You have the desire to start a farm, but you don’t have the funding. The USDA has your back. They offer 2 programs that help starting farmers get on their way. The USDA offers the Guaranteed and Direct Farm loans. Both loans help you get the capital you need to make your dream of farming a reality.
You can apply for a Direct loan through the FSA. If you want a Guaranteed loan, though, you’ll have to find a USDA approved lender.
Direct Farm Ownership Loans
Beginning farmers with little or no experience can secure 100% financing for their farm. You can use the Direct Farm Loan to buy farmland, start operations, or for a funding emergency related to the farm. Farmers are eligible to receive up to $300,000 to buy a farm. The loan can have a term of up to 40 years. The only stipulation is that you have never had a Direct Farm loan before.
Qualifying for the Direct Farm Loan for farm funding is similar to what you would do for a residential loan. You need good credit and can’t have defaulted on any federal loans. A key factor, though, is that you can’t be eligible for any other loan. If you have the option for other financing for the farm, you can’t take out a Direct loan.
In order to qualify for the loan, you’ll need to provide 3-years of your financials. You’ll also need to have a business plan in place. This shows the FSA that you are serious about owning a farm. If approved, you can secure 100% of the cost of the farm.
Guaranteed Farm Ownership Loans for Funding
Guaranteed Farm Ownership loans offer funding to starting a farm as well. However, rather than dealing with the FSA directly, you’ll deal with a lender. These loans are available in much larger amounts. You can secure up to $1,399,000, depending on what you qualify to receive.
Qualifying for the Guaranteed Farm loan works the same way as the Direct Farm loan. The difference is you apply directly with the lender. You must prove you have good credit and that you can’t secure financing from anywhere else. The Guaranteed loan also offers terms up to 40 years.
Education Required for Starting a Farm
One requirement both Guaranteed and Direct Loans require is education on starting a farm. You must be able to prove you have the property education before you can get approved.
In addition, the Direct Farm Loan requires that you have experience operating your farm for at least 3 years out of the last 10 years. The FSA may grant an exception to the rule if you have other experience that may qualify you for the loan.
Both Guaranteed and Direct loans provide funding when starting a farm. The USDA guarantees the loans, which means the lender won’t lose too much if you default. However, the FSA and lenders still need to be careful about who they lend to. Make sure you do your homework and create your plan so that you can get the best deal on a USDA farming loan.