The Farm Service Agency (FSA) grants farm operating loans to family ranchers and farmers to promote, build, and preserve family farms in support of a flourishing agricultural economy.
FSA’s farm loan programs are designed to help farmers move to commercial financing. The agency’s objective of providing interim, monitored loans is completed once a farmer can receive credit from the commercial lending sector.
Loan funds can be utilized for a variety of purposes, including typical running expenses, machinery, and equipment, modest real estate repairs and renovations, and debt refinancing.
Program requirements
Certain requirements need to be met for one to qualify for an FSA loan and some conditions could render one unqualified for a loan.
Applicants must be family farmers, citizens, non-citizen nationals, or lawful resident aliens of the United States or U.S. territories, and have one year of appropriate farm management experience to be eligible for assistance.
You must also meet the following requirements:
- Have a good track record of honoring credit obligations, as well as the legal ability to repay loans, and also be unable to acquire credit elsewhere at acceptable rates and terms to meet current demands,
- After the loan is closed, become the tenant-operator or sole operator of a family farm.
If an applicant is in default on federal debt or has incurred a loss for the FSA as a result of debt forgiveness, he/she is automatically disqualified.
FSA loan programs
FSA provides family-size farmers and ranchers with Direct and Guaranteed farm ownership (FO) and Operational loans (OL) when they are unable to secure commercial credit from a bank, Farm Credit System institution, or other lenders.
Land, cattle, equipment, feed, seed, and supplies can all be purchased with FSA loans.
These loans can also be utilized to build structures or improve farmland.
Upcoming farmers who cannot qualify for traditional loans due to a lack of financial means are frequently given FSA loans.
Established farmers who have suffered financial setbacks due to natural disasters or whose resources are insufficient to maintain lucrative farming operations can also benefit from FSA assistance.
Types of FSA farm loans
1. Guaranteed loans
FSA guaranteed loans offer up to a 95% guarantee of the principal loan amount to traditional agricultural lenders.
For the duration of the loan, the lender is responsible for servicing the borrower’s account. To be eligible for guarantees, all loans must meet specified requirements, and the FSA has the authority and responsibility to monitor the lender’s servicing actions.
Farmers who want to take out these loans must first apply to a traditional lender, who will then arrange for the FSA guarantee.
2. Direct loans
Direct farm ownership and operational loans are made and serviced by the FSA. These direct loan customers receive credit counseling and loan supervision to help them succeed in their farming operations.
Direct loan funding is restricted at the FSA, and applicants may have to wait for funds to become available. A direct loan applicant must be able to demonstrate substantial repayment capabilities and commit sufficient collateral to fully secure the loan.
3. Operation loans
Operating loans are available for the purchase of livestock, seed, and equipment. It can also be used to cover farm operational expenditures and family living expenses while a farm is being established.
4. Farm ownership loans
You can buy or extend a farm or ranch with a Farm Ownership Loan. This loan can be used to cover closing costs, develop or improve agricultural buildings, or help conserve and protect soil and water resources.
5. Youth loans
A Youth Loan is a sort of Operating Loan for participants aged 10 to 20 who require financial assistance with an educational agriculture project.
6. Emergency loans
When a tornado, flood, drought strikes, or other natural disasters occur, the FSA’s Emergency loan program is available to assist qualifying farmers and ranchers in rebuilding and recovering from their losses.
These loans assist farmers who have experienced qualified farm-related losses as a result of a disaster in a county that has been proclaimed or designated as a primary disaster or quarantine region.
Farmers in counties near the declared, designated, or quarantined area may also be eligible for emergency loans.
3 Main Benefits of FSA loans
1. Covering Land Expenses
- FSA loans can be used to buy or rent land. The pros and cons of buying farmland can be complicated, and the area of land you require will be determined by the type of cultivation you intend to conduct.
- To determine how much to borrow, you must first determine what type of land you need, how much of it you require, and how much it will cost.
2. Purchasing Farm Machinery
A farm cannot function without specialized equipment. Your business is just as good as the equipment you utilize, from tractors to irrigation systems to silos.
High-quality, dependable equipment will last longer and make your job easier, but it will cost you a lot of money.
Once you know how much equipment you’ll need, calculate the quantity of the loan you’ll require and make sure you’ll be able to afford the payments before seeking an FSA loan.
3. Getting through the Storm
- Farming is a volatile industry. Year to year, you never know how well your crops or cattle will do. You, like any other business, are at the mercy of your customers and buyers. The price of commodities is notoriously variable.
Furthermore, some crops are seasonal. Your slow season may require additional funding to keep the lights on and the business running. You can safeguard yourself with an FSA loan during the ups and downs of your business.
Conclusion
As a family rancher or farmer, you understand how expensive the costs of beginning and sustaining a farm might be. It may be daunting, and you’ll almost certainly require funding – especially if you’re new to the field. An FSA loan can help with this.
FSA loans are designed expressly for the agricultural industry, and there are a variety of methods to put the money to work getting your farm or ranch up and running or expanding your operations.