Farmers Loans | What They Are and How To Use Them

Farmers have access to various great loans that can help them expand their farms, keep them running smoothly, or even help them get back on their feet when hard times strike, including Direct Farm Loans and Farm Ownership Loans through the United States Department of Agriculture and installment loans.  

During uncertain times, small farmers may find themselves in need of financial assistance. Thankfully, there are so many great options available to them. 

What Is a Farmer's Loan?

A farmer's loan is used to purchase, expand, or care for a farm or ranch. 

During uncertain times, farmers may struggle to make ends meet or don't have the funds readily available to expand and adequately take care of their ranch. 

While there are many options available for farmers, they're not one-size-fits-all. While some loans are great for new, small farmers, some are geared towards helping farms scale their farms, while microloans are offered for family farms. 

One of the best solutions for any farmer who needs a loan is an installment loan. 

So, which loan is best for you, and how can you use it?

Types of Government-Backed Farmers Loans

Since farming is one of the most important industries in the U.S., many great loans are offered through the United States Department of Agriculture. 

The two main categories most of these loans fall under are:

Guaranteed Loan Program

Commercial lenders, such as the Farm Credit System, banks, credit unions, and other non-traditional lenders, are serviced and make these loans.

The Farming Service Agency backs the lender's loan against a loss of up to 95% and oversees approving loan guarantees and keeping an eye on what the lender is doing.

Direct Loan Program

The Farming Service Agency services direct loans by using federal government funds and issuing them to farmers. They offer credit counseling and supervision to help steer borrowers in the right direction and help applicants figure out if their real estate, machinery, facilities, goals, financial management, production management, and equipment are good enough.

Direct Loans

Now that you know a little about the direct loans program, it is time to discuss other types of direct loans.

Operating Loans

Farmers can use operating loans to buy the animals and tools they need to keep their farms running well. Furthermore, farmers can also use these loans to pay for small repairs to their land and any annual operating costs.

Operating loans are an excellent option for small farmers who need them to make meaningful updates to keep their farms running smoothly.

This type of loan is suitable for up to $400,000, with a term of up to 25 years. 

Farm Ownership Loans

A farm ownership loan allows farmers to purchase land for a farm or enlarge an existing farm or ranch. It can also help farmers fix up or build a building on their farm or ranch, pay for water and soil protection and conservation, and even cover closing costs.

Farm ownership loans are outstanding for farmers who need more money to expand their farm or buy land to start one. It's also great for farmers who wish to add conservation practices to their farm or ranch. But because of these higher costs, many farmers don't have the money available when needed.

This loan is good for up to $600,000 with a term of up to 40 years. 

Emergency Loans

Emergency loans offered through the USDA are given to farmers who have suffered a qualifying loss caused by natural disasters.

If a natural disaster causes damage to a farm or ranch, the farmer may be able to get an emergency loan that can be used to:

• Restore or replace essential property. Emergency loans can be used to replace barns, equipment, and other necessary labor items.
• Pay necessary family living expenses. Use funds to pay family debts and other household budgets.
• Pay all or part of production costs associated with the year the disaster took place.
• Reorganize the farming operation. Make investments in new crops and pay different vendors.

Emergency loans for farmers cover 100% of the actual or physical losses, or $500,000. So, it will usually be whichever one is the lowest. 

Microloans

The USDA uses microloans as direct farm ownership and operating loans. They have a shortened application process with reduced paperwork designed to meet the needs of smaller farms or ranches that may be considered non-traditional or have a niche-type operation.

The maximum loan amount for this loan is $50,000, with a term of up to 25 years. 

Guaranteed Loans

Another option for farmers is guaranteed loans. A guaranteed loan is a type of loan that a third-party guarantor, such as a government agency or a private organization back. This guarantor agrees to repay the loan if the borrower cannot make the payments or defaults on the loan.

The guarantee provides lenders with an added security level, allowing them to offer more favorable terms, such as lower interest rates and longer repayment periods.

Conservation Loans

Conservation loans let farmers do things to protect and conserve water and soil, which might be part of an approved conservation plan.

These loans are great but are hard to come by as the rules are strict.

The maximum loan amount for this is adjusted annually for inflation. The term of this loan depends on the life of the security but should not exceed 30 years. 

EZ Guarantee Loans

These loans have a shortened application and process and a reduced amount of paperwork. They are designed to meet the needs of small farmers that may be non-traditional or fit a niche-type operation.

EZ Guarantee Loans are offered through the USDA and are an excellent resource for small farms that want simple loans.

The maximum loan amount for this loan is $100,000, with a term of up to 40 years. 

Farm Ownership Loans

A farm ownership loan allows farmers to purchase land for a farm or enlarge an existing farm or ranch. It can also help farmers fix up or build a building on their farm or ranch, pay for water and soil protection and conservation, and even cover closing costs.

Farm ownership loans are great for farmers who need more money to expand their farm or buy land to start one. It's also great for farmers who wish to add conservation practices to their farm or ranch. But unfortunately, because these are higher costs, many farmers don't have the money readily accessible when needed.

This loan is good for up to $600,000, with a term of up to 40 years. 

Are You Eligible?

Each loan through the USDA has different requirements you must meet to receive them. You must also meet additional loan requirements for both direct and guaranteed loans.

General Eligibility Requirements for Direct Loans

Although each loan offered through the United States Department of Agriculture has different requirements that must be met to obtain them, here are some of the general eligibility requirements for Direct Loans:

• You must be a citizen of the United States, a non-citizen national, or a qualified alien.
• You are unable to obtain credit elsewhere at reasonable rates or terms.
• You have the legal capacity to get a loan.
• You can show that you have a good credit history or that bad credit history has been due to circumstances beyond your control, did not happen recently, or was infrequent.
• You have not received any debt forgiveness on any other direct or guaranteed loan. 
• You are trained, educated, and experienced enough to effectively manage your farm or ranch.
• Your operation is a family farm or ranch, and you primarily provide the physical labor and management to a family member or another entity member.
• When the loan is closed, you will not be behind on any debt you owe to the government.

Here are a couple of loan-specific requirements you must meet for certain types of loans offered through the USDA.

Beginning Farmer or Rancher Targeted Funds: 

• You have operated a farm or ranch for ten years or less.
• You currently own a farm or ranch less than 30% of the size of the average farm in your county.

Farm Ownership Loans:

• You have participated in the business operations of a farm or ranch for at least three of the last ten years.

For Down Payment Loans:

• You can make a cash down payment of at least 5% of the purchase price for the farm or ranch you intend on buying.

For Emergency Loans:

• Your operation is in a county with a disaster designation, and it has not been over eight months since the designation was declared.
• You lost 30% or more of your production or something physical because of the disaster.

General Eligibility Requirements for Guaranteed Loans

The general eligibility requirements for Guaranteed Loans are primarily the same as the general requirements for a Direct Loan, with this addition:

• You understand that the lender will not approve the loan without an FSA guarantee (This doesn't apply to conservation loans).

Other Loans Offered

A couple of other loans are offered through the United States Department of Agriculture. Let's check out the list.

Youth Loans

The FSA offers operating loans of up to $5,000 for youth ages 10 to 20 to finance income-producing, agriculture-related projects.

Youth in FFA, 4-H clubs, agriculture-related groups, or tribal youth organizations must do these projects.

These projects must be organized, supervised by work programs, and overseen by an organization advisor. Additionally, it must produce sufficient income to repay the loan.

These loans can be used to:

• Buy equipment, supplies, seeds, or livestock.
• Pay for the expenses of operating the project.
• Repair, rent, or buy tools and equipment needed for the project.

Farm Storage Facility Loan Program

This loan program is for farmers who need to build or upgrade their storage and handling facilities. The maximum loan amount for this is $500,000, but several other rules and regulations exist for this loan program.

Sugar Storage Facility Loan Program

This loan program allows farmers to be helped with upgrading or construction costs for facilities that store raw or refined sugar.

Recourse Marketing Assistance Loan

This loan is used when the item used as collateral doesn't meet the U.S. grading standard quality requirement.

What If You Need a Loan Fast?

Does all the above feel like a lot? 

Thankfully, farmers can obtain loans in other ways without dealing with the government's fickle eligibility requirements. 

Traditional Installment Loans

Simple Fast Loans offers installment loans that farmers can easily acquire to help them through troubled times. 

Sometimes you need cash, and you need it fast. Since the process of obtaining a farmer's loan can be complicated and lengthy, Simple Fast Loans offers great installment loans that can help you get back on your feet. 

What Can You Use Installment Loans For?

Whether your production costs skyrocketed, you require more funds to use for upkeep, there are so many things you can use an installment for, and they won't be regulated by the government, giving you more room to do as you please with your loan. 

• Maintenance. Large or small, farms require regular maintenance to ensure it runs smoothly. Maintenance can add up, whether it be getting work done on equipment, repairing fences, replacing essential items, or more. 
• Land Costs. Looking to buy a little more land? Use an installment loan for a down payment. 
• Expansion. In the same vein as land costs, you can use an installment loan to invest in your growth. You'll need more supplies and equipment if you have purchased new land. 
• Supplies. The cost of supplies tends to skyrocket at a moment's notice. Already in a rut and worried about being able to purchase the necessary supplies needed to operate? An installment loan is a great option. 

Final Thoughts 

Farmers have access to various great financial assistance programs to ensure they can grow and thrive. A backbone of the United States, farmers help make everyone else's lives function. 

Although so many wonderful government-backed loans are available, many come with strict stipulations you may not want to deal with and can take a long time to be officially approved. 

If you require a loan, fast, Simple Fast Loans can help you quickly get the money you need with an installment loan.