The 6 Best Agriculture Business Loans For Your Farm Or Ranch
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.
An agriculture business loan can help farmers run their businesses. From purchasing farming equipment to buying land to hiring employees, costs can pile up quickly, leaving even the most prepared small business owner struggling to stay afloat. In Q1 2022, the agriculture business loan outlook was mostly positive due to elevated commodity prices, though bankers expected a downturn in Q2 due to the ongoing drought. That’s where USDA loans can help.
What are USDA loans? The USDA (United States Department of Agriculture) offers assistance to struggling farmers in the form of FSA loans and, in 2022, announced a new USDA program for farmers impacted by natural disasters, as well as a USDA program for farmers transitioning to organic production.
Read on to learn more about farm business loan opportunities, how to qualify, and which type of financing is best for your farm or ranch.
Other Featured Options:
- National Funding: Best for bad credit.
Read more below to learn why we chose these options.
Table of Contents
Where Can I Get An Agricultural Loan?
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 for getting a farm loan.
Government Programs For Agriculture & Farm Financing
The United States Department of Agriculture’s Farm Services Agency (FSA) has several farm loan programs to fit the needs of new and established farming and agriculture businesses.
Farm Operating Loans
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 refinance 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
FSA Direct Farm Ownership loans are another option for farmers. This agriculture business 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.
Guaranteed Farm Loans
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 of 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, reorganize operations, and refinance 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.
Farm Labor Housing Direct Loans & Grants
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.
Value-Added Producer Grants
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 of 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 Grants
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.
More Grant Opportunities For Farmers
Finally, the USDA also offers pandemic assistance for farmers. Some, but not all, of the USDA’s pandemic assistance programs are still accepting applications in 2022.
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 upgrading old equipment or adding more to keep up with your expanding business, an equipment loan makes these purchases more affordable.
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.
6 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 agricultural business loan options:
- Lendio: Best for purchasing farm equipment.
- OnDeck: Best for working capital.
- Capital One Spark Cash Plus: Best for recurring monthly expenses.
- SmartBiz: Best for purchasing commercial real estate.
- Fundbox: Best for purchasing supplies and inventory.
- National Funding: Best for bad credit.
1. Lendio: Best For Purchasing Farm Equipment
- High borrowing amounts
- Apply for multiple loans at once
- Receive funding within 24 hours
- Rates can be expensive
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.
2. OnDeck: Best For Working Capital
- Fast and easy application
- Builds business credit
- Lower costs for repeat customers
- Low maximum loan amount
OnDeck offers fast, easy, short-term installment loans up to $250,000. Interest rates for OnDeck’s term loans start at a 35% APR, but the average rate is 54.96%. A one-time origination fee of up to 5% of the total loan amount is also charged. You will have to repay your OnDeck loan quickly, but this type of farm business loan works well for short-term working capital needs.
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 35.99%.
3. Capital One Spark Cash Plus: Best For Recurring Monthly Expenses
Capital One Spark Cash Plus
Capital One Spark 2% Cash Plus
N/A (balance due in full)
- Unlimited 2% cash back on all purchases
- Free employee cards
- 5% cash back on rental vehicles and rental car insurance
- Need excellent credit to qualify
Capital One Spark Cash Plus is an excellent choice for farmers, ranchers, and other business owners because of its unlimited 2% cash back rewards on all purchases. A business charge card such as Spark Cash Plus works well for paying ongoing expenses, including those that you may need some extra days or weeks to pay off while earning cash back on all your expenditures.
With Spark Cash Plus, there are no minimum requirements for redeeming your rewards, and businesses that spend at least $200,000 yearly will receive an extra $200 annual cash bonus. The card does come with an annual fee of $150, but this fee is less than that charged by competing business cards, such as American Express Plum Card. Capital One Spark Cash Plus also comes with free employee cards, 5% cash back on rental vehicles, and rental collision coverage.
While Capital One does not specify a minimum credit score for this card, applicants must typically have excellent credit to qualify. Note that this is a charge card, so you’ll need to pay off your balance every month.
- Streamlines SBA loan application process
- Low-interest rates
- Transparent terms and fees
- Funds take longer to disburse than other (non-SBA) online loans
The Small Business Administration offers affordable and flexible agriculture business loan options, but navigating the application process is difficult and time-consuming for many. SmartBiz is a lender that takes the guesswork out of SBA loans, with interest rates starting at just 5%.
Through SmartBiz, you can submit an online application for an affordable SBA 7(a) loan to purchase commercial real estate for farming. Loan amounts of $500,000 to $5 million are available, with repayment terms of up to 25 years. Your SmartBiz SBA loan should be funded about a month after approval, compared to two to three months when you obtain an SBA loan through traditional channels.
To qualify for a SmartBiz SBA 7(a) commercial real estate loan, at least 51% of the property must be owner-occupied. You must be in business for over three years and have a minimum credit score of 675.
- 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
Fundbox offers simple, flexible business financing, including online lines of credit up to $150,000. A business line of credit such as the one offered by Fundbox works great for having capital on-demand to buy equipment, purchase inventory, fund payroll, and pay vendors. A line of credit is also good for when you don’t know the exact amount of capital you need or when the amount required may vary from month to month.
Fundbox repayment terms are 12 or 24 weeks, and once you repay what you owe, your line replenishes. Fees begin at 4.66% and are paid along with your balance through weekly payments. There are no prepayment penalties, and paying off your loan early helps you save on fees. You’ll just need six months in business and a 600 FICO to qualify.
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.
6. National Funding
- Poor credit-friendly
- Next-day funding
- Rates can be expensive
National Funding offers short-term business loans to a variety of business types, including agricultural businesses, in amounts from $5,000 to $500,000. Notably, National Funding can approve applicants with credit scores as low as 500 for direct loan borrowers and 475 for renewals; you also only need six months in business. And unlike other agriculture business loan types, such as an SBA loan or FSA loan, you don’t need any collateral or down payment for a National Funding loan.
Whether funds are needed to hire agricultural workers, update farm equipment, add new crops, or upgrade livestock housing, a National Funding loan can help farmers with bad credit get the capital they need in as soon as 24 hours.
Note that the borrowing fee may be as high as 36% of the amount you borrow, plus a 2% origination fee taken off the top of the loan. You’ll repay your farm business loan and fees over six to 15 months via daily ACH payments.
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 (USDA) 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.