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Beginning farmer loan basics

The USDA Farm Service Agency makes and guarantees loans to beginning farmers who are unable to obtain financing from commercial lenders.

Each fiscal year, FSA targets a portion of its direct and guaranteed farm ownership and operating loan funds to beginning farmers.

Key Points

The maximum farm ownership, operating loan is $300,000.

Interest rate is 4% below the FO rate, but not less than 1.5%.

Applicants must have farm experience.

Who’s a beginning farmer?

A beginning farmer is an individual or entity who:

has not operated a farm for more than 10 years

meets the loan eligibility requirements of the program to which he or she is applying

substantially participates in the operation

for farm ownership purposes, does not own a farm greater than 30% of the median-size farm in the county

All applicants for direct farm ownership loans must have participated in the business operation of a farm for at least three years. If the applicant is an entity, all members must be related by blood or marriage, and all members in a corporation must be eligible beginning farmers.

Maximum loan amounts are:

direct farm ownership or operating loan: $300,000

guaranteed farm ownership or operating loan: $1,119,000 (amount varies annually based on inflation)

The FSA has a special loan program to assist socially disadvantaged and beginning farmers in purchasing a farm. Retiring farmers may use this program to transfer their land to future generations.

To qualify, the applicant must make a cash down payment of at least 5% of the purchase price.

The maximum loan amount must not exceed 45% of the least of

a) the purchase price of the farm or ranch to be acquired;

b) the appraised value of the farm or ranch to be acquired; or

c) $500,000 (Note: This results in a maximum loan amount of $225,000).

The term of the loan is 20 years. The interest rate is 4% below the direct farm ownership rate, but not lower than 1.5%.

The remaining balance may be obtained from a commercial lender or private party. FSA can provide up to a 95% guarantee if financing is obtained from a commercial lender. Participating lenders do not have to pay a guarantee fee.

Financing from participating lenders must have an amortization period of at least 30 years and cannot have a balloon payment due within the first 20 years of the loan.

Beginning farmers may choose to participate in a joint financing arrangement. With this arrangement, FSA lends up to 50% of the amount financed, and another lender provides 50% or more. The interest rates can be obtained from your local FSA office, and the term of the loan will not exceed 40 years or the useful life of the security.

For more information, contact your local FSA office.

Source: Farm Service Agency

Youth loans available

Many beginning farmers and ranchers start out with youth loans. Youth loans of up to $5,000 are available for eligible individual rural youths age 10 through 20 to finance income-producing, agriculture-related projects.

The project must be of modest size, educational, and initiated, developed and carried out by rural youths participating in 4-H clubs, FFA or a similar organization.

The project must be an organized and supervised program of work. It must be planned and operated with the assistance of the organization adviser, produce sufficient income to repay the loan, and provide the youth with practical business and educational experience in agriculture-related skills.

To qualify for a loan, the applicant must:

comply with FSA’s general eligibility requirements

reside in a rural area, city or town with a population of 50,000 or fewer people

conduct a modest income-producing project in a supervised program of work.

To find out more, visit your local USDA Service Center. More information is available on the FSA website at www.fsa.


This article published in the March, 2011 edition of DAKOTA FARMER.

All rights reserved. Copyright Farm Progress Cos. 2011.