FSA Loans for Socially Disadvantaged Farmers and Ranchers: Loan Requirements

FSA loans are government-backed loans that help farmers and ranchers acquire, expand or operate their agribusiness enterprises. A portion of the Farm Service Agency's funding for FSA loans goes each year for socially disadvantaged farmers and ranchers. The following information explains how FSA loans work and the requirements for socially disadvantaged farmers and ranchers to take advantage of them.

Understanding FSA Loans

Among other responsibilities, the U.S. Farm Service Agency funds the FSA Loan Program. As with many loan programs underwritten by the government, the money is actually made available through private lenders and backed by the government. This allows lenders to offer more competitive interest rates or loan terms than the borrower would typically qualify for. FSA loans are backed at 90 to 95 percent by the Farm Service Agency.

What Is Socially Disadvantaged?

A portion of SFA loan funding is dedicated each year to helping socially disadvantaged farmers and ranchers. In this context, "socially disadvantaged" has a specific definition.

According to the Farm Services Agency, "a socially disadvantaged (SDA) farmer, rancher or agricultural producer is one of a group whose members have been subjected to racial, ethnic or gender prejudice because of his or her identity as a member of the group without regard to his or her individual qualities."

Specific groups considered to be socially disadvantaged farmers and ranchers include: women, African Americans, American Indians, Alaskan Natives, Hispanic Americans, Asian Americans and Pacific Islanders. You are required to be in one of these groups to participate in the FSA socially disadvantaged program.

Loan Requirements

If you qualify as a socially disadvantaged farmer or rancher, the loan you want must also qualify and be for one of a few specific purposes. The loan can be for direct farm ownership, or FO, loans or for farm operations, or OL loans.

An FO loan can be used to purchase farms or ranches or to buy land to add to an existing farm or ranch. This includes buying easements required to operate your land, construct or improve structures or meet soil and water conservation requirements. The FO loan program can also be used for generational transfer of land ownership within a family.

An OL loan can be for purchasing livestock, equipment, seed, fertilizer or other chemicals, insurance and fuel. You can borrow with OL SFA loans for training. You can even refinance with them.

Lender Requirements

FSA loans are only offered through qualified lenders. The Farm Service Agency requires FSA loans to be processed through banks, credit unions or farm credit agencies.

Loan Terms

FSA loans for socially disadvantaged farmers and ranchers can only be for 45 percent of the total loan amount needed, and you are required to put 5 percent down. The remaining 50 percent of the loan must come from other assets you have or other borrowing. OL loans must be paid back in one to seven years. FO loans have a maximum payout of 40 years. Interest rates vary with the cost of borrowing to the government.