Overview

The U.S. Department of Agriculture’s Farm Service 

Agency (FSA) makes and guarantees loans to eligible 

socially disadvantaged (SDA) farmers to buy and 

operate family-sized farms and ranches. Each fiscal 

year, FSA targets a portion of its direct and guaranteed 

farm ownership (FO) and operating loan (OL) funds to 

SDA farmers. Non-reserved funds can also be used by 

SDA individuals.

An SDA farmer or rancher is a group whose members 

have been subject to racial, ethnic, or gender prejudice 

because of their identity as members of a group 

without regard to their individual qualities. These 

groups consist of American Indians or Alaskan 

Natives, Asians, Blacks or African-Americans, Native 

Hawaiians or other Pacific Islanders, Hispanics, and 

women.

FSA:

• Helps remove barriers that prevent full participation

 of SDA farmers in FSA’s farm loan programs; and

• Provides information and assistance to SDA farmers

 to help them develop sound farm management

 practices, analyze problems, and plan the best use of

 available resources essential for success.

FACT SHEET

August 2019

Farm Service Agency

Loans for Socially Disadvantaged

Farmers and Ranchers

1

Types Of Loans And Uses Of

Loan Funds

Direct FO loans and OLs are made by FSA to eligible 

farmers. Guaranteed FO loans and OLs are made by 

lending institutions subject to federal or state 

supervision (banks, savings and loans, and units of the 

Farm Credit System) and guaranteed by FSA. 

Typically, FSA guarantees 90 percent of any loss the 

lender might incur if the loan fails. FO

funds may be used to purchase or enlarge a farm or 

ranch, purchase easements or rights of way needed in 

the farm’s operation, erect or improve buildings, 

implement soil and water conservation measures, and 

pay closing costs. Guaranteed FO funds also may be 

used to refinance debt.

OL funds may be used to purchase livestock, poultry, 

farm equipment, feed, seed, fuel, fertilizer, chemicals, 

insurance, and other operating expenses. The funds 

also may be used for training costs, closing costs, and 

to reorganize and refinance debt.

Terms And Interest Rates

Repayment terms for direct OLs depend on the 

collateral securing the loan and usually run from one 

to seven years. Repayment terms for direct FO loans 

vary but never exceed 40 years.

Interest rates for direct loans are set periodically 

according to the government’s cost of borrowing.

Guaranteed loan terms are set by the lender. Interest 

rates for guaranteed loans are established by the 

lender.
USDA is an equal opportunity provider, employer, and lender. 2

LOANS FOR SDA FARMERS AND RANCHERS - AUGUST 2019

Down Payment Program

FSA has a special loan program to assist SDA 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 the purchase price of the farm

 or ranch to be acquired, the appraised value of the

 farm or ranch to be acquired, or $667,000

 (Note: This results in a maximum loan amount of

 $300,150);

• 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.

Land Contract Guarantees

These provide certain financial guarantees to the seller 

of a farm through a land contract sale to a beginning or 

SDA farmer. The seller may request either of the 

following:

• Prompt Payment Guarantee: A guarantee up to the

 amount of three amortized annual installments plus

 the cost of any related real estate taxes and

 insurance.

• Standard Guarantee: A guarantee of 90 percent of the

 outstanding principal balance under the land

 contract.

The purchase price of the farm cannot exceed the 

lesser of $500,000 or the market value of the property. 

The buyer must provide a minimum down payment of 

5 percent of the purchase price of the farm. The 

interest rate is fixed at a rate not to exceed the direct 

FO loan interest rate in effect at the time the guarantee 

is issued, plus three percentage points. The guarantee 

period is 10 years for either plan regardless of the term 

of the land contract. The contract payments must be 

amortized for a minimum of 20 years. Balloon 

payments are prohibited during the 10-year term of the

guarantee.

Sale Of Inventory Farmland

FSA advertises inventory property within

15 days of acquisition. Eligible SDA and beginning 

farmers are given first priority to purchase these 

properties at the appraised market value. If one or 

more eligible SDA or beginning farmer offers to 

purchase the same property in the first 135 days, the 

buyer is chosen randomly.

How To Apply

Applications for direct loan assistance may be 

submitted to the local FSA office serving the area 

where the operation is located. Local FSA offices are 

listed in the telephone directory under U.S. 

Government, Department of Agriculture, or Farm 

Service Agency. For guaranteed loans, applicants must 

apply to a commercial lender who participates in the 

Guaranteed Loan program. Contact the local FSA 

office for a list of participating lenders.

More Information

For more information, visit fsa.usda.gov/farmloans

or farmers.gov. Find your local USDA Service 

Center at farmers.gov/service-locator.