Everything You Need to Know About Farm Loans

A picture of green farm land with cattle and a red barn in the distance with blue overlay to the right of the picture that reads, "Everything You Need to Know About Farm Loans".

Owning and operating a farm or ranch is not only a lot of work but highly expensive, and acquiring an agricultural loan may feel like an overwhelming task. Fortunately, there are many financing options designed to fit your farm or ranch needs. Whether you want to purchase farm or ranch land, update equipment, or refinance debt, there are many options for farmers and ranchers in Colorado.

At the Reichert Mortgage Team, we are grateful for the hard work that Colorado farmers and ranchers do every day. As a mortgage broker in Colorado Springs, our knowledgeable team is passionate about working with individuals across southern Colorado to find them the perfect farm loan. El Paso County has thousands of acres of farm and ranch land for sale, so there is no better time than now to invest in your future with a farm or ranch loan.

A picture of a green farm field and tractor at sunset.

What is a Farm Loan?

Being a farmer or rancher is a demanding job, and there may be times when you need to borrow money to run your business or family farm. A farm or ranch loan can help you tremendously. This type of loan is offered by the Farm Service Agency (FSA) of the Department of Agriculture (USDA) to assist farmers and ranchers in getting the financing they need to start, expand, sustain, or make changes to their farm or ranch.

USDA Farm Loans

There are many different types of loans for farmers and ranchers looking to finance their operations. Examples of farm loan programs include:

Operating Loans

Farm Operating Loans can be used by farmers or ranchers to purchase seeds, equipment, and livestock. This type of loan can also be used to cover operating and family living expenses while the farm gets started. 

Farm Ownership Loans

Farm Ownership Loans can be used to purchase or expand a farm or ranch. Also, it can be used to pay closing costs, improve farm buildings, cover construction costs, and help protect natural resources, like soil and water.

Microloans

Microloans are a type of operating or Farm Ownership Loan designed to meet the unique needs of beginning farmers. This loan can also be used for non-traditional and specialty operations, such as truck farms, farmers’ markets, grocery stores, Community Supported Agriculture, and more. 

Youth Loans

Youth Loans are a type of operating loan for individuals between the ages of 10 and 20. This type of loan is used by those who require assistance with an educational agricultural project usually as part of 4-H clubs, Future Farmers of America, or other youth organizations.

Native American Tribal Loans

Native American Tribal Loans assist tribes to acquire land within a tribal reservation or Alaskan Native community. This type of loan provides farming financial assistance and helps Native American communities advance farming operations and increase agricultural productivity.

Emergency Loans

Emergency loans can be used by farmers and ranchers to recover from losses due to natural disasters, like drought and flooding.

USDA Direct Loans vs. USDA Guaranteed Loans

FSA farm loans are usually available as either direct loans or guaranteed loans. Direct loans mean the loan is offered by the FSA directly to the farmer or rancher. Guaranteed loans are offered by a USDA-approved lender and the FSA backs the loan. 

FSA Loan Interest Rates

Here are the current farm loan rates as of February 1st, 2022.

ProgramInterest Rates
Farm Operating – Direct2.250%
Farm Operating – Microloan2.250%
Farm Ownership – Direct2.875%
Farm Ownership – Microloan2.875%
Farm Ownership – Direct, Joint Financing2.500%
Farm Ownership – Down Payment1.500%
Emergency Loan – Amount of Actual Loss3.250%

FSA Loan Requirements

An agricultural loan can help with many things, including purchasing farm or ranch property, refinancing existing loans, planning for the future, paying debt, and completing farm and ranch improvements or construction projects. However, farmers and ranchers wanting to apply for an FSA loan must meet certain farm loan requirements to be eligible, such as:

  • Legal ability to accept the loan obligation
  • Minimum credit score of 660; exceptions on a case-by-case basis
  • Must be a U.S. citizen, permanent resident, or U.S. based entity
  • Must be a farm or agricultural property owner, investor, or farmer
  • Must be prepared to present the following information: collateral, personal and business tax returns, personal and business balance sheets, profit and loss statements

Because farm loans are a type of agricultural loan, this loan only applies to certain types of property, including:

  • Row crops
  • Grains and forage
  • Citrus groves and vineyards
  • Sugarcane land
  • Vegetable farms
  • Improved pastures
  • Working cattle ranches and diaries

Acquire a Farm Loan Perfect For Your Needs With the Reichert Mortgage Team

Whether you are looking to buy farm or ranch land, purchase newer equipment, or pay off debt, there are many options available for farmers and ranchers. As a mortgage lender in Colorado Springs, the Reichert Mortgage Team is proud to serve rural communities throughout Colorado. With our knowledgeable team by your side, we will find the best farm loan option for you and your unique financial needs. If you have any questions about FSA farm loans, contact us today!

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