Benefits of Farm Loans

Farm loans can come through both federal and private lenders. They will help farmers to both get into the industry with beginning loans or to expand operations. As farming has a high fixed cost associated with getting land, livestock and equipment, it may be necessary to seek financing in order to get started with any project. Ultimately, farm loans are not unlike other types of business or personal loans.

Purchase Land

Beginning farm loans can be used to purchase land necessary to get the operation underway. This type of financing can be for large, commercial farms and ranches or even smaller, local plots. If you plan on living off the land or selling your product on the market in anyway, a farm loan may be available to help get you started. The high cost of real estate today precludes most individuals from purchasing land outright. Using a modest land loan, very similar to a mortgage, will help even young farmers get started. 

Purchase Equipment

Farm equipment is very high cost and constantly evolving. Similar to other construction and factory equipment, farming and ranching machinery needs to be replaced as technology advances for a farmer to stay competitive on the market. Further, in order to expand production, most farmers will require additional equipment. Financing for this equipment can usually be achieved by securing the loan against the equipment itself. This makes equipment loans available at lower interest rates.

Build Business Credit

A farm or ranch is a business like any other. Even if you are simply providing for your own family off of your land, it is equivalent to a salary for one or more individuals in your household. Treating your farm like a business is the best way to ensure it is profitable in the long run, regardless of how large your undertaking is. This means you should consider the financial status of your farm on the general market. Having good credit is essential for a business to continue to grow and prosper. Building credit is achieved fastest through taking and paying off large loans on schedule.

Take Advantage of Federal Incentives

Many farm loans can come directly through the federal government. Other farm loans can be secured through the federal government, making them much cheaper for borrowers. Farm loans are generally provided through the USDA and FSA in a combined loan program. Through these programs, farmers can seek direct loans at low interest rates. If the farmer needs a larger loan than what the government can offer, that farmer can approach a private lender for the remainder of the financing. If the borrower qualifies under FSA standards, the federal government will guarantee the loan, meaning even the private lender will offer the loan at a low rate. The USDA and FSA also offer incentives for land purchase that allow those who borrow through them to have the first opportunities to purchase land for sale. Reading about federal farm loans can teach a borrower where he or she may qualify.