Farming is both a labor-intensive and a cash-intensive business. If you are just starting out, you need funding to acquire your land and buildings, your tractors and other equipment, and your initial seed or livestock. On an ongoing basis, you need money to pay salaries for your workers, utilities like electricity and water, fertilizer for your crops or feed for your animals. Buildings and your property must be kept in good repair and of course, you need money to fund your own living expenses as well.
Agricultural loans are going to be a huge part of your cash-flow situation, so you need to know where you can locate the best lenders and how to apply for their money.
Federal Loans
From the federal government you can apply for a number of different loans depending on your need and the purpose for the money. Most of this money is available from the Farm Service Agency (FSA) division of the U.S.D.A. (U.S. Department of Agriculture).
Direct Operating Loans fund the day-to-day expenses of running an established farm or ranch. This money can help with purchasing equipment and fertilizer, seed and feed, and paying worker salaries.
Farm Ownership Loans are available for purchasing land and constructing or repairing buildings and equipment.
Farm Emergency Loans are provided when a catastrophe or natural disaster affects an entire region of the country and destroys or interrupts farm production.
The FSA also provides loan guarantees to agricultural lenders, encouraging them to relax their application standards for farmers in order to provide funds for people who might not ordinarily qualify for credit under stricter criteria. See USDA Grants for further discussion of loans available through the FSA.
State-Funded Loans
Most states with a significant agricultural industry provide funding for farmers and ranchers through loans. The money is raised by issuing “Aggie Bonds.” These bonds are a combination of federal and state money. They permit lenders to loan money to farmers at below-market interest rates, often 1 to 3 percentage points lower than a conventional loan.
Sixteen states currently issue Aggie Bonds and provide loans to their farmers and ranchers with the proceeds: Arkansas, Colorado, Idaho, Illinois, Indiana, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, Oklahoma, Pennsylvania, South Dakota and Wisconsin.
Private Lenders
There is an established network of farm lenders that provide an above-average proportion of their loans to agricultural businesses. These lenders have developed a variety of loans, small and large, for a variety of farming and ranching purposes. These lenders are also the ones which make the federally-guaranteed loans with the guarantees provided by the FSA.
Farm credit bureaus are financial organizations that are member-owned and provide services similar to those provided to the non-farming community by a credit union. These organizations lend money and provide other essential help to farmers and ranchers.
Non-Profits and Other Organizations
There are also a number of non-profit organizations that offer grants and loans to farmers and ranchers for various purposes.
The Carrot Project is an NPO that targets small-to-medium farms, limited-resource farms (defined as those farms which fall below a particular threshold of both sales and household income) and those which practice sustainable ecological methods. This group is currently confined to the New England and New York area, but it does offer a great deal of information and financial education for farmers all over the country. The organization is dedicated to finding and creating financing solutions for farmers in need.
The Equity Trust Fund is an opportunity for socially-responsible investors and donors to participate in funding and helping to preserve the agricultural way of life in America. This organization recognizes the fact that non-farming businesses are creating an environment where farmland is too expensive to remain in the hands of farmers. Its ideals are to strengthen the community by strengthening the farmer, and permitting farmers to continue to exist by making the land more affordable.
There are many small private and non-profit organizations that provide funding — both loans and grants — to current and aspiring farmers. While some digging may be involved, the fruits of your labors will be repaid a thousand times over. Many are very locally focused so a search including the name of your county and state could prove fruitful.