USDA Farm Loans: Requirements & Interest Rates

FSA Farm Loans, offered by the United States Department of Agriculture (USDA), are financial assistance programs designed to support farmers in the United States. The USDA’s Farm Service Agency (FSA) administers these loan programs to provide access to credit for agricultural producers who may not qualify for conventional commercial loans.

To start or continue to grow in agriculture, you need farm loans that can help you in purchasing or renting land, equipment, disaster management, etc. But which type of USDA farm loan to take? or what are the interest rates and requirements? & how to apply?

If these questions are in your mind, then this article is going to help you in understanding farm loans offered by USDA FSA, programs, requirements, eligibility, interest rates & application process.

FSA Farm Loan Programs

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Direct Loan Program

The Federal government gives money to FSA, and they use it to make loans under this program. FSA helps people who borrow directly from them. They give advice & support to borrowers to help them understand if they have enough resources like land, buildings, machines, money, and plans for their business.

Under this program, Farm ownership, operating & emergency loans are available.

Eligibility Requirements

1. Available for beginner farmers who have started farming less than 10 years ago or if you are a socially disadvantaged farmer. (For beginner farmer targeted funds only)

2. Farmer must be a United States citizen, a non-citizen national, or a qualified person.

3. Should posses the legal capacity to avail the loan.

4. Farmer should have a good credit history. In case of failure, you can show evidence stating that the failure was due to an uncontrollable phenomenon.

5. Your farm or ranch should be a family owned & managed farm.

6. Farmer can apply if he or she has the training, education, or experience of farming and management.

7. Farmer should not have any outstanding debts (except for debts under the Internal Revenue Code of 1986) owed to the U.S. Government at the time the loan is finalized.

8. You should have worked in your farm for at least 3 years in the last 10 years. (For Farm ownership loans)

9. You should be able to make a cash down payment of at least 5% of the purchase price for the farm that you want to buy. (For downpayment loans)

10. Your farm should be located in a disaster designation county declared not more than 8 months ago and only if you suffered 30% production loss, you can get emergency loans.

Guranteed Loan Program

Farmers can get FSA farm loan through their programs. Loans offered by FSA are temporary and it helps you to get mature for commercial credits. So before applying for a loan, let’s get to know about various loan programs of FSA.

Guaranteed loans are special loans provided by banks, the Farm Credit System, credit unions, and other commercial lenders. When someone gets a guaranteed loan, the FSA (Farm Service Agency) promises to help the lender if the borrower can’t pay back the loan. They will cover up to 95% of the losses for the lender. The FSA makes sure that all eligible loan guarantees are approved & also keeps an eye on what the lender does.

Under this program, Farm ownership, operating, and conservation loans are available.

Eligibility Requirements

1. You should be a United States citizen, a non-citizen national, or a qualified person.

2. Farmer should posses legal capacity to get loan.

3. You should not have recieved debt forgiveness.

4. Farmer applying for this loan program should be able to show good credit history.

5. Your farm should be a family owned and managed farm.

6. Farmer should not have any outstanding debts (except for debts under the Internal Revenue Code of 1986) owed to the U.S. Government at the time the loan is finalized.

Land Contract Gurantee Program

A land contract guarantee is a special agreement that gives the seller of a farm or ranch some financial protection. This protection comes when they sell the property using a land contract to a farmer or rancher who is just starting out or facing social disadvantages. It helps ensure that the seller will receive the agreed-upon payment for the property.

Eligibility Requirements

1. Applicant should be a citizen of the United States, a non-citizen national, or a qualified person.

2. You should be a beginner or socially disadvantaged farmer or rancher.

3. Farmer should posses legal capacity to enter into a legally binding agreement.

4. Without FSA agreement, you should not enter into the land contract.

5. Farmer should have a good credit history, family owned & managed farm and should not have received debt forgiveness on a direct or guaranteed loan.

6. Farmer should not have any outstanding debts (except for debts under the Internal Revenue Code of 1986) owed to the U.S. Government at the time the loan is finalized.

Highly Fractionated Indian Land Loan Program

This Loan Program helps to give money to certain lenders who have a good history of lending money in Indian areas & know how to work with the Bureau of Indian Affairs. These lenders then use the money to make loans to tribes, tribal members, and tribal groups so they can buy pieces of land that are divided into many small parts.



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Types Of FSA Farm Loans

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Once you have understood about loan programs, then you will need to know types of loan offered by FSA under USDA. You may need one or more types of loan depending on your credit requirements.

Farm Ownership Loans

Farm Ownership loans can help you buy or make your farm or ranch bigger. You can also use these loans to build new structures or improve the ones you already have on your farm or ranch. They can cover the costs of closing the deal and help you with soil and water conservation & protection.

Loan Type	Maximum Loan Amount	Rates	Terms
Direct Farm Ownership	US $600,000	Fixed Interest Rate	Up to 40 years
Direct Farm Ownership Participation	US $600,000	For farm owners, the interest rate is reduced by 2% if at least 50% of the loan comes from another lender. However, even with this reduction, the lowest interest rate they will have to pay is 2.5%.	Up to 40 years
Direct Downpayment	Out of the total amount, 45% will be taken from the smaller value of the following options: the farm or ranch’s buying price, the appraised value of the property. Maximum laon amount: US $300,150	Fixed Interest Rate	Up to 40 years

Operating Loans

Operating loans are like a helping hand to buy animals & tools. It also help you pay for small fixes on your property and cover yearly costs of running your business.

Loan Type	Maximum Loan Amount	Rates	Terms
Direct Operating	US $400,000	Fixed Interest Rate	Up to 1 to 7 years

Emergency Loans

Emergency loans are there to support you if something bad happens, like a natural disaster damaging your farm or ranch. These loans can be used to fix or replace important things on your farm, cover some of the costs of producing crops or animals during the disaster year, pay for necessary family expenses, reorganize your farming business & even pay off certain debts. They are meant to help you get through tough times and get your farm back on track.

Loan Type	Maximum Loan Amount	Rates	Terms
Direct Emergency	US $500,000 100% actual or physical losses (lowest among them)	Fixed Interest Rate	Up to 1 to 7 years (for non real estate purpose) Up to 40 years (for physical losses on real estate)

Microloans

Microloans are loans that help people who own or work on farms. These loans are easier and faster to apply for, and you don’t need to fill out as much paperwork. They are made specifically for smaller farms, non-traditional farms, and niche-type operations.

Loan Type	Maximum Loan Amount	Rates	Terms
Direct Farm Ownership Microloan	US $50,000	Fixed Interest Rate	Up to 25 years
Direct Operating Microloan	US $50,000	Fixed Interest Rate	Up to 25 years

EZ Gurantee Loans

EZ Guarantee loans are special loans for farmers that make it easier to buy or run a farm. The application process is shorter & there is less paperwork to fill out. These loans are made for smaller farms, non-traditional farms and farms that focus on specific types of products or activities.

Loan Type	Maximum Loan Amount	Rates	Terms
Guranteed Farm Ownership	Adjusted annually for inflation	Can be negotiated	Up to 40 years
Guranteed Operating	Adjusted annually for inflation	Can be negotiated	Up to 1 to 7 years
EZ Gurantee Farm Ownership	US $100,000	Can be negotiated	Up to 40 years
EZ Gurantee Operating	US $100,000	Can be negotiated	Up to 1 to 7 years
Guranteed Conservation Loan	Adjusted annually for inflation	Can be negotiated	Not more than 30 years

Highly Fractionated Indian Land Loans

Highly Fractionated Indian Land Loans are a special kind of loans that help tribes, tribal members & tribal groups buy small parts of land that are divided among many people. These loans are given by intermediary lenders.

Land Contract Gurantees

A land contract guarantee is a way to provide financial security to a person selling a farm or ranch. This guarantee is given when the seller sells the land to a new farmer who is just starting or facing social disadvantages. The seller can choose one of two types of guarantees:

1. Prompt Payment Guarantee: This ensures that the seller gets paid on time. It covers up to three yearly payments, along with real estate taxes & insurance costs. To make sure everything goes smoothly, a third-party escrow agent will handle the transactions.

2. Standard Guarantee: With this guarantee, the seller is ensured to receive 90% of the remaining loan amount under the land contract. To handle the contract, a third-party servicing agent is chosen.

Both of these guarantees are meant to protect the seller & offer assurance when selling their farm or ranch to a new farmer.

Loan Type	Maximum Loan Amount	Rates	Terms
Land Contract Gurantee	US $500,000	Fixed Interest Rate (Cannot exceed the direct farm ownership interest rate + 3%.	Must be amortized for a minimum of 20 years with equal payments during the term of the guarantee. The guarantee period is 10 years. 5% Downpayment (At least)

How To Apply For A Guranteed Loan Program?

After understanding your requirements, contact your local commercial lender to assist you in preparing forms for the application. You can get the application form from the local Farm Service Agency office or can download and fill from the official website: Guranteed Loan Application Form Portal

After filling he form correctly, your lender will have to submit the form at FSA. The organization will review your form, and if any document or information is found missing, then your lender will be notified within 5 days. If your application is approved, FSA will notify the lender in writing.

But, in case your application is rejected, then FSA will notify your lender in writing. They will mention reasons of rejection, oppurtunities & mediations possible.

How To Apply For A Direct Loan Program?

In this loan program no commercial lender is involved, therefore you can directly apply for this loan program at FSA. Visit the local FSA office and get connected with the local official to get help in completing your form. They will provide you receipt of service when you ask for assistance, application, or submit the form.

You can submit the form of direct loan program by mailing your application to the local FSA office, fixing an appointment, or electronically.

After submitting application form, you will be notified within 10 days, if any form or information is missing. FSA will make a final decision on approval or rejection of your loan request within 60 days after recieving all required information.

If your farm loan request is approved under direct loan program, then FSA will notify you in writing about loan term, interest rates, approved use of funds, your responsibilities, etc.

FAQ ON USDA Farm Loans