Direct Ownership FSA Loans: Loan Requirements

The Farm Service Agency offers FSA loans to farmers and ranchers who cannot otherwise qualify for financing. These loans are generally low interest, and they also require less in down payment than most private loans.  If you qualify for an FSA loan, you will be able to finance up to $300,000 toward a farm purchase. However, qualifying for this program relies on more than just financial loan requirements. You must also meet the requirements of the program in terms of your demographic and experience in order to receive the rural loan.

Farming Experience & Needs

The first set of requirements you must meet for an FSA loan has nothing to do with your financial abilities; rather, this set has to do with farming abilities. You must show you have sufficient experience, training or knowledge to run a farm or ranch. If you are looking for a direct loan, you must have participated in the operation of a successful farm or ranch for 3 to 10 years. It is okay if this was not a commercial farm. A family farm will qualify as long as it was run successfully. If you own another farm or farms, you will not qualify under the direct ownership program because it is aimed at individuals who are purchasing their first piece of property. You must also be the owner or operator of the farm once the loan is closed. This means you cannot seek a loan on someone else's behalf. 

Financial Requirements

Since this is a government loan, you must also be a citizen of the United States or a non citizen national. You must, naturally, have the legal ability to assume a loan. This simply means you are not under a current restriction from a previous bankruptcy, not wanted for any arrest warrant and other types of legal qualifications. Most importantly if you are looking for a direct loan, you must be unable to find other financing. This means you will need to seem agricultural loans or small business loans from private lenders first. Only if you have been rejected can you then seek an FSA loan. You will need to have sufficient credit to be deemed creditworthy, but the credit requirements for this loan are more forgiving if you have a short credit history. If you have defaulted on a previous loan with the FSA, you will not be eligible. If you have outstanding taxes, those must be paid before you are eligible.

Private Loan Considerations

Private loans have less requirements of you as an individual and more requirements of you as a financial entity. This means a private lender will evaluate your ability to repay the loan above all other factors. The FSA loan programs are typically need based, but private loans are always ability based. Qualifying for a private loan can be more expensive than using the FSA program, but you may still be eligible for a loan guarantee from the FSA even if you have a private loan. This guarantee can lower your interest rate.