Farm Service Agency loans for beginning farmers have allowed many people a chance to break into an industry that already has a long list of barriers to entry. The process to getting a loan is daunting, especially to someone who doesn’t know where to start or to whom they should speak.
FSA loans vary for those who are looking for this specific program. On the fsa.usda.gov site, they state three possible options:  “Farm Ownership loans can provide access to land and capital. Operating loans can assist beginning farmers in become prosperous and competitive by helping to pay normal operating or family living expenses; open doors to new markets and marketing opportunities; assist with diversifying operations; and so much more. Through the Microloan programs, beginning farmers and ranchers have an important source of financial assistance during the start-up years.”
While there are many other programs for FSA loans, such as women and minority farmers, this particular program focuses on those whom have less than 10 years’ experience. “While FSA is fully committed to all farmers and ranchers, there is a special focus on the particular credit needs of farmers and ranchers who are in their first 10 years of operation. Each year, FSA targets a portion of its lending by setting aside a portion of all loan funds for financing beginning farmer and rancher operations. With the single exception of the Direct Farm Ownership Down Payment Loan, the Beginning Farmer classification is not related to a type of loan program; it references a specific, targeted funding source.”
There are also requirements to meet for an approval to be considered. There is a farm acreage limit, which the website explains with an example:
“Let’s say the average size farm for “ABC County” is 94 acres. 30 percent of the average, rounded to the nearest tenth, is 28.2 acres. So, to meet the beginning farmer requirement, a loan applicant may not own more than 28.2 acres when the loan application is submitted.
If the farm crosses county lines and is located in more than 1 county, “ABC County” and “XYZ County,” FSA uses the average size farm data for the county where the loan applicant lives. If the loan applicant’s house is not located on the farm, then the Agency looks to the data for the county in which the largest portion of the farm is located.”
And then there are basic requirements, like not having owned or operated a farm or ranch for more than 10 years, substantially participates in the operation, and other minimum requirements specific to each type of loan.
With all of this information, and links to downloadable application forms that might be difficult to answer, where does a beginning farmer start?
First, head to the website, fsa.usda.gov, and click on the state offices tab at the top. Choose your state on the map that pops up. On the left-hand side of the page find “county offices.” Locate your county on the map and click on it. This will take you to a page that displays the contact information for your local office, and probably the state office. Find out the name and phone number of the agent in your area and call.
That’s all I did. I got a hold of my agent, and she had a lot of questions for me. Where was I looking for land? What kind of cattle operation was I wanting to run? Had I reached out to my local stockyard yet? What weight was I planning to sell calves? What was my background in ranching? I got bombarded with questions, some I answered while others I couldn’t. My agent told me to get in touch with her when I was ready to make an appointment and meet at the local office. From there, she could help me with my application and get the process started.
From others who have already completed this process, I have heard a lot of praise.
“We actually used FSA beginner farmer to purchase a piece of land and we also used FSA for our operating note.” Naomi Loomis, a rancher in Nebraska, had a great experience. “I would highly recommend it to anyone that is eligible to apply for their programs. It really has made a difference in our cash flow.”
“The interest rates are so low that we were able to pay a lot of principal making it easier to pay that down. I also appreciated what the FSA taught us a little bit about managing our books better.”
However, Loomis does have one minor issue. Not a deal breaker whatsoever, though. “The applications every year is a little difficult and takes a while but once you get through it and have an understanding, it gets better.”
Her advice for beginning the process? “To prepare for filling out the application, I would suggest going into the FSA loan officer and have him/her walk you thru what you need.”
Ryan Cox, a diverse farmer and rancher in Alabama, had a negative experience with the process at first but ultimately, was happy with the outcome.
“Overall my experience with FSA loans has been positive. In my opinion it all depends on your agent. I started with a bad one and it was like pulling teeth to get anything accomplished. The agent I have now is absolutely awesome and I thoroughly enjoy working with her. She understands ag and what she doesn’t understand, she wants to learn about. Towards the future, I will probably use FSA to make a land purchase and purchase more livestock.”
For those who might struggle finding financing other ways, like Cox, an FSA loan might be your saving grace.
“I chose FSA because as a beginning farmer I could not get secured financing through traditional channels. Most traditional loans wanted 15-20% cash or collateral and as you know, when you’re starting fresh, that can be difficult to come up with.”
Realistically, there are always going to be issues when it comes to financing a business. Cox is transparent about his struggles with his experience. Discussing them is a way to be aware of what you should prepare for, but not necessarily something you yourself will face.
“The biggest cons were LOTS of paperwork and even more waiting. The paperwork portion of the loan can be very discouraging as it seems there is always something missing that the FSA is calling and asking you for. I started with an agent who was in the early stages of retirement, so he was basically coasting. I strongly feel my loan got approved because of my constant calling and ensuring that he stay on top of my case.
Some people feel that when you receive money from FSA they have “control” over your operation. I felt this way to some extent with my initial loan agent. He was very adamant about notifying him when calves were sold and urged the note to be paid immediately after instead of when the note was due. Another con would be when the cattle were being bought, I had to supply a Bill of Sale to FSA before they ever released any money. If you’re buying from someone who has never used FSA before or you’re attending an auction, this can become difficult.
The last con I could think of is there is no flexibility of payments (Notes are due 365 days from the time it is signed). Example, I bought a load of bred heifers in June, they calved in February, meaning I would need to wean early and market while they were “peewee” calves. This would leave a large amount of money on the table, thankfully I have some other cattle that I can use to offset the payments. However most Ag Credits would understand the situation and move the payment forward or backward depending on when the calves could be marketed profitably. “
All of this, though, didn’t outweigh the positive aspects and overall outcome of the loan for Cox.
“The agent I am working with now is great, she ensures all my paperwork is complete, everything is signed and dated with plenty of time to spare before deadlines, conducts on farm visits once or twice a year and usually bring me documents to sign. Her work ethic keeps my loan processes very easy and up to date.
The money is super low interest with very little down payment and once you wade through the paperwork of an initial loan its fairly simple to get yearly operating loans or borrow money for infrastructure (I purchased a cattle trailer with leftover money).
FSA took into consideration my off-farm income to help secure the loan, they would not let the loan ride on the cattle alone. The cattle had to cash flow on paper and as far as loaning the money against them, if you can make it work on paper it’s a safe bet that you can get financed.”
The diversity of location, operation and business model, and the needs of a beginning farmer will all play important roles in how the loan is processed. Knowing what options you have, where to go and who to ask, as well as asking every question you have, will help you find the right option. The FSA process might seem challenging at first, but could be the one thing keeping you from following your dream of owning and operating a farm or ranch!
