Dangers of a Farm Service Agency (FSA) Loan

FSA loans are designed to provide assistance to farmers and ranchers in order to assist in this country’s agricultural development. The Farm Service Agency, which is part of the U.S. Department of Agriculture (USDA), makes direct and guaranteed loans for the purpose of owning a farm in the form of a direct and guaranteed Farm Ownership loans (FO). FSA also provides guaranteed operating loans (OL) for family and commercial sized farmers and ranchers.

The dangers of FSA loans, in general, have to do with what may happen to the credit of the borrower if they are unable to pay back the loan. This could be due to a crop failure or the inability of the farmer to pay back the loan’s terms as stated in the loan agreement. Aside from these dangers, an FSA loan has the same dangers to a borrower that any other loan does – if you have taken out a loan, you certainly understand what those risks and dangers are.

FSA Loan Programs

In all, the FSA operate the following loan programs for the benefit of farmers and ranchers:

  • Beginning Farmers and Ranchers Loans
  • Direct Farm Loans
  • Emergency Farm Loans
  • Guaranteed Farm Loans
  • Socially Disadvantaged Farmers and Ranchers Loans

There are no dangers associated with acquiring a FSA loan. These loans are designed to assist farmer and ranchers with funding necessary to start or maintain their agricultural enterprise. These loan programs come in the form of direct aid through the USDA FSA or loan guarantees given by private lenders.  

Dangers That May Be Associated

Any dangers associated with taking out a FSA loan are no different than the dangers associated with other types of loans. This includes both government direct, guaranteed and private loans.  These dangers include denial of a loan application due to insufficient collateral or credit, lack of business experience or inability to secure a co-signer. Aside from these issues, which arise with all loan types there is nothing that is especially dangerous about taking out a FSA direct loan or borrowing money from a private lender guaranteed by the FSA.

Understanding Loan Requirements

A farmer or rancher seeking a loan from the FSA should understand the requirements associated with the program that they are applying. Each of the programs assists farmers and ranchers in different ways and applying for the wrong loan may result in delays or denial of a loan application. These requirements include any lender requirements and qualifications that may be in place for a loan.

Loan Application Process

The loan application process is available online via the FSA website or through a local agency office within a farm community. Again, there is no danger in applying for a FSA loan and the process has been streamlined to make it easier for any applicant to complete a request for loans. Meeting with a local FSA official can help a farmer or rancher determine which of the loan programs are applicable to their purpose so that the proper application can be submitted.