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 grants or even loans 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.
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 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 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 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. 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 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.
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?
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!
