FSA Loans for Farm Storage Facilities: Qualifying with Bad Credit

FSA loans provide low-interest financing to producers in need of buying or building storage facilities. Like any loan, these agricultural loans are distributed based on the item you are looking to finance as well as your personal credit and financial history. The federal government often has lower standards for qualification than a private lender, but if you have bad credit you will still need to answer more questions than a good credit borrower. 

Meeting Basic Requirements

There are a number of requirements to secure an FSA Farm Storage Facility loan that have nothing to do with your credit. These include the type of commodity you plan on handling or storing, the type of facility you are financing and what you will do with the commodity. These loans are not actually small business loans, because they are meant only for farmers who will use the facility for personal use. If you are seeking a commercial rural loan, you may need to look to a different program. 

Meeting Credit Requirements

One criteria the FSA will consider your application on is your ability to pay the loan based on past loan performance. There are minimum credit requirements, even when you are dealing with the federal government. Typically, you should have no defaults or bankruptcies, no late payments for two years, and a score somewhere around 700 to 750. However, if you do not meet these requirements, you will need to prove your ability to pay in other ways. If you have a high income or can testify as to why your credit is low, you may still be considered for this loan. 

Meeting Security Requirements

This loan program is intended to be financed through secured loans only. The first $50,000 of any FSA Farm Storage Loan can be provided in the form of a promissory note from a bank. This means the institution must agree to pay off the amount if you fail to do so. Any financial institution can issue a promissory note, but the government will typically require the note come from an institution meeting its financial rating requirements. Any amount from $50,000 to the loan maximum of $500,000 must be guaranteed against an asset. Most producers will use the farm itself as collateral. As a low-credit borrower, you will need to assure you can secure the loan in order to qualify.

Meeting Down Payment Requirements

The program is aimed at creating opportunities for those producers who would not typically be able to secure financing through a private lender, and the result is a better deal for you as the borrower. If you are inheriting the farm, you may be able to avoid down payments all together. However, the loan will be cheapest if you can provide 10% down. Especially if you do not meet credit requirements, being able to provide a bigger down payment will help you qualify.