projects.
The USDA provides guaranteed 504 loans that can be used to buy farm equipment. However, these loans have higher rejection and withdrawal rates than other USDA loan programs and typically require strong credit as well as multiple years of business experience for approval.
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Farm Service Agency loan programs provide access to loans designed to help beginning farmers and ranchers start, expand, or maintain family farms. Each loan program varies in terms and requirements as does its application process – you’ll find everything needed on the FSA website.
FSA recognizes and meets the unique credit needs of beginning farmers and ranchers by setting aside part of its loan funds annually to accommodate beginning farmer loans and rancher loans.
FSA Youth Loans are made available to young people between 10-20 years of age who require assistance with an educational agricultural project. Nik Bouman used his Youth Loan to purchase equipment that enabled his hydroponic basil operation to quadruple production – providing fresh, healthy basil to his community at large and making a positive difference in lives everywhere he was active in his hydroponics operation.