FSA Loans for Young Farmers and Ranchers: Benefits

The FSA offer direct and guaranteed loans to beginning farmers and ranchers who cannot secure commercial loans. The FSA is the Farm Service Agency of the government that offers loans to farmers. Commercial loans may be difficult to achieve for new farmers who have not been in the business very long and have insufficient financial resources to qualify for another type of loan. These agricultural loans are similar to FSA micro-loans because they aim to make a farm self-sustaining within a short period of time. Farmers and ranchers will receive a number of benefits by going through this loan source instead of a private lender. 

Inexpensive Loans

The main reason to seek a government-guaranteed loan is the less expensive financing. Interest rates on these loans will be lower than independent loan rates. Also, the terms on these loans are extended in order to help a borrower keep their costs down. Many borrowers receive individualized financing plans because lenders recognize that a young farmer is juggling work, school and a farm.

 Low to No Down Payment

The FSA encourages young and new farmers and ranchers by offering incentives for low to no down payment. Where a bank would typically require 10-15% down on a loan, the FSA offers incentives for much lower financing costs for the borrower.

The FSA encourages socially-disadvantaged farmers by offering a 0 or 5% down option. In addition, aging farmers may use this initiative to transfer a farm to a younger generation. The loan will only partially cover the cost of the farm. However, the FSA will guarantee up to 95% to 100% of a loan given by a private lender, keeping the cost down across the board. 

Opportunities to Purchase Land

The FSA receives information on land for sale. Those who qualify under the new farmers and ranchers loans will have first priority to purchase the land at the assessed market value. Instead of entering a bidding war with other farmers, the FSA chooses a buyer at random if there is more than one offer. This will help new farmers get a fair price on land. The loan program will also help with:

  • Improvements of farm real estate
  • Develop land to promote soil
  • Water conservation
  • Pay operating expenses
  • Invest in machinery
  • Breeding stock and purchasing livestock

Other Loan Features

The maximum loan amount for is $200,000, with guaranteed loans offered up to $949,000. The loan program is available for established farmers that may have suffered a financial setback due to a natural disaster or emergency.