The United States Department of Agriculture has a website dedicated to new farmers which is filled with helpful information on how to get started, make a business plan, find financing and educational resources and become connected with a mentor.
There are six main funding sources for beginning farmers in Ohio:
- Local banks
- Private contracts
- Farm Credit Services
- USDA’s Farm Service Agency
Many banks participate with agencies in providing financing to beginning farmers and guarantee financing through USDA. Ask if a bank or lender is a “preferred” lender for USDA’s Farm Service Agency. If so, it can help streamline and speed up the process.
Many property owners are willing to contract directly with a beginning farmer for sale of land, machinery, livestock or other assets. Contracts can range from cash deals to share rent, to work-in arrangements in which labor pays for part or all of the property.
The Natural Resources Conservation Service’s Environmental Quality Incentives Program offers financial and technical assistance to agricultural and forestry producers to put in structures like fencing and concrete manure pads to improve the environment.
The Conservation Reserve Program Transition Incentives Program provides for the transition of expiring Conservation Reserve Program land from a retired or retiring owner or operator to a beginning, veteran or underserved farmer. This program can provide annual rental payments for up to two additional years after the expiration of the CRP contract, provided the transition is not to a family member.
AgCredit offers financial programming for young, beginning and small farmers through its AgStart program, which has provided more than $71 million in loans over the last four years to 293 farmers. Some examples:
- AgGrow Loans for farm operators: For farmers who are making their first or second purchase of farmland or establishing a livestock production operation. This program offers minimal owner equity and current ratio requirements, low down payment, extended terms, discounted and/or no loan origination fee and discounted loan closing costs.
- AgNiche Loans: Intended for farmers running a non-traditional operation, this program includes flexible repayment terms to match income stream.
Farm Credit Services
- The Young & Beginning Loans program is for producers age 35 or younger, or with 10 years experience or less.
- The Development Fund assists young and beginning producers who have a plan to start, grow or remain in agriculture by providing them with needed working capital loans and business planning assistance.
FSA Beginning Farmer Loan Programs
USDA’s Farm Service Agency makes and guarantees low interest loans to beginning farmers who are not financially ready to obtain financing from commercial lenders.
FSA defines a beginning farmer as somebody who:
- Has not operated a farm or ranch for more than 10 years.
- Does not own a farm greater than 30 percent of the average size farm in the county as determined by the most current Census of Agriculture at the time the loan application is submitted.
- Meets the loan eligibility requirements of the program to which he or she is applying: Farm Operating Loan, Farm Ownership Loan or Microloan
Substantially participates in the operation.
FSA provides loans with funding Congress appropriates each year with a portion targeted toward beginning farmers. Some of the loans available to new farmers:
- Land Contract Guarantee Program — Landowners willing to sell land to beginning farmers on contract can qualify for a government guarantee through FSA. This program provides one of two types of guarantees to be in effect for 10 years: “prompt payment” guarantee and 90% principal loan value guarantee.
- Farm ownership loans provide access to land and capital. For example, FSA’s Down Payment Loan Program requires beginning farmers to put 5% down, the bank 50% and FSA finance 45% with certain terms.
- Operating loans help beginning farmers become prosperous and competitive by helping pay normal operating or family living expenses, opening doors to new markets/marketing opportunities and assisting with diversifying operations.
- Joint Financing Loans allow beginning farmers to obtain up to a 50% loan at a 5% interest rate if a commercial loan was obtained for the remaining purchase price. No down payment required.
- Through Microloan Programs, beginning farmers and ranchers have an important source of financial assistance during the start-up years.
- FSA’s Guaranteed Farm Loan Programs help family farmers obtain loans from USDA-approved commercial lenders at reasonable terms to buy farmland or finance agricultural production.
- The EZ Guarantee Program is available for smaller loans up to $100,000. This program provides a simplified guaranteed loan application process to help small, new or underserved family farmers with early financial assistance.
To learn more, contact the local FSA county office where you plan to farm. For the down payment loan, you will also need to apply with a commercial lender for the remaining financing. If you’re buying land on contract you will work directly with the landowner.
Sources: USDA, Center for Rural Affairs, Farm Credit