If you are a beginner in farming or ranching and do not have sufficient collateral, then it is very difficult to get loans from private banks. In that case you can turn to the government funded programs to get a loan.
Under the USDA i.e. the United States Department of Agriculture, the FSA i.e. the Farm Service Agency has come out with guidelines which have to be followed to avail of a beginner’s loan. You too can avail of a farm ownership [FO] or an operating loan [OL] if you meet the following criteria.
According to the guidelines, you are considered a beginner farmer or rancher if you have not operated a farm or ranch in the last 10 years, if you meet the loan eligibility requirements of the program where you are applying, if you substantially participate in the operations, or for [FO] loan purposes, do not own a farm which is 30 percent more than the average farm size in the country, (Note: all applicants for direct FO loans must have participated in business operation of a farm for at least 3 years). If you are applying as an entity, i.e. more than one person, then all the members must be related by blood or marriage, and all stockholders in a corporation must be eligible ‘beginning’ farmers or ranchers.
The maximum loan amount that can be given under direct [FO] or [LO] is $ 2,00,000.00 and under guaranteed [FO] or [LO] is $ 9,49,000.00 [This amount will fluctuate along with inflation]. The down payment required for beginning farmers and ranchers is as follows.
The applicant will have to make a cash-down payment of minimum 10 percent of the purchase price. FSA can make a maximum of 40 percent of the purchase price or appraised value whichever is less. The loan period is 15 years at a fixed interest rate of 4 percent. A commercial lender or a private party can fund the remaining balance. FSA can provide up to a 95 percent guarantee if finance is obtained from a commercial lender. Participating lenders do not have to pay any guarantee fee. The purchase price or appraised value, whichever is lower, can not exceed $ 250,000.00.
FSA also advertises farm property that it has acquired, within 15 days of its acquisition. Eligible beginning farmers and ranchers get first priority over this property and they can purchase these properties at the appraised market value within 135 days of its acquisition. If there are more than one beginning farmers or ranchers applying for purchase of the property, then the buyer is chosen by a random method. Beginning farmers or ranchers can also take part in a joint financing plan which is also open to other participants. In this program, FSA lends up to 50 percent of the amount financed, and another lender provides 50 percent or more. FSA will charge a reduced interest rate on the loan.
You can apply to the local FSA Office in your area. Local FSA offices are listed in the telephone directory under U.S. Government, Department of Agriculture, and Farm Service Agency. For guaranteed loans, applicants must apply to a commercial lender who participates in the Guaranteed Loan Program. Local FSA offices have lists of participating lenders.
If you feel that you match the above criteria, then you can use the above information to apply for a ‘beginner’s’ farmers or ranchers loan.