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Farm LoansOverviewFACT SHEETMarch 2020Overviewa guaranteed loan, a commercial lender makes andservices the loan, and FSA guarantees it against lossup to a maximum of 90 percent in most cases or95 percent in limited circumstances. FSA approveseligible loan guarantees and provides oversight oflenders’ activities. Contact a local FSA office for a listof participating lenders.The U.S. Department of Agriculture’s Farm ServiceAgency (FSA) offers direct and guaranteed loans tofarmers and ranchers to promote, build, and sustainfamily farms for a thriving agricultural economy.Farm ownership, operating, and emergency loansare available under the Direct Loan Program. Farmownership, operating, and conservation loans areavailable under the Guaranteed Loan Program. FSAoffers two types of guarantees under the Land ContractGuarantee Program.Farm Ownership LoansFarm Ownership Loans may be used to purchase afarm, enlarge an existing farm, construct new farmbuildings and/or improve structures, pay closingcosts, and promote soil and water conservation andprotection. The direct loans are available up to amaximum of 600,000. Microloans are also available.FSA will guarantee farm ownership loans through acommercial leader up to 1,776,000. The maximumrepayment term is 40 years for both direct andguaranteed farm ownership loans.The goal of FSA’s farm loan programs is to helpfarmers and ranchers obtain commercial credit. Onceyou are able to obtain credit from a commercial lender,our mission of providing temporary, supervised creditis complete.Direct Farm LoansFSA’s Direct Loan Program is designed to help farmersstart, purchase, or expand their farming operation.From beginning farmers who have limited financialhistory to qualify for commercial credit to farmers whohave suffered financial setbacks from natural disasters,FSA offers a variety of loans to provide additionalresources farmers need to establish and maintainprofitable farming operations. Farmers may apply fordirect loans at their local FSA offices.Guaranteed Farm LoansFSA guaranteed loans are available to farmers whomay not meet loan qualifications from a commerciallender. Guaranteed loans are made and serviced bycommercial lenders, such as banks, Farm CreditSystem institutions, or credit unions. Under1
FARM LOANS OVERVIEW – MARCH 2020Farm Operating Loansfarm to be acquired or 667,000 (Note: This resultsin a maximum loan amount of 300,150);The term of the loan is a maximum of 20 years.The interest rate is 4 percent below the direct farmownership rate, but not lower than 1.5 percent;The remaining balance may be obtained froma commercial lender or private party. FSA canprovide up to a 95 percent guarantee if financing isobtained from a commercial lender. Participatinglenders do not have to pay a guarantee feeFinancing from participating lenders must have anamortization period of at least 30 years and cannothave a balloon payment due within the first 20years of the loan.Farm Operating Loans may be used for normaloperating expenses, machinery and equipment, minorreal estate repairs or improvements, and refinancingdebt. The direct loans are available up to a maximumof 400,000. Microloans are also available. FSA willguarantee farm operating loans through a commercialleader up to 1,776,000. The repayment term mayvary, but it cannot exceed seven years. Annualoperating loans are generally repaid within 12 monthsor when the commodities produced are sold. Directoperating loans require applicants to have sufficienteducation, training, or at least one year’s experience inmanaging or operating a farm or ranch within the lastfive years. Down Payment ProgramYouth loans may be made to young persons who aresponsored by a project advisor, such as a 4-H club,FFA, tribal youth organization, or similar agricultureaffiliated group. The project must provide anopportunity for the young person to acquire experienceand education in agriculture-related skills. These loansare only available as direct loans with a maximum loanamount of 5,000. Youth loans are available to thosebetween the ages of 10 and 20 years at the time of loanclosing. Youth LoansThe Down Payment loan assists socially disadvantagedand beginning farmers in purchasing a farm.Requirements: The applicant must make a cash-down payment ofat least 5 percent of the purchase price;The maximum loan amount does not exceed 45percent of the least of the purchase price of thefarm to be acquired, the appraised value of the2USDA is an equal opportunity provider, employer, and lender.
FARM LOANS OVERVIEW – MARCH 2020Emergency Loansfarm and test for credit requirements are not applicableto Conservation Loans.Emergency loans help farmers and ranchers whohave suffered a loss caused by natural disastersthat damaged their farming or ranching operation.Emergency loan funds may be used to restore orreplace essential property, pay all or part of productioncosts associated with the disaster year, pay essentialfamily living expenses, reorganize the farmingoperation, and refinance certain debts. The county orcounties where the farm is located must be declareda disaster area by the President or designated by theSecretary of Agriculture. For production loss loans,applicants must demonstrate a 30 percent loss in asingle farming enterprise. Applicants may receiveloans up to 100 percent of production or physicallosses.Farmers and ranchers may use conservation loansto complete any conservation activity included ina USDA approved conservation plan or ForestryManagement Plan. The maximum loan amount is 1,776,000 with a maximum repayment term of 30years. Conservation Loans are available as guaranteedloans only.Loans for Beginning and SociallyDisadvantaged FarmersEach year, Congress targets a percentage of farmownership and farm operating loan funds to beginningand socially disadvantaged farmers. Providing loanprograms is important as these groups of farmers havehistorically experienced more difficulties obtainingfinancial assistance. FSA offers several loan programsto assist beginning and socially disadvantagedfarmers (refer to the fact sheets titled Loans forSocially Disadvantaged Farmers and Ranchers andLoans for Beginning Farmers and Ranchers). FSA’sDown Payment Program is offered to assist sociallydisadvantaged and beginning farmers in purchasing afarm with a maximum loan amount of 300,150.These loans are only available as direct loans fromFSA with a maximum loan amount of 500,000.Conservation LoansConservation Loans provide access to credit forfarmers and ranchers who want to implementconservation measures on their land. These loansare available to both smaller and less financiallyestablished farmers and ranchers, and to larger andfinancially stronger farmers and ranchers. The family3USDA is an equal opportunity provider, employer, and lender.
FARM LOANS OVERVIEW – MARCH 2020Land Contract GuaranteesWho Is Eligible?FSA also offers financial guarantees for land salecontracts to a beginning or socially disadvantagedfarmer. The seller may request either of the following:Eligibility requirements: Prompt Payment Guarantee: A guarantee up tothe amount of three amortized annual installmentsplus the cost of any related real estate taxes andinsurance.Standard Guarantee: A guarantee of 90 percent ofthe outstanding principal balance under the landcontract. The purchase price of the farm cannot exceed thelesser of 500,000 or the market value of the property.The buyer must provide a minimum down paymentof 5 percent of the purchase price of the farm. Theinterest rate is fixed at a rate not to exceed the directfarm ownership loan interest rate in effect at thetime the guarantee is issued, plus three percentagepoints. The guarantee period is 10 years for eitherplan regardless of the term of the land contract. Thecontract payments must be amortized for a minimumof 20 years. Balloon payments are prohibited duringthe 10-year term of the guarantee. 4Be a family farmer;Have a satisfactory credit history;Be a citizen of the United States, including PuertoRico, the U.S. Virgin Islands, Guam, AmericanSamoa, Commonwealth of the Northern MarianaIslands, Republic of Palau, Federated States ofMicronesia and the Republic of Marshall Islands; aU.S. non- citizen national or a qualified alien underfederal immigration law;Be unable to obtain credit elsewhere at reasonablerates and terms to meet actual needs;Have the legal capacity to incur the obligations ofthe loan;Not have outstanding unpaid judgments obtainedby the U.S. in any court, excluding judgments filedin U.S. Tax Courts;Not be delinquent on a federal debt;Must not have provided FSA with false ormisleading documents or statements in the past;Not have been convicted under federal or statelaws of planting, cultivating, growing, producing,harvesting, or storing a controlled substance withinthe last 5 crop years;Not have received debt forgiveness from FSA(certain exceptions apply); andUSDA is an equal opportunity provider, employer, and lender.
FARM LOANS OVERVIEW – MARCH 2020 Be within the time restrictions as to the number ofyears they can receive FSA assistance.accounts are distressed or delinquent, including: Applications may also be made by entities. Entitiesare corporations, cooperatives, joint operations,partnerships, trusts, and limited liability companies.Their members/stockholders must meet these sameeligibility requirements. The entity must also beauthorized to operate a farm or ranch in the state wherethe land is located. Re-amortization, rescheduling, consolidation, and/ordeferral of loans;Rescheduling at a lower interest rate;Acceptance of conservation contracts onenvironmentally sensitive land in exchange forreduction of debt; andWriting down the debt.If none of these options results in a feasible farmoperating plan, FSA will work with borrowers todetermine if they are eligible for consideration to retainthe homestead and up to 10 acres. Borrowers may beoffered the opportunity to pay off their debt for anamount below the full debt if that amount represents themarket value of the loan collateral.For socially disadvantaged members, they must holda majority interest in the entity applicant to receivetargeted funding.Working with Farmers and RanchersFSA does more than just provide credit - it workswith farmers and ranchers to identify strengths andopportunities for improvement in farm productionand management. FSA helps farmers and ranchersfind alternative options, so they can achieve success.Learning and improving business planning andfinancial insight through FSA’s credit management isthe difference between success and failure for manyfarm families.Farms that come into FSA ownership are sold at marketvalue, with preference given to socially disadvantagedand beginning farmers.More InformationFor more information, visit fsa.usda.gov/farmloans orfarmers.gov. Find your local USDA Service Center atfarmers.gov/service-locator.FSA works to keep farmers and ranchers farming. FSAmay be able to support direct loan borrowers whose5USDA is an equal opportunity provider, employer, and lender.
Farm Operating Loans Farm Operating Loans may be used for normal operating expenses, machinery and equipment, minor real estate repairs or improvements, and refinancing debt. The direct loans are available up to a maximum of 400,000. Microloans are also available. FSA will guarantee farm operating loans through a commercial leader up to .
