FACT SHEET

UNITED STATES DEPARTMENT OF AGRICULTURE

FARM SERVICE AGENCY

Page 1

February 2011

Farm Loans

Overview

 

The U.S. Department of 

Agriculture’s Farm Service 

Agency (FSA) makes and 

guarantees loans to family 

farmers and ranchers to 

promote, build and sustain 

family farms in support 

of a thriving agricultural 

economy. FSA maintains its 

headquarters in Washington, 

DC, with offices located in 

each state, usually in a state 

capital or near a state landgrant university, as well as in 

most agriculturally productive 

counties. Farmers may apply 

for direct loans at local FSA 

offices. Guaranteed loans 

may be available from local 

commercial lenders who apply 

for loan guarantees from FSA. 

Although general information 

may be obtained from 

headquarters and state offices, 

all programs are administered 

through local offices.

 

The goal of FSA’s farm loan 

programs is to graduate its 

borrowers to commercial 

credit. Once a farmer is able 

to obtain credit from the 

commercial lending sector, the 

Agency’s mission of providing 

temporary, supervised credit is 

complete.

 

FSA Farm Loans

 

FSA’s loan programs are 

designed to help family 

farmers obtain loans and loan 

guarantees, and conduct 

business planning. In many 

cases, these are beginning 

farmers who need additional 

financial and business acumen 

to qualify for commercial 

credit. In other cases, 

they are farmers who have 

suffered financial setbacks 

from natural disasters, or who 

need additional resources 

with which to establish and 

maintain profitable farming 

operations.

 

Some farmers obtain their 

credit needs through the 

use of loan guarantees. 

Under a guaranteed loan, a 

commercial lender makes and 

services the loan, and FSA 

guarantees it against loss up 

to a maximum of 90 percent 

in most cases. In certain 

limited circumstances, a 95 

percent guarantee is available. 

FSA has the responsibility 

of approving all eligible loan 

guarantees and providing 

oversight of lenders’ activities.

 

For those not yet meeting 

the qualifications for a loan 

guarantee from a commercial 

lender, FSA also makes direct 

loans, which are serviced 

by an FSA official. FSA 

has the responsibility of 

providing credit counseling 

and supervision to its direct 

borrowers by making a 

thorough assessment of 

the farming operation. The 

Agency helps applicants 

evaluate the adequacy of 

the real estate and facilities, 

machinery and equipment, 

financial and production 

management, and the 

farmer’s goals. FSA assists 

the applicant in identifying 

and prioritizing areas needing 

improvement in all phases of 

the operation. An FSA official 

then works one-on-one with 

the farmer to develop and to 

help strengthen the identified 

areas that ultimately result 

in the farmer’s graduation to 

commercial credit.

 

Unlike FSA’s commodity loans, 

most farm loans must be 

fully secured and can only be 

approved for those who have 

repayment ability.

 

Farm Ownership Loans

 

Eligible applicants may obtain 

direct loans up to a maximum 

indebtedness of $300,000. 

Maximum indebtedness 

for guaranteed loans is 

$1,119,000 (amount adjusted 

annually for inflation). The 

maximum repayment term is 

40 years for both direct and 

guaranteed farm ownership 

loans. In general, loan funds 

may be used to purchase a 

farm, enlarge an existing farm, 

construct new farm buildings 

and/or improve structures, pay 

closing costs, and promote soil 

and water conservation and 

protection.

 

Farm Operating Loans

 

Eligible applicants may 

obtain direct loans for up to 

a maximum indebtedness of 

$300,000, and guaranteed 

loans for up to a maximum 

indebtedness of $1,119,000 

(amount adjusted annually 

for inflation). The repayment 

term may vary, but typically 

it will not exceed seven 

years for intermediate-term 

purposes. Annual operating 

loans are generally repaid 

within 12 months or when 

the commodities produced 

are sold. In general, loan 

funds may be used for 

normal operating expenses, 

machinery and equipment, real 
FACT SHEET

Farm Loans February 2011

estate repairs, and refinancing 

debt.

 

Targeted Funds to Socially 

Disadvantaged and 

Beginning Farmers

 

Each year Congress targets a 

percentage of farm ownership 

and farm operating loan funds 

to socially disadvantaged 

(SDA) and beginning farmers. 

For more information, refer to 

the FSA Fact Sheet, “Loans 

for Socially Disadvantaged 

Farmers.”

 

Downpayment Program

 

FSA has a special loan 

program to assist socially 

disadvantaged and beginning 

farmers in purchasing a farm. 

Retiring farmers may use this 

program to transfer their land 

to future generations.

 

To qualify:

 

■ The applicant must make 

a cash down payment of at 

least 5 percent of the purchase 

price.

 

■ The maximum loan 

amount does not exceed 45 

percent of the least of (a) the 

purchase price of the farm or 

ranch to be acquired; (b) the 

appraised value of the farm 

or ranch to be acquired; or (c) 

$500,000 (Note: This results 

in a maximum loan amount of 

$225,000).

 

■ The term of the loan is 20 

years. The interest rate is 4 

percent below the direct FO 

rate, but not lower than 1.5 

percent.

 

■ The remaining balance may 

be obtained from a commercial 

lender or private party. FSA 

can provide up to a 95 percent 

guarantee if financing is 

obtained from a commercial 

lender. Participating lenders 

do not have to pay a 

guarantee fee.

 

■ Financing from participating 

lenders must have an 

amortization period of at least 

30 years and cannot have a 

balloon payment due within the 

first 20 years of the loan.

 

Rural Youth Loans

 

These are available as 

direct loans only and have 

a maximum loan amount of 

$5,000. Rural youth loans 

may be made to individuals 

who are sponsored by a 

project advisor, such as a 4-H 

Club, FFA or local vocational 

instructor. Individuals must be 

at least 10 but not more than 

20 years old to be eligible and 

reside in a town or city with a 

population of 50,000 or fewer 

people. 

 

Emergency Loans

 

These loans are available 

only as direct loans from FSA. 

Emergency Loans assist 

farmers who have suffered 

physical or production losses 

in areas declared by the 

President as disaster areas or 

designated by the Secretary 

of Agriculture as disaster 

or quarantine areas (for 

physical losses only, the FSA 

Administrator may authorize 

Emergency Loan assistance). 

For production loss loans, 

applicants must demonstrate 

a 30 percent loss in a single 

farming or ranching enterprise. 

Applicants may receive 

loans up to 100 percent of 

production or physical losses. 

 

Loan purposes include 

operating and real estate, 

restoring/replacing essential 

property, production costs for 

disaster year, essential family 

living expenses, reorganization 

and refinancing certain debts. 

 

The maximum indebtedness 

under the Emergency Loan 

program is $500,000.

 

Loan Servicing and 

Supervised Credit

 

FSA’s mission is not limited 

to providing just credit - it 

is to provide supervised 

credit. This means that FSA 

works with each direct loan 

borrower to identify specific 

strengths and opportunities 

for improvement in farm 

production and management, 

and then works with the 

borrower on alternatives and 

other options to address the 

areas needing improvement 

to achieve success. Learning 

improved business planning 

and financial acumen through 

supervised credit is the 

difference between success 

and failure for many farm 

families.

 

To help keep borrowers 

on the farm, FSA may be 

able to provide certain loan 

servicing benefits to direct loan 

borrowers whose accounts 

are distressed or delinquent 

due to circumstances beyond 

their control. These benefits 

include:

 

■ Reamortization, 

rescheduling, and/or deferral 

of loans;

 

■ Rescheduling at the Limited 

Resource (lower interest) rate;

 

■ Acceptance of conservation 

contracts on environmentally 

sensitive land in exchange for 

reduction of debt; and

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FACT SHEET

Farm Loans February 2011

 

■ Writing down the debt 

(delinquent borrowers only).

 

If none of these options results 

in a feasible farm operating 

plan, borrowers may be offered 

the opportunity to pay off their 

debt at the current market 

value of the security. If this 

is not possible, other options 

include:

 

■ Debt settlement based on 

inability to repay.

 

■ In some cases, where a 

feasible plan of operation 

cannot be developed, FSA 

works with commercial lenders 

to help him or her retain the 

homestead and up to 10 acres 

of land.

 

Farms that come into FSA 

ownership are sold at market 

value, with preference given 

to socially disadvantaged and 

beginning farmers.

 

Who May Borrow

 

To qualify for assistance, 

applicants must meet all 

loan eligibility requirements 

including:

 

■ Be a family-size farmer;

 

■ Have a satisfactory history of 

meeting credit obligations;

 

■ For direct OL loans, have 

sufficient education; training, 

or at least 1-year’s experience 

in managing or operating 

a farm or ranch within the 

last 5 years. For direct FO 

loans, applicants must have 

participated in the business 

operations of a farm or ranch 

for 3 years;

 

■ Be a citizen of the United 

States, including Puerto Rico, 

the U. S. Virgin Islands, Guam, 

American Samoa, and certain 

former Pacific Island Trust 

Territories, a U.S. non-citizen 

national, or a qualified alien 

under federal immigration law;

 

■ Be unable to obtain credit 

elsewhere at reasonable rates 

and terms to meet actual 

needs;

 

■ Possess legal capacity to 

incur loan obligations;

 

■ Not be delinquent on a 

Federal debt;

 

■ Not have caused FSA a loss 

by receiving debt forgiveness 

(certain exceptions apply) and; 

 

■ Be within the time 

restrictions as to the number 

of years they can receive FSA 

assistance.

In the case of an entity, certain 

eligibility requirements apply. 

The entity must:

 

■ Meet applicant eligibility 

requirements;

 

■ Be authorized to operate 

a farm or ranch in the State 

where the actual operation is 

located and; 

 

■ Be owned by U.S. citizens, 

U.S. non-citizen nationals or 

qualified aliens.

 

For SDA members, they must 

hold a majority interest in the 

entity applicant to receive SDA 

benefits.

 

If the individuals holding 

a majority interest in the 

entity are related by blood 

or marriage, at least one 

stockholder, member, or 

partner must operate the 

family farm or ranch. If they 

are not related by blood or 

marriage, those holding a 

majority interest must operate 

the farm or ranch.

 

For More Information

 

Additional information may be 

obtained at local FSA offices 

or through the FSA website at 

www.fsa.usda.gov.

Page 3

The U.S. Department of Agriculture 

(USDA) prohibits discrimination in 

all its programs and activities on 

the basis of race, color, national 

origin, age, disability, and where 

applicable, sex, marital status, 

familial status, parental status, 

religion, sexual orientation, 

political beliefs, genetic 

information, reprisal, or because all 

or part of an individual’s income is 

derived from any public assistance 

program. (Not all prohibited 

bases apply to all programs.) 

Persons with disabilities who 

require alternative means for 

communication of program 

information (Braille, large print, 

audiotape, etc.) should contact 

USDA’s TARGET Center at (202) 

720-2600 (voice and TDD). To file a 

complaint of Discrimination, write 

to USDA, Assistant Secretary for 

Civil Rights, 1400 Independence 

Avenue, SW., Stop 9410, 

Washington, DC 20250-9410, or call 

toll-free at (866) 632-9992 (English) 

or (800) 877-8339 (TDD), or (866) 

377-8642 (English Federal-relay), 

or, or (800) 845-6136 or. USDA is 

an equal opportunity provider and 

employer.