FSA Loans for Young Farmers and Ranchers: Loan Requirements

FSA loans are typically more flexible than private lenders, with respect to loan requirements. FSA loans for beginning farmers and ranchers are often aimed at giving economically-disadvantaged persons. They are meant to provide opportunity for a farmer to operate a self-sustaining business. There will be a few requirements for the FSA loan:

Who is a Beginning Farmer?

The biggest factor in determining if you qualify is seeing if you fit the definition of a beginning farmer. There is a four-part definition, and a person or entity must meet all four criteria to be considered for the agricultural loan.

  1. You have operated the farm for less than 10 years. If you operated a farm for any longer than 10 years, you will not be eligible.
  2. You meet specific eligibility requirements to the loan you are applying for. Some loans, such as joint financing arrangements, will set forth further criteria you must fit into in order to apply.
  3. You are a substantial participant in the operation you are seeking to finance. You cannot look for a loan for a friend or family member's farm or ranch.
  4. If you are seeking a farm ownership loan, the size of the farm cannot exceed 30% of the median sized farm in the country. This median is set each year.

What are the Loan Amounts?

Maximum loan amounts are set yearly. The average maximum loan size for a farm ownership or operational loan has averaged at $300,000.  The maximum loan amount can range between $200,000 to $949,000, depending on whether a loan is guaranteed. However, if you require further financing in order to achieve ownership or operation, you may seek a joint financing arrangement. This allows you to seek an additional commercial loan which is then guaranteed by the FSA. These limits usually top out at just over $1M. 

What about the Down Payment?

The FSA aims to encourage ownership by those who do not have sizable funds for down payment. Typically, only a 0 to 5% down payment is required for purchase. If you are utilizing this low down payment program, then you will have lower limits on the actual size of the loan. Financing more than 45% of your purchase will make you ineligible for this low down payment option. Interest rates on the low down payment option may be lower.  

What are the Terms?

The loan terms on federally supplied or federally guaranteed loans are set annually, but typically the life of the loan cannot exceed 30 years. There are also restrictions on the payment structure based on the type of loan.