Farm Loans: Best Options and How to Get One
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Farm loans help farmers and ranchers start, grow or maintain their farming businesses. These small-business loans can be used to cover operating expenses, purchase livestock, buy farm machinery and agricultural equipment, as well as construct farm buildings, among other purposes.
Loans for farms are available from a range of sources, including government agencies and lenders that specialize in agriculture. The best farm financing for your business will be the most affordable option you can qualify for that meets your needs.
How much do you need?
We’ll start with a brief questionnaire to better understand the unique needs of your business.
Once we uncover your personalized matches, our team will consult you on the process moving forward.
Best farm loan options for agricultural businesses
1. Farm Service Agency (FSA) loans
Best for: Low interest rates; the variety of loan options.
Through the U.S. Department of Agriculture (USDA), the FSA offers several types of farm loans. FSA loans can be a good choice for first-time and established farmers alike. These loans have competitive interest rates, long repayment terms and can be used for a range of different purposes. Here are your options:
Direct operating loans. These loans can be used to cover daily operating costs and family living expenses. They can also be used to purchase livestock, seed and equipment. Loans are available in amounts up to $400,000 with repayment terms up to seven years. The FSA sets monthly interest rates — and as of July 2023, the interest rate on these loans is 4.5%. No down payment is required.
Direct ownership loans. Farm ownership loans are used to buy or expand a farm or ranch. These loans are available in amounts up to $600,000 with repayment terms up to 40 years. As of July 2023, the interest rate on these loans is 4.875%.
Microloans. FSA microloans are designed to provide financing to small and beginning farmers, as well as niche and nontraditional farm operations, such as truck farms, farms participating in direct marketing and sales, and Community Supported Agriculture (CSA). You can choose between an ownership and operating microloan; interest rates and eligible use cases mirror their standard loan counterparts. Funding amounts for either microloan max out at $50,000.
Guaranteed loans. Unlike FSA direct loans, which are issued directly from the agency to the farmer, FSA guaranteed loans work similarly to the SBA loan program. With these farm loans, the FSA guarantees up to 95% of the financing, and the loans are issued by USDA-approved commercial lenders. Rates and terms are negotiated between you and your lender, subject to the FSA's maximums.
Additional loans. The FSA also offers youth loans, Native American tribal loans and emergency loans. Rates, repayment terms and maximum funding amounts vary based on the individual program.
To qualify for one of these FSA farm loans, you’ll need to meet a variety of industry- and loan-specific requirements. You’ll need to prove your operation is an eligible farm enterprise, show your managerial experience, as well as describe your acceptable loan purpose.
As a borrower, you’ll need to show your ability to repay the loan. Although the FSA doesn’t rely on credit scores to make eligibility determinations, it’s helpful to have a good credit history. However, the FSA will not deny applications based on credit problems or a lack of credit history.
Applications for these government business loans will require extensive documentation. You have the option to apply online through the e-Gov system, by mail, in person at your local FSA office or by phone. You can expect to receive funding within 60 days after the FSA has received your application and corresponding paperwork.
2. SBA loans
Best for: Established businesses with good credit.
Like FSA farm loans, SBA loans offer long repayment terms and competitive interest rates. Plus, SBA loans have larger maximum funding amounts — up to $5 million.
Although the U.S. Small Business Administration recommends that farms and agricultural businesses look at FSA loans before applying for SBA loans, SBA 7(a) and SBA 504 loans can both be good options for established farmers with strong credit.
SBA 7(a) loans can be used for a variety of purposes, including working capital, buying inventory and purchasing equipment. Interest rates range from 11.5% to 15%, and repayment terms are up to 10 years for working capital, inventory and equipment purchases and up to 25 years for real estate.
SBA 504 loans, on the other hand, are specifically designed for equipment and real estate purchases. Unlike 7(a) loans, which are issued by banks or credit unions, 504 loans come from three places:
A bank (50%).
A Certified Development Company, or CDC (40%).
The borrower (10%).
Typically, the borrower would provide 10% of the financing, but because farms are considered a “special purpose property” by the SBA, you’re required to provide 15% of the loan amount.
SBA loan rates on 504 loans are tied to the 10-year U.S. Treasury notes. You’ll also have to meet a job and retention requirement to qualify, which is not an element of the 7(a) loan program.
You’ll generally need multiple years in business, good credit and strong finances to qualify for either of these SBA loan options. Although — like FSA loans — SBA loans can be slow to fund, you can expedite the process by working with an SBA preferred lender. These lenders have extensive experience with SBA loan applications and are authorized to accelerate the underwriting process.
3. Farm Credit organizations
Best for: Industry expertise; personalized experience.
Farm Credit is a network of lending institutions across the U.S. that are owned by farmers, ranchers and other agricultural businesses. These institutions are divided into four districts and each district has its own regional wholesale bank.
In each of these districts, you can find organizations that offer loans exclusively for farms and other agricultural businesses. These banks offer farm equipment loans, first-time and beginning farm loans, livestock loans, poultry loans, land loans and lines of credit, among other options.
Loan amounts, repayment terms and interest rates will vary based on the specific institution and loan program — but regardless of which Farm Credit institution you work with, you’ll receive guidance and expertise that’s unique to your industry.
Representatives at these institutions can offer a personalized experience, as well as educational resources and a continuous relationship with your business. If you’re looking to work closely with your bank throughout the loan process and beyond, a local Farm Credit organization may be an option to consider.
4. Farm Plus Financial
Best for: Beginning farmer loans.
Farm Plus Financial is an asset-based lender that offers both farm loans and lines of credit. All of the lender’s available products are secured by agricultural real estate, making it a good choice for newer farmers who may not have the financials to qualify for other options.
Farm loans from Farm Plus Financial are available in amounts that range from $200,000 to $50 million. For term loans, the company can finance up to 75% of the loan-to-value (LTV). For lines of credit, on the other hand, this amount falls to 50% LTV.
Interest rates vary based on the product you choose, your repayment terms and your qualifications, among other factors. You can reach out to a lending representative to receive more information about current interest rates.
Although the value of your farm’s real estate will be one of the most important factors in your business loan application, Farm Plus Financial also requires that all borrowers have a minimum personal credit score of 660 or higher. In addition, your farm property must be five acres or greater to be eligible.
You can start an application by submitting an online inquiry form with basic information about your farm and its financing needs. Once you’ve sent the form, a farm loan specialist will reach out to discuss your options and help you with the application. In general, it can take anywhere from one to three months to get funded.
5. National Funding
Best for: Bad credit; quick access to capital.
If you need capital quickly — or you have bad credit (a personal credit score of 620 or below) — you might consider National Funding for a farm loan. National Funding is an online lender that offers two distinct options: short-term loans and equipment financing.
With National Funding’s short-term loans, you can access up to $400,000 and can use the money to cover working capital needs, inventory purchases and other day-to-day expenses. These loans are available with repayment terms up to 24 months and interest is quoted as a factor rate, which starts at 1.1 for borrowers with strong credit.
The lender’s equipment financing program, on the other hand, provides equipment loans and leases in amounts up to $150,000. You can finance or lease new and used equipment, such as combines, tractors and trucks.
These farm loans have repayment terms up to five years and factor rates that also start at 1.1 for borrowers with strong credit.
Regardless of which option you choose, National Funding offers flexible business loan requirements and a streamlined application process. To qualify, you’ll need to have been in business for at least six months, a personal credit score of 600 or higher and an annual revenue of $250,000 or more.
When you’re ready to apply, you can fill out a simple form on the lender’s website. Next, you’ll talk to a funding specialist who will help you decide which type of farm loan is right for your needs. This representative will also guide you through the application — and once you’re approved, you’ll receive funds in as little as 24 hours.
How to get a farm loan
To get a farm loan for your agriculture business, you can follow these steps:
Understand your financing needs
Think about why you need capital and what you’re going to use it for — this will help you determine which type of financing is right for your business.
You should also consider how much debt you can afford to take on. You should make sure that you’ll be able to handle any potential loan payments based on your current income.
Evaluate typical farm loan requirements
Overall, the farm loan requirements you’ll need to meet will vary based on your loan type and business lender. Most lenders, however, will consider your personal credit score, time in business and annual revenue.
Additionally, as an agriculture business, lenders will likely pay close attention to industry-specific criteria, such as your farm management experience, the amount of land you have, your farm business plan and assets.
Research and compare lenders
With a better understanding of your needs and qualifications, you should be able to focus your lender search to find the options that will be best suited to your business. In general, if you think you may qualify for an FSA loan, you might consider starting your search with these low-interest options.
As you explore different lenders, you should compare them based on factors such as:
Loan types.
Maximum funding amounts.
Repayment terms.
Business loan rates and fees.
Down payment requirements.
Funding speed.
Application process.
Customer service.
Industry experience.
Lender reputation.
Gather your documentation and apply
Once you’ve found the right lender for your needs, you can gather all of the documentation you need to submit your application. In many cases, you’ll be able to work with a lending representative who will be able to help you through the process and answer any questions you may have.
Once you’ve submitted your application, approval and funding times will vary. Government and commercial lenders tend to have longer timelines, ranging anywhere from several weeks to several months. Online lenders, on the other hand, can fund applications much faster — with some companies providing capital in just 24 hours.
