The first step on the path to securing credit is to learn the basics about agricultural lending. Understanding how lenders review loan applications and what information they require will help you get ready.
Good record keeping allows you to set and track progress toward your financial goals, enables you to make informed decisions about your business, and demonstrates your ability to generate revenue and pay off debt. Financial records, such as a balance sheet or income statement, also provide the data you need to prepare financial statements that lenders may require with the loan application.
A business plan is a written document outlining the goals, strategies and action plans for important areas of your farm operation, including management, finance, production and marketing. It should include enough information so that other people understand what you want to do and how you plan to do.
Your credit score shows your ability to borrow money and pay it back, pay bills on time and act in a financially responsible way. A credit score is an indicator of your credit-worthiness. Before applying for a loan, know your score and be prepared to answer questions a lender might have about your credit history.
The Fair Credit Reporting Act (FCRA) requires each of the nationwide credit reporting companies—Equifax, Experian, and TransUnion—to provide you with a free copy of your credit report, at your request, once every 12 months.
To get help setting up a record-keeping system, preparing financial statements and/or developing a business plan, contact your local Cooperative Extension Agent, State Department of Agriculture, local Farm Credit, or commercial lending institution
In 1916 Congress enacted a law to establish the Farm Credit System (FCS) to provide a reliable source of financing for farmers. FCS is a nationwide network of borrower-owned lending institutions and specialized service organizations that provide loans and other services to agricultural producers, rural homeowners, aquatic producers, timber harvesters, agri-businesses, and agricultural and rural utility cooperatives. According to the federal Farm Credit Administration—which regulates and examines FCS—FCS is the largest agricultural lender in the United States. To locate a Farm Credit institution near you, visit the Farm Credit network website.
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State finance programs provide low interest loans, loan guarantees, and loan participation programs to help producers buy land, buildings, equipment and breeding livestock. Some programs, including “Aggie Bond” programs, are targeted specifically to beginning farmers. The National Council of State Agricultural Finance Programs tracks available programs and produces a comprehensive directory of state-level programs available to beginning and established producers.
The USDA Farm Service Agency (FSA) provides direct and guaranteed loans to farmers and ranchers unable to obtain financing from other lenders for operating expenses and land purchases. Microloans are direct farm operating loans with a shortened application process and reduced paperwork designed to meet the needs of smaller, non-traditional, and niche type operations.
To find out more about program eligibility and/or the application process, contact FSA, typically located in your local USDA service center.
Your local bank may also be a potential source for credit. Many banks participate with agencies in providing financing to beginning farmers through state loan programs, including “Aggie Bond” Programs”, and/or may offer loans guaranteed by FSA. Although it is uncommon, some banks have created local financing initiatives that link funds from depositors to a special lending pool available to beginning farmers. Ask your local bank if such a program is available.
Community Development Financial Institutions (CDFIs) are organizations that provide fair and responsible loans with community development as a primary objective. Often, CDFIs are lenders with a mission to provide fair, responsible financing to rural, urban, Native, and other communities that mainstream finance doesn’t traditionally reach. The U.S. Department of the Treasury’s CDFI Fund Program offers both Financial Assistance and Technical Assistance awards to CDFIs. These competitive awards support and enhance the ability of these organizations to meet the needs of the communities they serve.
In some cases, non-profits that focus on supporting local or regional agricultural may support farm business by providing loans or grants.
The USDA Farm Service Agency (FSA) provides loans help Tribal Nations become owners of additional property within the reservation to advance and increase current operations, provide financial prospects for Native American Communities, increase agricultural productivity, and save farmland for future generations.
The Sustainable Agriculture Research and Education (SARE) program is a regional competitive grants and education program operating in every state. The program, supported by USDA, is run by four regions—North Central, Northeast, South and West, each guided by a volunteer Administrative Council that makes grants and sets regional priorities. SARE’s four regions offer an array of competitive grants for farmers and ranchers (and researchers, agricultural educators, and students) in the United States.
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State Departments of Agriculture may offer grants to farmers to implement conservation practices, expand market opportunities, develop new products or provide assistance with business planning. These opportunities may be available to new and experienced farmers and typically can be found listed on State Departments of Agriculture websites under Funding Opportunities or Programs.
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USDA’s Rural Development offers multiple grant funding opportunities. The Value Added Producer Grant Program helps agricultural producers enter into value-added activities related to the processing and/or marketing of bio-based, value-added products. Priority may be given to a beginning farmer or rancher, a socially-disadvantaged farmer or rancher, a small or medium-sized farm or ranch structured as a family farm, a farmer or rancher cooperative.
The Rural Energy for America Program provides guaranteed loan financing and grant funding to agricultural producers and rural small businesses for renewable energy systems or to make energy efficiency improvements. Agricultural producers may also apply for new energy efficient equipment and new system loans for agricultural production and processing.
Each fiscal year, Rural Development grant applications are requested through an announcement posted on Grants.gov.
The Brighter Future Fund assists farmers in successfully launching, growing, and sustaining farms in the face of forces impacting the food and agricultural system, including the COVID-19 pandemic, changing markets, severe weather, and climate change. The Fund was initially seeded with a generous contribution from Tillamook, one of America’s favorite farmer-owned co-ops. The fund is also supported through a generous donation from Tractor Supply.
The New England Farmer Microgrants Program (NEFMP) provides direct financial support to farmers across New England. The program continues addresses key barriers faced by New England farmers: access to land, farm succession and land transfer planning, and adopting regenerative agriculture or soil health practices on livestock operations.
Included in Farm Aid’s work to build a thriving family farm-centered system of agriculture, is the Farm Aid grant program, which funds organizations serving family farms. Farm Aid grantees around the country are critical partners in the movement to keep family farmers on the land, producing good food for all.
In some cases, non-profits that focus on supporting local or regional agricultural may support farm business by providing loans or grants.
The Native American Agriculture Fund (NAAF) is a private, charitable trust serving Native farmers and ranchers created from the historic Keepseagle v. Vilsack litigation settlement.
NAAF’s mission is to fund the provision of business assistance, agricultural education, technical support, and advocacy services to Native American farmers and ranchers to support and promote their continued engagement in agriculture.
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You can find more information about preparing for credit from the websites below, as well as a wealth of information about agricultural production and marketing assistance.
Find more information about preparing for credit and other information about agricultural production and marketing assistance.
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