Loans For Beginning Farmers and Ranchers-Factsheet

Loans for Beginning
FACT SHEET
Farmers and Ranchers MARCH 2020
Overview • Guaranteed farm ownership or operating loan:

$1,776,000
Building a successful farm is a significant financial • EZ Guarantee: $100,000 ($50,000 if the lender is a
investment and can be especially challenging for micro lender)
beginning farmers who are not financially ready to
access credit from commercial lenders. The U.S. Down Payment Program
Department of Agriculture’s (USDA) Farm Service
Agency (FSA) makes and guarantees loans to FSA has a special loan program to assist beginning
beginning farmers. While FSA is fully committed to farmers in purchasing a farm. Retiring farmers may
all farmers and ranchers, there is a special focus on the use this program to transfer their land to future
credit needs of farmers and ranchers who are in their generations.
first 10 years of operation.
Requirements:
Each year Congress targets a percentage of farm
ownership and farm operating loan funds to beginning • Cash down payment of at least 5 percent of the
farmers. Providing loan programs is important as purchase price.
beginning farmers have historically experienced more • Loan amount limited to 45 percent of the least of:
difficulties obtaining financial assistance. • The purchase price of the farm;
• The appraised value of the farm; or
A beginning farmer is an individual or entity who: • $667,000 ($300,150 maximum).
• Has not operated a farm for more than 10 years;

• Substantially participates in the operation;
• For farm ownership loans, the applicant cannot
own a farm greater than 30 percent of the average
size farm in the county, at time of application.
• If the applicant is an entity, all members must
be related by blood or marriage, and all entity
members must be eligible beginning farmers.
In addition, beginning farmers must meet the loan

eligibility requirements for the program.
Maximum Loan Amounts

• Direct farm ownership: $600,000
• Direct operating loan: $400,000
• Microloan: $50,000 each for operating and farm
ownership
1
LOANS FOR BEGINNING FARMERS AND RANCHERS – MARCH 2020
• 20 years loan term. Land Contract Guarantees

• Interest rate is 4 percent below the direct farm
ownership rate, but not lower than 1.5 percent. FSA provides financial guarantees for land sale
contracts to a beginning farmer. The seller may request
The remaining balance may be obtained from a either of the following:
commercial lender or private party. FSA can guarantee
up to 95 percent of the loan if financing is obtained • Prompt Payment Guarantee: A guarantee up to
from a commercial lender. Participating lenders do not the amount of three amortized annual installments
have to pay a guarantee fee. plus the cost of any related real estate taxes and
insurance.
Financing from participating lenders must have an • Standard Guarantee: A guarantee of 90 percent of
amortization period of at least 30 years and cannot the outstanding principal balance under the land
have a balloon payment due within the first 20 years of contract.
the loan.
The purchase price of the farm cannot exceed the
More Options for Accessing Capital lesser of $500,000 or the market value of the property.
The buyer must provide a minimum down payment
Beginning farmers may choose to participate in a joint of 5 percent of the purchase price of the farm. The
financing arrangement. FSA will lend up to 50 percent interest rate is fixed at a rate not to exceed the direct
of the amount financed and another lender provides 50 farm ownership loan interest rate in effect at the time
percent or more. The applicant will use funds from the the guarantee is issued, plus 3 percentage points. The
joint financing arrangement along with FSA funds for guarantee period is 10 years for either plan regardless
any authorized farm ownership purpose. The interest of the term of the land contract. The contract payments
rate is 2 percent less than the direct farm ownership must be amortized for a minimum of 20 years. Balloon
rate but not lower than 2.5 percent. The term of the payments are prohibited during the 10-year term of the
loan will not exceed 40 years or the useful life of the guarantee.
security.
2 USDA is an equal opportunity provider, employer, and lender.

LOANS FOR BEGINNING FARMERS AND RANCHERS – MARCH 2020
Farms for Sale

In instances where FSA has acquired properties, FSA
advertises inventory property that meets program
requirements first to eligible beginning farmers to
purchase these properties at the appraised value. If one
or more eligible beginning farmer offers to purchase
the same property in the first 135 days, the buyer is
chosen randomly.
How to Apply
Farmers may apply for direct loans at their local
FSA offices. Your local FSA offices are listed in
the telephone directory under U.S. Government,
Department of Agriculture or Farm Service Agency or
find your local FSA office at farmers.gov.
For guaranteed loans, applicants must apply to a

commercial lender who participates in the Guaranteed
Loan Program. Contact your local FSA office for a list
of participating lenders.
More Information
For more information, visit fsa.usda.gov/farmloans
or farmers.gov. Find your local USDA Service
Center at farmers.gov/service-locator.
3 USDA is an equal opportunity provider, employer, and lender.

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Loans for Beginning

Overview • Guaranteed farm ownership or operating loan:

• Has not operated a farm for more than 10 years;

In addition, beginning farmers must meet the loan

Maximum Loan Amounts

• 20 years loan term. Land Contract Guarantees

2 USDA is an equal opportunity provider, employer, and lender.

Farms for Sale

For guaranteed loans, applicants must apply to a

3 USDA is an equal opportunity provider, employer, and lender.

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