Farmers and ranchers can use farm loans to start up, expand or maintain their farms. Small-business loans are available to help cover expenses such as purchasing livestock, buying farm equipment and machinery, or building farm buildings.
There are many sources of farm loans, such as government agencies or lenders who specialize in agricultural lending. Farm financing is the option that you qualify for and meets your requirements.
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The best farm loans for agricultural enterprises
1. Farm Service Agency loans
The best loan option is: Low rates of interest; variety of loans available.
The FSA provides several different types of loans through the U.S. Department of Agriculture. FSA loans are a great option for both new and experienced farmers. They offer competitive rates of interest, long terms of repayment and are suitable for many different uses. You have a few options.
Direct Operating Loans
You can use these loans to pay for your daily living costs, as well as other expenses. You can use them to buy livestock, seeds and equipment. The loan amount can be up to $400,000. Repayment terms are up to 7 years. Interest rates are set by the FSA monthly. As of July 20,23, these loans will have an interest rate of 4.5%.
. There is no down payment required.
Direct ownership loans. These loans can be used to purchase or expand an existing farm or ranch. The loans can be up to 600,000 dollars with a repayment term of up to forty years. The interest rate for these loans will be 4.875 %. as of July 2023.
Microloans. FSA Microloans provide funding to beginning and small farmers as well as non-traditional and niche farm operations such as trucks farms, direct marketing farms and Community Supported Agriculture. The interest rate and use cases are the same as standard loans. The maximum funding amount for each microloan is $50,000.
FSA Guaranteed Loans. These loans are similar to SBA loans. They’re not direct FSA loans that go directly to the farmers. The FSA will guarantee up to 95% on these loans. They are provided by USDA-approved lenders. You and your lender negotiate rates and terms, within the FSA maximums.
The FSA offers additional loans. FSA offers emergency loans as well as youth loans. The FSA offers a variety of programs, each with different rates, terms for repayment and funding limits.
You’ll have to satisfy a number of requirements, both industry and loan specific, in order to qualify for FSA Farm Loans. To qualify for a FSA farm loan, you’ll have to show that your business is an approved farm enterprise. You will also need to demonstrate your management experience and describe the acceptable purpose of your loan.
You’ll have to prove your repayment ability as a borrower. The FSA does not rely on your credit score to determine eligibility, but it is helpful to maintain a positive credit history. The FSA does not reject applications because of a credit problem or lack thereof.
Documentation is required for the application of these business government loans. The FSA offers a variety of ways to submit your application: online via the eGov system; by post, at the local FSA branch or over the phone. The FSA will fund your account within 60 days of receiving the application.
2. SBA Loans
Established Businesses with Good Credit
SBA farm loans have long terms of repayment and low interest rates, just like FSA loans. SBA loan maximums are higher, up to $5,000,000.
SBA 7(a), SBA 8(a), and SBA 9(a) are all available to agricultural and farm businesses.
SBA 504 Loans
Both are good options for farmers who have strong credit.
SBA 7(a), loans are available for many purposes including purchasing inventory, working capital and equipment. The interest rates are between 10.5% and 13%. Repayment terms for equipment, working capital and inventory purchases can be up to 10 or 25 years.
SBA 504 Loans are designed specifically for real estate and equipment purchases. 504 loans are not issued by credit unions or banks, but come from three sources:
A Bank (50%).
A Certified Development Company (CDC) (40%).
The borrower is typically required to contribute 10%, however, because the SBA considers farms as “special-purpose properties”, you are also expected to pay 15%.
SBA 504 loan rates are linked to 10-year U.S. Treasury bills. To qualify for the 504 loan, you’ll need to satisfy a requirement on job creation and retention. This isn’t part of the 7(a).
These SBA loans require a long history of business experience, good credit scores and solid finances. SBA loans, like FSA loan applications, can take a long time to process. However you can speed up the process by using an SBA-approved lender. They have extensive knowledge of SBA loans and can speed up the process.
3. Farm Credit Organizations
What’s best for? Expertise in the industry; personalized service
Farm Credit, a nationwide network of agricultural lending institutions owned by American farmers and ranchers as well as other businesses in the agriculture industry. The institutions are divided up into four different districts, and each one has its regional wholesale banks.
You can locate organizations in each district that specialize in lending to farms and agricultural enterprises. They offer a variety of options, including farm equipment, loans for first-time farmers, loans to poultry, loans to livestock, and land loans.
The amount of the loan, its repayment term, and the interest rate will differ depending on which institution or program you are working with. But no matter what institution, Farm Credit offers you guidance and expert advice that is specific to your business.
These institutions offer representatives who can provide a personal experience as well as education resources, and maintain a relationship with you. A local Farm Credit Organization may be a good option if you want to maintain a close relationship with your bank during the entire loan process.
4. Farm Plus Financial
Loans for beginning farmers
Farm Plus Financial, an asset-based lending company that provides both lines of credit and farm loans, is a lender whose products are secured by agricultural real estate. The lender offers a variety of products that are all secured by real estate. This makes it an excellent choice for younger farmers, who might not qualify for more traditional options.
Farm Plus Financial offers loans ranging from $200,000.00 to $50,000,000.00. The company will finance term loans up to 75% loan-to value (LTV). Lines of credit are subject to a 50% LTV.
The interest rates you pay will vary depending on your credit score, the type of product that is selected, and how long it takes to repay. Contact a representative of a lender to find out more about the current rates.
Farm Plus Financial requires that borrowers meet a personal credit score minimum of 660. Your farm must also be at least five acres in size to qualify.
Start your application by filling out an online form. Include basic details about the farm, its needs and any financing you are seeking. After you submit the form, an expert in farm loans will contact you to help with your application and discuss the options available. It can generally take between one and three months for funding to be approved.
5. National Funding
Best: Poor credit? Quick access to capital
National Funding can help you if you are in need of capital fast or have bad credit. National Funding, an online lender offers short-term loan options and equipment financing.
National Funding offers short-term loan up to $400,000. You can use this money for working capital, to purchase inventory, or to pay other daily expenses. The repayment term for these loans is up to 24 month and the interest rate quoted in a factor-rate, starting at 1.1 percent.
Equipment financing programs are available from lenders up to an amount of $150,000. Financing or leasing new and used farm equipment such as combines and tractors is possible.
The farm loan repayment term is up to 5 years. Factor rates start at 1.1% for those with good credit.
National Funding has flexible requirements for business loans and an easy application process. You must have been operating your business at least 6 months and possess a credit score above 600. Your annual income should also be over $250,000.
You can apply online by filling out the simple application form. Then, you will speak to a specialist funding who can help you determine which farm loan best suits your requirements. The representative will guide you along the way, and once approved you can receive your funds within 24 hours.
Get a Farm Loan
You can use these steps to get a loan for an agriculture business:
Understanding your financial needs
Consider why and how you will use the capital. This can help you decide which financing option is best for you.
Consider how much debt your budget allows you to incur. If you are currently earning an income, make sure you can afford any loan repayments.
Calculate typical farm loan needs
The requirements for a farm loan will depend on the type of loan and lender. However, most lenders will take into account your credit rating, the length of time you’ve been in business, and your annual income.
As an agricultural business, you can expect lenders to pay attention to specific criteria such as the size of your land, your farming business plan, and your assets.
Compare and research lenders
You should now be better able to narrow down your search for lenders to those that are most suitable to your company. If you believe you qualify for an FSA, it is worth looking at these options with low interest rates.
When you compare different lenders you can use factors like:
Types of loans
Terms of repayment
Requirements for down payment
Speed of funding
Experience in the industry
Reputation of the lender
Collect your documents and submit
You can submit an application once you have found the best lender to suit your needs. You’ll often be able work with a representative of the lending company who can guide you through the application process and answer your questions.
After you submit your application, the approval and funding time will differ. The timelines for government and commercial lenders can be longer, from several weeks up to several months. Online lenders can provide capital much quicker. Some companies even fund your application within 24 hours.
How can I obtain a loan for a farm with shaky credit?
Yes. It is possible to obtain financing even if there are fewer options for farm loans available to those with poor credit. For example, the FSA does not reject loan applications based on poor credit history or no credit history. Also, online lenders will accept more borrowers who have bad credit.
You can get a mortgage to purchase a farm.
Yes. The FSA actually offers direct loans for farm and ranch ownership. Online and commercial lenders can also provide business loans to help you buy a ranch or farm.
What are the options for obtaining a loan without requiring a down payment?
FSA direct farm loans are a good place to start if you’re looking for a loan without requiring a down payment. FSA Direct Farm Loans do not always require a deposit.
Consider online lenders such as National Funding. Many of them do not require down payment for their loans. To get a no-down payment loan, you will need to be able to meet certain qualifications.
It’s important to remember that you may be charged higher rates of interest on loans with no down payment than if a had been made.