FSA Loans Expand Financing Options For Farmers & Ranchers

If your farm or agribusiness has difficulty getting a loan, the Farm Service Agency (FSA) can provide a financing lifeline.

The FSA is an agency of the U.S. Department of Agriculture (USDA) that lends to farmers and ranchers who are unable to obtain credit elsewhere to start, purchase, sustain or expand a family farm. 

In contrast to a standard commercial loan, FSA loans are temporary. The mission of FSA is to provide a financing bridge to farmers as they move on to more permanent commercial credit. Once farmers find credit from a traditional commercial lender, FSA moves out of the picture.

Every farmer or rancher’s financial situation is unique, but it’s important to know what types of loans are available to them through the FSA. Let’s look at the three different FSA loan programs:

1. Guaranteed Loan Program

Guaranteed loans are started and serviced by commercial lenders, like Stearns Bank. The FSA has the responsibility of approving all eligible loan guarantees.

2. Direct Loan Program

Direct loans are started and serviced by the FSA using government-backed funds. The FSA is responsible for providing credit counseling and supervision to its direct borrowers by helping farmers or ranchers evaluate the condition of their real estate, facilities, machinery, equipment, financial and production management and goals.

3. Land Contract Guarantee Program

Land contract guarantees are used by farmers or ranchers intending to sell real estate through a land contract to a beginning or socially disadvantaged farmer or rancher.

Types Of FSA Loans

Before a farmer or rancher applies to one of these programs, they need to determine the appropriate type of loan.

Or, they may need to apply for more than one loan type for different purposes. There are various types of loans under these three programs:

1. Farm Ownership Loans – Help farmers and ranchers purchase farm land or increase the value of property through construction. Funds also can be used to help conserve and protect soil and water resources.
2. Operation Loans – Enable farmers to purchase livestock and equipment, pay for building improvements, and operating expenses.
3. Targeted Loan Funding – A portion of FSA loan funds are set aside for minority and women farmers to buy and operate a farm or ranch.
4. Native American Tribal Loans – Help tribes acquire land interests within a tribal reservation or Alaska Native community while advancing current farming operations. These loans also provide financing for Native American communities to increase agricultural productivity and preserve cultural farmland for future generations.
5. Microloans – For operating or farm ownership. They’re designed to meet the needs of small and beginning farmers, or for non-traditional and specialty operations by easing paperwork and eligibility requirements.
6. Emergency Loans – Used when a qualifying loss caused by natural disasters that have damaged farming or ranching operations. The funds may be used to replace essential property, pay for production costs, pay essential family living expenses, reorganize the farming operation or refinance debts.
7. Conservation Loans – These loans are intended to complete a conservation practice in an approved plan.

Use the FSA’s Farm Discovery Tool to find a loan or program that’s right for you.

How To Qualify

Depending on the type of loan you want, you need to meet eligibility requirements. To qualify for assistance, applicants must be family farmers, citizens, non-citizen nationals or legal resident aliens of the United States or U.S. territories, and be able to demonstrate one year of sufficient farm managerial experience.

You qualify as a socially disadvantaged farmer or rancher if you are:

1. American Indian or an Alaska Native
2. Asian
3. Black or African-American
4. Native Hawaiian or other Pacific Islander
5. Hispanic
6. Female

You must also meet the following:

• Satisfactory history of meeting credit obligations
• Legal ability to sustain loan obligations
• Unable to obtain credit elsewhere at reasonable rates and terms to meet actual needs
• Function as tenant-operator or owner-operator of a family farm after loan closing.

Applicants are disqualified if either of the following apply:

• Are delinquent on a federal debt, or
• Have caused FSA a loss by receiving debt forgiveness (certain exceptions apply).

If you would like to learn more about FSA loans, click below to fill out a contact form to start a conversation with a Stearns Bank lender.