If you’re in the process of creating a new agricultural operation, you’ve probably already noticed how difficult it can be to get your agribusiness growing - especially if you’re starting a farm with no money or experience.
There are government grants that can help first-time farmers along the way but there’s still a significant gap in funding for new farms in the United States. It’s not easy to find financial assistance like grants or even loan options to support a new farming endeavor. We offer some perspective about why that’s the case, and how you can think about your funding journey as you start your farm.
First-time ranchers who just hopped on the saddle are also considered under the umbrella of beginning farmer.
Before we dive in, it’s important to understand who qualifies as a beginning farmer and if this blog post is right for you.
The U.S. Department of Agriculture (USDA) defines a beginning farmer as someone who has “operated a farm or ranch for 10 years or less either as a sole operator or with others who have operated a farm or ranch for 10 years or less.”
And at FarmRaise, we make a further distinction between beginning farmers (someone with some experience, with or without land) and aspiring farmers (someone with no experience and no land). And yes, ranchers are included, too!
But what if you have 11 years of experience and want to start a new farm? Does that make you a beginning farmer? Short answer: No. You wouldn’t qualify for programs as a beginning farmer. You should still absolutely apply for USDA funding and initiatives for your farm projects (in fact, it should be easier for you), however this article covers new farms for beginning and aspiring farmers.
Back in the 1980s, the farm sector in the United States went into a crisis. Before the Farm Crisis, agricultural lenders were comfortable making a loan to borrowers based mostly off of a farmer’s asset base (the land). But today, ag lenders look at both your asset base and your ability to generate cash flow and farm credit. They want to see whether you’ll 1) persist in your agribusiness, and 2) be profitable enough to cover the outstanding debt.
If you’re interested in 1980s Farm Crisis and how we might avoid it again, check out Escaping 1980, a podcast series hosted by agricultural journalist, Sarah Mock.
Every farm loan officer today is well-versed in the “5 C’s of Credit” and usually use it to evaluate your suitability as a loan candidate. Lenders consider your reputation in the local farming community, your current income and debt and even factors that you can’t control like current interest rates.
Most of the current farm operating and farm ownership loans targeted at beginning farmers require at least one year of farm management experience. So, beginning and aspiring farmers will have difficulty securing a loan, such as a beginning farmer loan or business loans.
Every state boasts its very own Beginning Farmer and Rancher Coordinators — these are friendly faces on the USDA team dedicated to making your farming journey smoother. They help demystify the USDA process, providing one-on-one technical assistance and guidance as you embark on your farming adventure.
These coordinators have a treasure trove of resources. They can connect you with organizations tailor-made for beginning farmers and ranchers, ensuring you get the specialized support you need. When in doubt, don't hesitate to get in touch with your state's Beginning Farmer and Rancher Coordinator.
As you venture into the world of farming and seek funding to kickstart your agricultural dreams, one aspect plays a pivotal role in determining your eligibility for grants or loans: effective farm financial management. This section explores the significance of managing your farm's finances, keeping track of expenses and income, and why this practice is crucial for both securing funding and establishing a successful farm business plan.
In the realm of agriculture financing, the ability to showcase a robust financial plan is often as crucial as having hands-on farming experience. Lenders and grant providers not only assess your farming knowledge but also scrutinize your financial management practices. In the modern era, ag lenders evaluate not only the asset base but also your capacity to generate consistent cash flow. This shift in focus emphasizes the importance of financial stability and prudent management practices.
Whether you're eyeing grants or loan programs, demonstrating sound financial management is key. Most grant programs, including those offered by the federal government, are geared toward supporting existing farms. To stand out as a new farmer seeking funding, showcasing a clear understanding of your farm's financial health is crucial.
To simplify the process of managing your farm finances, consider leveraging tools like FarmRaise Tracks. It’s a mobile application that works offline and is designed to streamline expense tracking, budgeting, and documentation, ensuring your financial records are organized and easily accessible. By adopting FarmRaise Tracks into your operation, you not only enhance your funding prospects but also set the foundation for a financially resilient small business.
As you embark on your journey to secure funding for your new farm, remember that effective financial management is not just a prerequisite; it's a strategic asset. By demonstrating a keen understanding of your farm's financial landscape, you not only increase your chances of obtaining grants or loans but also lay the groundwork for a flourishing and sustainable agribusiness. Stay informed, keep your finances in check, and when you're ready to apply for funding, let FarmRaise be your ally in turning your farming aspirations into reality.
Unfortunately, there are not many grant programs that new farmers can access to help purchase land or equipment. Most grant programs offered by the federal government are oriented for existing farms, and they support:
There are often requirements that the applicant has at least one year of sales or $1,000 in farm income to be competitive. And grants cannot be used to cover the cost of equipment that has a value of over $5,000 or a useful life of more than a year.
That said, there may be some tax incentives, loan guarantees and other programs available in your state that reduce the cost burden of starting a farm. A call to your state department of agriculture could point you in the right direction.
So, if it’s hard for aspiring and beginning farmers to get loans and grants, then how can a new farmer get started?
For new farmers navigating the challenging landscape of funding options, the USDA's Farm Service Agency (FSA) microloans can be a valuable resource. These microloans are specifically designed to assist small, beginning, and niche farmers including truck farms, farms engaged in direct marketing through avenues like farmers' markets, CSA's (Community Supported Agriculture), and those supplying restaurants and grocery stores.
FSA microloans are targeted financial tools that provide qualified farmers with a streamlined application process and reduced paperwork compared to traditional loans. These microloans aim to support the unique needs of small farms, making them an accessible option for those who may not meet the requirements of larger loan programs.
If you’re interested in learning more about FSA microloans, you can visit your local FSA office or USDA service center.
If you’re just starting out and don’t have farm management experience, you’ll likely face some barriers that can be remedied by getting more experience.
If you have less than one year of previous farm management experience, we recommend starting out slowly. Look for opportunities to gain experience by apprenticing or serving as farm manager for an existing operation.
A tried and true option is woofing (World Wide Opportunities on Organic Farms). It doesn’t have much to do with dogs, but it could give you a chance to gain farm experience and travel while living on a farm for free.
There may be programs in your area that provide training and acreage for beginning farmers. Here's an example: The Liberty Prairie Foundation in Chicago, which helps beginning farmers access land and mentorship. There are many other programs like this offered today, thanks to future-oriented farm advocates and theUSDA’s Beginning Farmer/Rancher Development Program.
It can be tempting to invest in land as the first step since it’s your most vital resource. However, land can be expensive and hard to come by.
We recommend renting land for the first few years so you can get to know your local landscape, grow accustomed to agricultural practices in your desired area and search for future land-purchasing opportunities. In the meantime, build your credit by taking out small operating loans to cover rental fees, costs of inputs and equipment.
At FarmRaise, a lot of farmers come to us who are itching to get funding and start developing their farms. Check out the following resources to kick start your journey:
Starting a farm requires more than understanding crops and livestock. Getting a few years of agribusiness knowhow under your belt is also key to securing funding as a new farmer. Start by keeping up to date on what’s happening in the farming world, and when you're ready to apply for funding, FarmRaise has your back!
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