The USDA’s Farm Service Agency (FSA) lends billions of dollars to farmers every year. And they do this at attractively low interest rates – the current cost of a direct ownership loan is 2.8% and a direct operating loans comes in at 1.4%. Those are nice rates.
The FSA serves farmer borrowers in two ways:
Direct ownership loans can be used to:
Direct operating loans can be used to:
There are sub-categories of these direct loans such as the Beginning Farmer Loan, Native American Loans, Microloans, Minority and Women Farmers and Rancher Loans, and Emergency Farm Loans. Think of these as pots of money set aside for specific use by a specific group of for a specific circumstance.
Whatever the loan is called, the FSA determines your eligibility for a loan in the same way: by analyzing your farm’s cashflows and assets/ liabilities. Cashflows demonstrate your ability to make principal and interest payments. Assets serve as collateral that, in the worst-case scenario, can be liquidated to repay a loan.
To apply for these loans, you must show proof of loan application rejection from a commercial lender, like Farm Credit. The FSA is the ‘lender of last resort’, meaning they support farmers that cannot get loans anywhere else.
The application itself requires 9 forms. Be sure to double-check your work before submitting, and keep in mind that FarmRaise can also help you navigate this application process. You can learn more about how we partner with farmers here.
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