Alright, farmers…you want to borrow some money and you’ve heard about FSA (Farm Service Agency) loans. Here’s what you should know.

The FSA is ‘the lender of last resort’. It lends to farmers who have applied for a loan elsewhere, like at a commercial bank, and been rejected. It has pretty much the lowest loan interest rates on the market. As of writing, it charges:

  • 1.875% for an operating loan (<$400K)
  • 3% for an ownership loan (<$600K)
  • 3% for an operating or ownership microloan (<$50K)

Nice, right?

The FSA will want to see that you know how to farm through education, on-the-job training and/or general farm
experience. For the ownership loan, they require you to show farm management experience for 3 out of the last 10 years.

The FSA does have a special category for beginning farmers or ranchers.  But, regardless of your experience, and its desire to promote American farming, this is still a loan, so they will evaluate your:

  • Cashflows to see if your expenses and revenues leave enough cash left over to make interest and loan principal
    payments.  Here’s a handy tool to understand what these will be.
  • Balance Sheet to understand any current loans you may have and what assets you own.  Loans are secured against assets because, if the worst comes to the worst and you really cannot repay, a lender will take from you something of equal value.
  • Financial history.  There’s some confusion about what role your credit score plays in this process.  The FSA does pull your credit score.  But, if your score is low they may still lend if you can explain that your low score was due to circumstances beyond your control.

You can visit this website to find your local FSA office.  Just call the main number and as to speak to a Loan Officer.  Be ready to say how much you want to borrow and what you want to spend it on, and to describe your operation.  Just have a chat.  They’ll be able to guide you forward.