Best Agriculture Business Loans For Your Farm Or Ranch

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 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.

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.

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 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, 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. Some, but not all, of the USDA’s pandemic assistance programs are still accepting applications in 2023.

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.

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.

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 small business 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.

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.

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.

The best bank for an agricultural loan is usually your own bank (or credit union) with which you already have an existing business relationship. If you don’t like your bank’s loan selection or want to explore other options, your next best bet for a farm business loan is finding a local SBA-partnered bank.

USDA loans for land or other agricultural business purposes have strict requirements that not all small farming businesses will be able to meet. Borrowing requirements can include collateral, three+ years in business, and proof that you can’t get credit from other lenders. USDA loans also have a longer time to funding than other types of business loans (such as online loans) and tend to max out at $300,000 or $500,000.

The USDA might deny a loan for various reasons, including delinquency on other federal debts, Federal Crop Insurance violations, insufficient farm management experience, or insufficient business income to make loan payments.

Government loans such as USDA FSA farm loans have stringent borrower requirements and generally take longer to fund than commercial business loans. However, provided that you meet the USDA Farm Service Agency loan requirements, you may qualify for and obtain a loan without significant difficulties.

A USDA farm business loan is worth it if you qualify for the loan and are able to wait as long as a few months to receive funding. These are high-quality loans with low-interest rates and generous repayment terms.

The USDA offers government loans to farms through its Farm Services Agency. These are smaller loans with affordable borrowing rates, specifically for agricultural businesses that cannot obtain financing elsewhere. A regular commercial business loan is issued from a bank or alternative lender rather than a government agency.

FHA loans are government-backed mortgage loans for homebuyers. The USDA also offers loans to homebuyers, but these home loans are specific to rural areas. Additionally, the USDA provides business loans to farmers through the Farm Services Agency (FSA).