Overview
Building a successful farm is a significant financial
investment and can be especially challenging for
beginning farmers who are not financially ready to
access credit from commercial lenders. The U.S.
Department of Agriculture’s (USDA) Farm Service
Agency (FSA) makes and guarantees loans to
beginning farmers. While FSA is fully committed to
all farmers and ranchers, there is a special focus on the
credit needs of farmers and ranchers who are in their
first 10 years of operation.
Each year Congress targets a percentage of farm
ownership and farm operating loan funds to beginning
farmers. Providing loan programs is important as
beginning farmers have historically experienced more
difficulties obtaining financial assistance.
A beginning farmer is an individual or entity who:
•
Has not operated a farm for more than 10 years;
•
Substantially participates in the operation;
•
For farm ownership loans, the applicant cannot
own a farm greater than 30 percent of the average
size farm in the county, at time of application.
•
If the applicant is an entity, all members must
be related by blood or marriage, and all entity
members must be eligible beginning farmers.
In addition, beginning farmers must meet the loan
eligibility requirements for the program.
Maximum Loan Amounts
•
Direct farm ownership: $600,000
•
Direct operating loan: $400,000
•
Microloan: $50,000 each for operating and farm
ownership
•
Guaranteed farm ownership or operating loan:
$1,776,000
•
EZ Guarantee: $100,000 ($50,000 if the lender is a
micro lender)
Down Payment Program
FSA has a special loan program to assist beginning
farmers in purchasing a farm. Retiring farmers may
use this program to transfer their land to future
generations.
Requirements:
•
Cash down payment of at least 5 percent of the
purchase price.
•
Loan amount limited to 45 percent of the least of:
•
The purchase price of the farm;
•
The appraised value of the farm; or
•
$667,000 ($300,150 maximum).
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FACT SHEET
MARCH 2020
Loans for Beginning
Farmers and Ranchers
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USDA is an equal opportunity provider, employer, and lender.
•
20 years loan term.
•
Interest rate is 4 percent below the direct farm
ownership rate, but not lower than 1.5 percent.
The remaining balance may be obtained from a
commercial lender or private party. FSA can guarantee
up to 95 percent of the loan 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.
More Options for Accessing Capital
Beginning farmers may choose to participate in a joint
financing arrangement. FSA will lend up to 50 percent
of the amount financed and another lender provides 50
percent or more. The applicant will use funds from the
joint financing arrangement along with FSA funds for
any authorized farm ownership purpose. The interest
rate is 2 percent less than the direct farm ownership
rate but not lower than 2.5 percent. The term of the
loan will not exceed 40 years or the useful life of the
security.
Land Contract Guarantees
FSA provides financial guarantees for land sale
contracts to a beginning farmer. The seller may request
either of the following:
•
Prompt Payment Guarantee: A guarantee up to
the amount of three amortized annual installments
plus the cost of any related real estate taxes and
insurance.
•
Standard Guarantee: A guarantee of 90 percent of
the outstanding principal balance under the land
contract.
The purchase price of the farm cannot exceed the
lesser of $500,000 or the market value of the property.
The buyer must provide a minimum down payment
of 5 percent of the purchase price of the farm. The
interest rate is fixed at a rate not to exceed the direct
farm ownership loan interest rate in effect at the time
the guarantee is issued, plus 3 percentage points. The
guarantee period is 10 years for either plan regardless
of the term of the land contract. The contract payments
must be amortized for a minimum of 20 years. Balloon
payments are prohibited during the 10-year term of the
guarantee.
LOANS FOR BEGINNING FARMERS AND RANCHERS
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MARCH 2020
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USDA is an equal opportunity provider, employer, and lender.
Farms for Sale
In instances where FSA has acquired properties, FSA
advertises inventory property that meets program
requirements first to eligible beginning farmers to
purchase these properties at the appraised value. If one
or more eligible beginning farmer offers to purchase
the same property in the first 135 days, the buyer is
chosen randomly.
How to Apply
Farmers may apply for direct loans at their local
FSA offices. Your local FSA offices are listed in
the telephone directory under U.S. Government,
Department of Agriculture or Farm Service Agency or
find your local FSA office at
farmers.gov
.
For guaranteed loans, applicants must apply to a
commercial lender who participates in the Guaranteed
Loan Program. Contact your local FSA office for a list
of participating lenders.
More Information
For more information, visit
fsa.usda.gov/farmloans
or
farmers.gov
. Find your local USDA Service
Center at
farmers.gov/service-locator
.
LOANS FOR BEGINNING FARMERS AND RANCHERS
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MARCH 2020
