Where & How To Get An Agriculture Business Loan (Plus 5 Great Loan Options To Get Started)
Alternative farm loans can help you finance your agricultural business, even if you don't qualify for a farm loan from a traditional bank lender.
Running a farm or agricultural business isn’t without its challenges. While the agricultural industry has unique hurdles to overcome, there’s one challenge that farmers, ranchers, and other entrepreneurs in the industry face just like any other business owner: financial issues and the need for capital.
Owning and operating a farm, ranch, or agricultural business comes with hefty expenses — expenses that a business owner often can’t face alone. From purchasing heavy-duty farming equipment to buying land to hiring employees, these expenses can pile up quickly, leaving even the most prepared small business owner struggling to stay afloat.
If you’re in the agricultural industry and facing a financial burden, know that you have options. Read on to learn more about agriculture and farm financing opportunities, how to qualify, and which type of financing is best for your financial needs.
Read more below to learn why we chose these options.
Table of Contents
Where To Get Agriculture Business Loans
Many different entities provide agriculture business loans, including government programs for agriculture businesses, as well as banks, nonprofits, online lenders, and more. Let’s go over some of your options when it comes to getting a farm loan.
Government Programs For Agriculture & Farm Financing
The United States Department of Agriculture’s Farm Services Agency, or FSA, has several farm loan programs to fit the needs of new and established farming and agriculture businesses.
The FSA’s Direct Farm Operating loan program provides loans for starting or operating a farm or ranch. This program offers up to $400,000 for reorganizing a farm, purchasing livestock, buying farm equipment, and paying operating expenses. Proceeds can also be used to improve or repair buildings, land and water development, and refinancing farm-related debt.
There are also FSA microloan programs targeted at beginning farmers and farmers that operate non-traditional farms. These include Ownership and Operating microloans. The Direct Farm Ownership Microloan provides up to $50,000 for down payments on land, soil, and water conservation projects and the construction, repair, or improvement of farm and service buildings and dwellings. Direct Farm Operating Microloans provide up to $50,000 for tools, fencing, equipment, irrigation systems, and other operating expenses.
FSA Direct Farm Ownership loans are another option for farmers. This loan is available for up to $600,000. Through this program, the FSA provides up to 100% financing for the purchase or expansion of farms.
The FSA also has Guaranteed Farm Loan programs that make it easier for farmers and ranchers to receive loans through commercial lenders. Through these programs, the FSA will guarantee up to 95% of a loan, putting less risk on the lender and increasing the borrower’s chances for approval. The FSA guarantees up to $1.776 million for farm ownership, conservation, and operating loans. For land contracts, up to $500,000 is guaranteed.
Finally, the FSA offers an emergency loan program. Through this program, up to $500,000 is available to cover expenses following a disaster, such as a flood, tornado, or drought. Loan proceeds are used to restore or replace property, cover production costs or living expenses, reorganization of operations, and refinancing non-real estate debt.
Grants For Farm & Agriculture Businesses
A grant is any money given — not loaned — by the government or other organizations to fund a project, start a business, and provide additional benefits to farm and agriculture businesses.
The USDA offers Farm Labor Housing Direct Loans & Grants. Funding from this program is used to develop housing for farm laborers when commercial credit can’t be obtained. Funds can be used to construct, improve, repair, or buy housing for domestic laborers. Funds can also be used to purchase and improve land, purchase furnishings, or pay construction loan interest. Eligible applicants can receive a need-based grant that pays up to 90% of project costs. Applicants can apply through the USDA website.
The USDA also offers Value-Added Producer Grants, which are used to expand marketing opportunities, create new products, and boost income. This program has working capital grants of up to $250,000 and planning grants up to $75,000. Beginning or socially disadvantaged farmers and ranchers and small- or medium-sized farms may receive priority for these grants. Applicants can apply through the USDA website.
Sustainable Agriculture Research & Education, or SARE, offers sustainable agriculture grants nationwide. Farmers and ranchers can submit a grant proposal to receive thousands of dollars in funding for their projects. Grants have been awarded in various relevant topics, including pest management, livestock production, soil quality, marketing, and energy. Applications can be submitted through the SARE website.
Finally, the USDA also offers pandemic assistance for farmers, a set of programs that include the Coronavirus Food Assistance Program (CFAP) for producers of agricultural commodities that faced market disruptions due to COVID-19. The Pandemic Livestock Indemnity Program (PLIP) provides financial assistance to support producers of eligible livestock depopulated during 2020 due to COVID-19. Both of these programs are still currently accepting applications as of August 2021.
Note that grants are also available at the state level. Applicants can visit their state’s Department of Agriculture website to learn more about grant opportunities, how to apply, and eligibility requirements.
Alternative Loans & Financing For Agriculture Businesses
If you don’t qualify for a government loan or grant, there are financing options available for you. If you need money quickly, have a low credit score, or have specific needs that government grants and loans don’t meet, alternative lenders provide several loan options for farmers and ranchers.
To keep your farm, ranch, or agriculture business running smoothly, you need the right tools and equipment. Backhoes, bailers, tractors, and other heavy equipment come at an expensive price — a cost that isn’t financially feasible for most farmers or ranchers. Whether you’re upgrading old equipment or adding more to keep up with your expanding business, an equipment loan makes these purchases more affordable.
An equipment loan is used to purchase equipment and tools needed for your business. With an equipment loan, you can buy the equipment you need and put it into use immediately without having to pay the full price upfront. Instead, you’ll pay through affordable scheduled payments spread out over time.
Business Credit Cards
A business credit card is always a good financial resource to have on hand. With a business credit card, you’ll be able to purchase supplies, pay operating expenses, or cover an emergency expense without waiting for loan approval. Once approved, you’ll be able to use your card immediately anywhere credit cards are accepted.
After using your card, you’ll make payments each month toward your balance and interest. As you repay your balance, these funds are available to use again. Many business credit cards also have rewards programs. By responsibly borrowing and paying your balance off as quickly as possible, you can rack up points to use toward cash back, flights, hotels, and other rewards.
With an installment loan, you receive a lump sum of money that gets repaid through scheduled installments. Repayments may be daily, weekly, or monthly based on the lender you select. Loan proceeds can be used for any business purpose, including purchasing supplies or inventory, buying livestock, or using the funds as working capital. Installment loans are best if you know the specific cost of your expense. If you are unsure of how much money you need, consider a more flexible option, such as a line of credit or business credit card.
The repayment terms, interest rates, and fees vary by lender. The most creditworthy borrowers typically receive the lowest rates and best repayment terms.
When you apply for a short-term loan, you’ll receive one lump sum that you repay over a short period. While most short-term loans have repayment terms of one year or less, some alternative lenders offer terms of up to three years.
Short-term loans are repaid through daily, weekly, or monthly payments. In addition to paying off the principal balance, you’ll also pay what is known as a factor rate instead of interest. This fee is calculated into the cost of the loan.
Short-term loans are a good choice for farmers, ranchers, and other business owners because they are quick and easy to receive. Short-term loans are available for any business purpose. Because they can be funded quickly, they work well for working capital, filling seasonal revenue gaps, or covering an emergency expense. Alternative lenders offer more options than ever, so you can find the financing you need regardless of credit score, annual revenue, or other challenges.
Lines Of Credit
Sometimes, you need money, and you need it right away. In these situations, waiting days or even weeks can be a struggle. Instead of pursuing a loan that requires a lengthy application and underwriting process, apply for a line of credit that you can access whenever you need extra money.
A line of credit is a type of revolving credit that allows you to make multiple draws as needed. Once approved for a line of credit, you’ll receive a credit limit. You can request any amount of money up to and including this credit limit. Funds are then deposited into your business bank account — often within one business day. Interest or fees apply to the funds that have been used. As you pay down your balance, the funds are available for you to use again, similar to a credit card.
Real Estate Loans
Your farm or ranch is prospering, and it’s time for an expansion. The only problem is you don’t have the funds to purchase real estate or land. Instead of taking on this financial burden yourself, make the smart move and apply for a commercial real estate loan.
A commercial real estate loan is used for commercial property or land. After paying a down payment that is typically 10% to 20% of the total purchase price, your lender provides the remaining funds. You can use the land or property immediately while repaying the principal balance and interest over several years. The real estate purchased with loan funds is the collateral for the loan.
5 Agriculture Loan Options For Businesses
Alternative farm loans can help you finance your agricultural business, even if you don’t qualify for a farm loan from a traditional bank lender. Here are some of our favorite agriculture business loan options you can apply for online, including Lendio, OnDeck, Spark Cash From Capital One, SmartBiz, and Fundbox.
Lendio is a loan aggregator that connects borrowers with multiple lenders via a single application. Equipment financing is just one loan product offered through Lendio. Through Lendio, you can apply for $5,000 to $5 million to purchase equipment. Loan terms are between one and five years. Interest rates for the most creditworthy borrowers are 7.5%.
The application process takes about 15 minutes, and you can receive funding in as little as 24 hours. Loans can be used to purchase heavy equipment, office furniture, software, vehicles, and more. To qualify through Lendio, you need at least $50,000 in annual revenue, a credit score of at least 650, and have been in business for at least 12 months. If your credit score is below 650, you may qualify with a lender based on cash flow and revenue from the last three to six months.
- High borrowing amounts
- Apply for multiple loans at once
- Receive funding within 24 hours
- Rates can be expensive
OnDeck offers fast, easy short-term installment loans up to $250,000. The factor rate for OnDeck loans is between 1.04 to 1.042 per month. A one-time origination fee between 2.5% and 4% of the total loan amount is charged.
Most established businesses will qualify for a loan from OnDeck. To qualify for an OnDeck loan, you must be in business for at least one year and have annual revenue of at least $100,000. The minimum credit score required is 600, but the lender reports that most business owners have credit scores of 650 or higher.
If an OnDeck short-term loan doesn’t fit your needs, the lender also offers lines of credit up to $100,000 with APRs as low as 13.99%.
- Fast and easy application
- Builds business credit
- Lower costs for repeat customers
- Low maximum loan amount
3. Spark Cash From Capital One
Spark® Cash from Capital One®
Spark® Cash from Capital One®
$95 ($0 the first year)
Capital One’s Spark Cash is an excellent choice for farmers, ranchers, and other business owners because of its unlimited 2% cash back rewards. There are no minimum requirements for redeeming your rewards. The card does come with an annual fee of $95, but this fee gets waived for the first year. You can also request free cards for your employees.
While Capital One does not specify a minimum credit score for this card, applicants must typically have excellent credit to qualify.
- Unlimited 2% cash back on all purchases
- Free employee cards
- Rental collision coverage
- Need excellent credit to qualify
The Small Business Administration offers affordable and flexible loan options for entrepreneurs and business owners, but navigating the application process is difficult for many. SmartBiz is a lender that takes the guesswork out of SBA loans, with interest rates starting at just 4.75%.
Through SmartBiz, you can apply for an affordable SBA 7(a) loan to purchase commercial real estate. Loan amounts of $500,000 to $5 million are available. SmartBiz offers low-interest rates with repayment terms of up to 25 years. Loans can be closed as soon as 30 days after approval.
To qualify, at least 51% of the property must be owner-occupied. You must be in business for over two years and have a minimum credit score of 675. You must sign a personal guarantee and pay fees, including a guarantee fee, packaging fee, and closing costs. A down payment of 10% to 20% is required.
- Streamlines SBA loan application process
- Low-interest rates
- Transparent terms and fees
- Funds take longer to disburse than other (non-SBA) online loans
Fundbox offers simple, flexible business financing, including online lines of credit up to $150,000. Repayment terms are 12 or 24 weeks. Fees begin at 4.66% and get paid along with your balance through weekly payments. There are no prepayment penalties, and paying off your loan early helps you save on fees.
The health of your business determines approval and credit limits. The application process takes about 10 minutes, during which you’ll connect your business bank account and accounting software. Once approved, funds are available immediately and can be deposited into your bank account as soon as the next business day.
- Fast, flexible access to capital whenever you need it
- You only have to repay what you withdraw
- No origination fee or draw fee
- Small credit limit
How To Get An Agriculture Business Loan
Now that you know what financing options are available to you, let’s learn what you need to start applying for farm loans and how to qualify for a government agriculture loan.
What You’ll Need To Apply For A Farm Loan
The documentation and information requirements for a farm loan are based on the type of loan you’re pursuing. For all loans, you will provide basic information about yourself and your business, such as your legal name, business name, address, phone number, social security number, and federal tax ID.
You will also need to prove that you are creditworthy and have the means to pay back the loan. Additional documentation to receive a farm loan may include:
- Business and personal bank statements
- Income statements
- Business and personal tax returns
- Balance sheets
- Profit and loss statements
- Business and personal credit scores
An application and all information and documentation must be submitted to your chosen lender. Underwriting and approval times vary based on the loan selected. Real estate and government farm loans may take several weeks or longer, while some alternative loans are instantly approved. To make the loan process more efficient, make yourself available to answer questions or provide additional information as needed. Learn more about the requirements for receiving a business loan.
What You Need To Qualify For A Government Farm Loan
For all government farm loans, borrowers must be citizens, non-citizen nationals, or legal resident aliens in the US and specific US territories. All borrowers must be unable to obtain credit from other lenders before applying for an FSA loan. Borrowers must not be delinquent on any federal debts, except for IRS tax debt.
All borrowers must also have no previous debt forgiveness from the FSA. Potential borrowers with Federal Crop Insurance violations are not eligible for FSA loans.
All borrowers must also have sufficient credit history. The FSA does not use credit scores but instead looks at a borrower’s past repayment history with creditors and the federal government. A lack of credit history, isolated incidents of slow payments, or adverse issues that were out of the borrower’s control will not automatically disqualify the borrower.
To qualify for an FSA Microloan, all borrowers must have three years of farm management experience acquired within ten years of the date of applying for the loan.
Some loans require collateral. For FSA Operating Microloans, a lien on farm property or agricultural projects totaling 100% to 150% of the loan amount is required. For Direct Farm Ownership Microloans, the real estate purchased or improved with loan proceeds serves as the collateral.
Additional information is required to receive an Emergency loan. Borrowers must apply within eight months of the date the disaster was declared, submit declinations of credit from commercial lenders, and obtain crop insurance for the coming year to receive the loan.
Agriculture Loan FAQs
In Summary: 5 Agriculture Loan Options For Businesses
- Lendio: Best for purchasing farm equipment.
- OnDeck: Best for working capital needs and seasonal gaps in revenue.
- Spark® Cash from Capital One®: Best for recurring monthly expenses or emergencies.
- SmartBiz: Best for purchasing commercial real estate.
- Fundbox: Best for purchasing supplies or inventory as needed.