How FSA Farm Loans Can Help You

First Financial Bank
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:

  1. 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.
  2. 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.

Talk with your lender about the FSA lending application process to be well on your way to the farm loan you want.

What are the FSA Guaranteed Farm Loan Requirements?

The USDA determines farm loan requirements:

  • You must be a United States citizen (or a legal resident alien).
  • Your lender determines that you have a good credit history.
  • You have the legal capacity to assume responsibility for the loan.
  • Without an FSA guarantee loan, you could not get another type of loan.
  • You must not have caused FSA a financial loss by receiving debt forgiveness on more than three occasions on or before April 4, 1996, or any occasion after April 4, 1996, on either an FSA direct or guarantee loan.
  • After the loan closes, you must be the owner-operator or tenant-operator of the “family farm”. If you have an Operating or Farm Ownership loan, you must operate the family farm after the loan is closed and meet the definition of a family farm.
  • You must not be delinquent on any Federal debt.

What is the Definition of a Family Farm?

To qualify for an FSA loan, one of the requirements you must meet is to be a family farm. Some characteristics include:

  • Your farm operation must comply with the community standards of a family farm. In most parts of the country, this means your family provides the majority of the day-to-day labor and operations.
  • Management and operational decisions are made by members of the family. Consultants and advisors are permitted, but a family member must be the decision-maker/manager.
  • Family members provide physical labor and management for the farm. However, you can use seasonal labor to supplement your family and usual labor for specific high-value and intensive crops.

You can learn more about the overall eligibility requirements here.

With an FSA Guaranteed Loan, What Will My Payments Be?

It’s essential to have a plan for managing your finances, including repayment of a loan. But how do you estimate what your payments might be on an FSA Guaranteed Loan through FFB? We’ve got you covered with a calculator to estimate your payments at various interest rates. Check it out below.

If you are ready to discuss your plans with us and want to learn more about the loan process, we will be happy to discuss it with you – and then you just may be well on your way to the farm loan that fits your needs.

Want to estimate your potential loan payments? Try the calculator above. Ready to chat about your plans and how an FSA loan can help you? Let’s talk.

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