Obtaining Agricultural Loans

Here's a step-by-step plan for finding the financing you need

By Elaine Grant, Principal, Muddy Dog Media LLC

For almost anyone in the business of agriculture, the maze of agricultural loan options can seem daunting. The good news is that there are many options for financing out there, both from commercial lenders and government-backed sources.

In order to get an agricultural loan, you'll need to:

Produce a detailed business plan with cash flow forecasts and marketing information
Compare lending terms from commercial banks and Farm Credit Associations
Seek out state-funded agricultural loans
Determine whether you qualify for loans from the U.S. Department of Agriculture (USDA) or other federal government sources

Write a business plan

If you want to get a loan, you must have a detailed business plan. Projecting your cash flow will help you — and your lender — figure out how much of a loan you can handle.
Try: For a meager $1.25 you can buy the guide Business Plans for Agricultural Producers from the Texas Cooperative Extension Service. PlanMagic Corp. has farm business plan software starting at $84.95. FarmCentre.com, a Canadian site, offers free downloadable business plans for farmers, beekeepers and horticulturalists. Or see tips for creating a business plan at First Pioneer Farm Credit. For help with cash flow forecasting, download this cash flow projection form from the Texas Cooperative Extension Service.

Explore your state's agricultural financing programs

All but 13 states offer at least one agricultural loan program; some offer several. They range from loans for "beginning" farmers to disaster recovery loans to short-term loans for getting through a difficult season to lines of credit for leasing equipment. One useful program is the Aggie Bond Beginning Farmer Loan Program (available in 17 states), which makes loans available to new farmers and ranchers for buying land, buildings, livestock, etc., at reduced interest rates.
Try: The National Council of State Agricultural Finance Programs has definitions of state-financed agricultural loan programs and directories to the states offering them. Or look up programs by state and compare features. The site also provides a directory of states with Aggie Bond programs.

Try a commercial lender

Examine offerings from commercial lenders specializing in agricultural loans. These include 2,500 farm banks in the U.S., the nationally chartered Farm Credit System and a handful of insurance companies. Banks provide more farm financing than the Farm Credit System does, and tend to be friendlier to small and family farms.
Try: To find a bank that specializes in farm loans, check The top 100 banks in the U.S. by agricultural loan concentration, the top 100 agricultural lenders by dollar volume, and 10 financial tips for young and beginning farmers. Or check out ag loan programs at Bank of America or U.S. Bank.

Sow a seed at the Farm Credit System or an insurance company

The Farm Credit System provides rural lending to a variety of borrowers in all 50 states.
Try: To find the bank that oversees lending in your area, visit the Farm Credit System entry on Wikipedia; you'll find links to the five Farm Credit banks. MetLife, which has an active ag loan program, provides funds not just to growers, but to ranchers, agribusiness and timber companies as well.

Turn to the federal government

If you can't get commercial credit, or you can't get as much money as you need through a commercial lender, you may qualify for one of several loan programs operated by the USDA Farm Service Agency.
Try: Check the USDA Farm Service Agency fact sheet. Or contact the Farm Service Agency's state office. Search for other federal government loan programs at GovLoans.gov, which describes some of the USDA loan programs and includes a few other ag loans as well, such as a Fisheries Finance program. To find out how many government-financed agricultural loan programs you qualify for, fill out an online questionnaire.

The USDA's Aggie Bond program can be used to help sell a farm to a younger family member.
Your financial records are as important as the quality of your zucchini and beans, if not more so, when it comes time to take out a loan. Don't skimp on record-keeping.
Your banker or lender can be an invaluable source of advice on business plans, tax strategies and forecasting.