Buying a farm is a big decision. Whether you want to commercially raise poultry, dairy cows, cattle, or produce one of many crops, is a big decision. You may need a loan to help get you started. That’s where the Farm Service Agency (FSA) and knowledgeable lenders like First Financial Bank come in – to assist family farmers like you.
What is an FSA Farm Loan?
The mission of the Farm Service Agency of the United States Department of Agriculture (USDA) is to “equitably serve all farmers, ranchers, and agricultural partners through the delivery of effective, efficient agricultural programs for all Americans.” One of the essential ways they support farmers and ranchers is by providing opportunities for financing that can help acquire or expand operations through their farm loan programs.
How do the FSA Farm Programs work?
There are a variety of loan programs available and two primary ways to access:
- Direct Loans from the federal government; or
- Guaranteed Loans through a lending institution.
What is a Direct FSA vs. Guaranteed Loan?
Direct FSA loans are made by the USDA’s Farm Service Agency, meaning that the government provides the funds to eligible farmers and ranchers. Repayment terms and interest rates for Direct FSA loans differ depending on the specific loan program, the borrower’s financial situation, and the intended use of the funds. The government is taking the risk, and the farmer or rancher is responsible for working directly with them.
Direct FSA loans are used for various agricultural purposes, including:
- Operating Expenses: Farmers can use these loans to cover day-to-day operating costs, such as purchasing seeds, fertilizers, livestock feed, and other essential inputs.
- Farm Ownership: These loans can also be used for purchasing, expanding, or improving farmland, farm buildings, or equipment.
The farmer submits the application directly to the FSA, who reviews the loan application to determine eligibility.
On the other hand, a Guaranteed Farm Loan is through a USDA-approved lending institution. The lending institution is extending credit to a farmer or ranch who may not typically qualify for credit. The lender is the FSA’s customer. Your lender services the loan, and the FSA guarantees the loan to the bank up to 95%.
What are the Advantages of a Guaranteed Farm Loan Through a Bank?
FSA loans overall have numerous benefits for you to consider in purchasing land or a farm:
- Reduced down payment over standard business loans
- Competitive interest rates
- Flexible terms
Getting a Guaranteed FSA loan from First Financial Bank (FFB) has several advantages:
- FFB is an FSA Preferred Lender in all 50 states, which means faster approvals for you.
- Loan officers at FFB have specific experience in farming and ranching, so they understand your concerns and needs as you acquire and/or expand your operations.
- The lender can ultimately be a long-term, trusted financial partner for both FSA loans and other loans as you navigate the highs and lows of your business.
The other advantage of a guaranteed FSA loan is that lenders may offer credit to farmers who may not meet the standard loan criteria for a business loan.
Once you have applied, your lender will keep you notified of the loan’s progress throughout the process. If the loan is approved, your lender closes the loan and disperses the funds.
