Guaranteed Loan

Program

Overview

The U.S. Department of Agriculture’s (USDA) 

Farm Service Agency (FSA) offers Guaranteed 

loans to farmers and ranchers to promote, build, 

and sustain family farms for a thriving agricultural 

economy. Agricultural producers can apply 

for a Guaranteed loan through FSA-approved 

commercial lenders.

FSA Guaranteed loans are made and serviced 

by commercial lenders such as banks, Farm 

Credit System institutions, or credit unions. 

FSA guarantees up to 95 percent of the loss 

of principal and interest on a loan. Farmers 

and ranchers apply to an agricultural lender, 

which then arranges for the guarantee. The FSA 

guarantee permits lenders to make agricultural 

credit available to farmers who do not meet the 

lender’s normal underwriting criteria.

FSA Guaranteed loans are for both farm 

ownership and farm operating purposes. FSA 

guarantees loans up to $2,236,000 (amount 

adjusted annually based on inflation).

Guaranteed Farm Onership Loans

Guaranteed Farm Ownership Loans may be 

made to purchase farmland, construct or repair 

buildings and other fixtures, develop farmland 

to promote soil and water conservation, or to 

refinance debt.

Guaranteed Operating Loans

Guaranteed Operating Loans may be used 

to purchase livestock, farm equipment, feed, 

seed, fuel, farm chemicals, insurance, and other 

operating expenses. The loans can also be used to 

pay for minor improvements to buildings, costs 

associated with land and water development, 

family living expenses, and to refinance debts 

under certain conditions.

Who Can Apply

To qualify for an FSA Guaranteed loan, an 

applicant must:

• Be a U.S. citizen or legal resident alien 

which includes Puerto Rico, the U.S. Virgin 

Islands, Guam, American Samoa, and 

certain former Pacific Trust Territories

• Have an acceptable credit history as 

determined by the lender

• Demonstrate ability to repay the loan

• Provide sufficient security for the loan

• Have the legal capacity to incur the 

obligations of the loan

• Be unable to obtain a loan without a 

guarantee

• Have not received FSA debt forgiveness 

on more than three occasions on or prior 

to April 4, 1996; or any occasion after 

April 4, 1996

• Be the owner or tenant operator of a 

family farm after the loan is closed. For 

Operating Loans, the applicant must be 

the operator of a family farm after the 

loan is closed

• Not be delinquent on any federal debt

• Not have outstanding unpaid 

judgements obtained by the U.S. in any 

court excluding judgements filed in U.S. 

Tax Courts

• Not have provided FSA with false or 

misleading documents or statements in 

the past

• Not have been convicted under federal 

or state laws of planting, cultivating, 

growing, producing, harvesting, or 

storing a controlled substance within 

the last 5 crop years

USDA is an equal opportunity provider, employer, and lender. OCTOBER 2023
GUARANTEED LOAN PROGRAM 2

Who Can Apply (cont.)

Applications may also be made by entities. 

Entities are corporations, cooperatives, 

joint operations, partnerships, trusts, and 

limited liability companies. Their members/

stockholders must meet the same eligibility 

requirements. The entity must also be 

authorized to operate a farm or ranch in the 

state where the land is located.

Loan Terms and Interest Rates

Loan terms vary according to the type of 

loan, the collateral securing the loan, and 

the producer’s ability to repay. Operating 

Loans cannot exceed seven years and Farm 

Ownership loans cannot exceed 40 years.

The Guaranteed loan interest rate and 

payment terms are negotiated between the 

lender and the applicant. Interest rates on 

Farm Ownership and Operating Loans may not 

exceed the maximum rates established by FSA.

Securing the Loan

Each loan must be adequately secured. 

Collateral for Operating Loans may consist of 

crops, livestock and equipment, and real estate 

when necessary. A lien may be taken on other 

chattel or real estate property.

Collateral for Farm Ownership loans consists 

of real estate or a combination of real estate 

and chattel. FSA staff determines whether the 

collateral proposed by the lender is adequate.

Percent of Guarantee

For most loans, the maximum guarantee is 90 

percent. The guarantee percentage will be 

determined by FSA based on the risk involved 

in the loan. The lender may receive a 95 percent 

guarantee when:

• The applicant meets the definition of a beginning 

farmer or a socially disadvantaged applicant; or

• The purpose of the loan is to refinance a Direct 

FSA farm loan. If only a portion of the loan is for 

this purpose, a weighted percentage of guarantee 

will be used; or

• The loan is made to a beginning farmer to 

participate in the Down Payment Loan Program or 

a qualifying state beginning farmer program; or

• The loan is made to a socially disadvantaged 

farmer to participate in the Down Payment 

Loan Program

FSA Fee for Guaranteed Loans

For most loans, FSA charges the lender a guarantee fee 

of 1.5 percent of the guaranteed portion of the loan.

This fee may be passed on to the borrower. The 

guarantee fee is waived when:

• The majority of the loan is to refinance a Direct 

FSA farm loan; or

• The loan is made to a beginning farmer to 

participate in the Down Payment Loan Program or 

a qualifying state beginning farmer program; or

• The loan is made to a socially disadvantaged farmer 

to participate in the Down Payment Loan Program.

OCTOBER 2023 fsa.usda.gov
GUARANTEED LOAN PROGRAM 3

How is the Loan Managed?

Guaranteed loans are the property and 

responsibility of the lender from the time of 

loan making, through loan servicing, until the 

loan is satisfied. The lender is responsible for 

servicing their Guaranteed loans as they service 

any other loan in their portfolio and complying 

with all FSA program requirements.

Secondary Market

The lender may resell the guaranteed portion of 

the loan to an interested party. The purchaser then 

becomes the holder of the loan, but the original 

lender must retain the loan servicing responsibilities. 

Investors who are looking for safe investments with 

a reasonable return are attracted to these loans 

because of the government’s full faith and credit 

guarantee against default. The existence of the 

secondary market makes Guaranteed loan notes 

more liquid. By reselling the guaranteed portions, 

lenders reduce interest rate exposure, increase their 

lending capabilities, and generate fees.

Advantages of Using the 

Secondary Market

Selling the guaranteed portion of the loan to other 

investors offers a number of advantages, including:

• Reduced interest rate risk. Lenders can 

transfer risk of interest rate increases on the 

guaranteed portion of a fixed rate loan;

• Increased Liquidity. Selling the loan on 

the secondary market frees the funds for 

additional lending or investing activity;

• Increased Lending or Investing Capabilities;

• Increased Return on Investment. The sale 

of the guaranteed portion of the loan in the 

secondary market increases the lender’s 

overall return on investment. Each time a bank 

sells a guaranteed portion, it generally retains 

a servicing fee; and

• Rates and Terms. Lenders may be able to offer 

the borrower more flexible repayment terms, 

as well as fixed and/or reduced interest rates 

to improve cash flow.

USDA is an equal opportunity provider, employer, and lender. OCTOBER 2023

More Information

For more information visit, fsa.usda.gov or farmers.gov. Find your local USDA Service Center at farmers.gov/service-locator.