For these reasons farmers can have a hard time accessing cash for equipment, livestock or even next season’s seedlings. If you’re like many farmers, you may feel like you have to jump through endless hoops just to access financing. However, understanding the different types of farm loans and the federal programs in place can help you secure the funds you need.
Farm loans are different than traditional loans. While raw land, especially land that supports crops or grazing livestock, can be valuable, it can also be harder to sell. The supply and demand of farmland can vary widely from year to year (and even from month to month) based on food prices, so professionals can’t easily predict whether the value of farmland will go up or down.
In addition, much of a farmer’s funds will be spent on depreciating assets like tractors or plowing equipment or on capital improvements like barn or fence repairs. Unless you have a substantial amount of equity in your farm already, a loan that will cover the cost of these improvements or purchases may bear more similarities to a personal loan than a land-secured mortgage or line of credit.
How Can Federal Agencies Help?
Operating loans are designed to cover the operating costs inherent in small and medium-sized farms. These loans can help pay for minor repairs to outbuildings or for the purchase of new equipment, seeds or livestock. To qualify for an operating loan, you’ll need to show how you plan to use the funds for an approved purpose and that the funds are “essential to the success” of your farm.
Microloans are a type of operating loan for niche or nontraditional farmers who can’t always qualify for more traditional operating loans. These loans are for smaller amounts than operating loans and require less paperwork to apply for.
FSA also has loans for farmers who may be in extra need of assistance. For example, beginning farmers and ranchers who have been operating their farms for less than 10 years may qualify. While these loans have different land-size requirements, on the whole these loans have requirements similar to those of microloans and operating loans.
Regardless of where you’re seeking funding for your next farming venture, partnering with financers can help you make sense of a complex process. Financial Consulting, Inc.. Is an experienced farm financer who will help you overcome the hurdles of obtaining financing for your farm. Call us today to learn more.