What Is a Farm Loan?
A farm loan is financing offered by lenders to farmers who can use the money for most farm-related expenses. Whether you’re looking to purchase, grow, or need cash flow to keep your farm operating, farm loans can help.
Types Of Business Loans For Farms
Farmers can access loans through the U.S. Department of Agriculture Farm Service Agency. They provide different loans, including:
- Beginning Farmers and Ranchers loans - These loans help first-time farmers finance a farm. You’ll need to meet specific requirements in order to qualify as a beginner farmer.
- Emergency Farm loans - If your farm has been damaged or destroyed due to a natural disaster, these emergency loans can help you rebuild.
- Farm Operating loans - Operating a farm costs big money each year. These loans can help keep your farm going when you don’t have the cash upfront.
- Farm Ownership loans - If you want to expand your farm, these loans can help you get the extra land you need.
- Guaranteed Farm loans - You’ll typically find these loans through commercial lenders like the ones in our list. Guaranteed loans can come in smaller amounts or be larger loans that help you keep your farm operating.
- Microloans - As you can likely guess, microloans are small loan amounts with quicker repayments. They’re best for niche farmers or smaller farmers that need more specific types of funding.
- Minority and Women Farmers and Ranchers loans - These loans support farmers from minority or underserved communities, and can help them find ownership and guaranteed loans.
- Native American loans - Native American tribal members can use these loans to expand their agricultural needs.
How to Get a Farm Loan?
The lenders on this list are a great place to start, but compare as many lenders as you need to get a sense of which lenders will work best with your financial picture. Each lender will offer different interest rates, loan amounts, and benefits to borrowers.
Only go with lenders whose requirements you meet
Loan lenders aren’t apt to take applicants that don’t meet their requirements, so it’s not worth your time to apply. You’ll increase your chances of approval by only focusing on companies that are likely to grant you a loan.
Make sure your credit is where it needs to be
Having a good credit score makes you royalty in the loan world. You’ll qualify for the best rates, the highest loan amounts, and the best discounts. If you have subpar credit, consider taking the time to focus on improving it before applying for loans.
Prequalify, if possible
Some companies, like Credibly, for example, allow you to prequalify so you can see if it’s worth submitting a full application. Prequalification comes with a soft credit check, which means it won’t be affected, so it’s always worth doing if you can.
How Can You Use Farm Loans?
Farm loans can be used to support most operations on a farm. Many loans are flexible, meaning you can use them for just about any legal purpose associated with your business. Here are a couple of uses:
- Start a farm - Startup loans are common among business loan lenders. Often, these come with lower amounts than loans to help farms already in operation, but they can be a big source of financing at the beginning of your farming journey.
- Purchase or repair equipment - Farming equipment comes at a high cost, so it can be difficult to repair or completely replace equipment without a loan.
- Purchase livestock - If you’re in the business of cattle farming (or any other livestock), you can use a farm loan to purchase additional head of livestock if the need arises.
- Hire extra workers - Farms rely on seasonal and migrant workers more so than other industries, and many farmers need to hire a lot of workers at once. It can be difficult to truly get the help you need, but farm loans can help you employ the right people at a fair price.
Farm loans come in a variety of types that support different farmers. Whether you’re a beginner or a seasoned farmer looking to continue growing your business, a farm loan could work for you. The companies on our list offer different loan amounts and credit requirements, so most farmers should be able to qualify through at least one lender.