A Guide to Farm Loans

Are you considering purchasing a farm but don't know how to finance it? Farm loans can provide you with the money necessary to make your dream of owning a farm come true. But with different types of farm loans on the market and an array of conditions and requirements to consider, it can be difficult for anyone not well-versed in agriculture financing to find the right loan for their goals. In this guide, we explain everything you need to know about farm loans so that you can make an informed decision before committing.


What Are Farm Loans?

Farm loans are an important source of financing for farmers and ranchers. They can be used to purchase farm equipment, make improvements to farmland, or finance operating expenses. There are several different types of farm loans available depending on the specific needs of the farm. These include direct farm ownership loans, farm operating loans, emergency farm loans, and farm real estate loans.


What Do Farm Loans Cover?

Each type of farm loan has its own set of requirements and terms, so it's important to understand the details before applying for a loan. When considering farm loans, it is important to do research on different lenders to find the best possible option for your farm's needs. Additionally, ensure that you have an up-to-date farm financial plan, as this will be needed to qualify for farm loans. When it comes to farm loans, having the right information and preparing in advance can make a huge difference in finding the best loan option.


How Do You Qualify And What Are the Interest Rates?

In order to qualify for farm loans, lenders typically require a farm financial plan that details the farm's needs and projected profitability. Additionally, potential borrowers must have good credit and be able to make steady payments on time. The interest rates on farm loans will vary depending on the lender and the loan type but are generally lower than other types of loans. This is because farm loans are often seen as a long-term investment and less risky for the lender. It's important to shop around and compare interest rates from different lenders in order to find the best possible farm loan option.

Overall, farm loans can be an invaluable source of financing for farmers and ranchers. Understanding the different farm loan types, requirements, and interest rates can help you make an informed decision when considering farm loans. Ultimately, having a farm financial plan in place and doing research on different lenders will be key to finding the best farm loan option for your farm's needs.


What Are the Benefits of Taking Out a Farm Loan?

A farm loan is an important tool for agricultural businesses. Whether you're starting up, expanding, or just need operating capital, a farm loan can help you reach your goals. But what are the actual benefits of taking out a farm loan? Read on to find out! 

Access to Capital

One of the primary benefits of taking out a farm loan is that it provides farmers with access to the capital they need in order to purchase land, equipment, and other materials necessary for running their business. With access to capital, farmers can make improvements to their operations and increase their productivity. 

Lower Interest Rates

Government-backed farm loans are a great option for aspiring farmers with lower capital looking to expand or purchase a new piece of land. With the U.S. Department of Agriculture (USDA) providing backing, these loans come with lower interest rates, making them more affordable and manageable. Moreover, due to the lower rate of interest and additional benefits provided by most lenders, they are much easier to pay back over time compared to higher interest non-government backed loans. This makes farm loans a great solution for farmers facing the financial risks associated with establishing a business in difficult conditions.

Improved Cash Flow

Farm loans can also provide farmers with improved cash flow because they allow them to purchase goods and services on credit rather than having to pay out-of-pocket upfront costs. This makes budgeting easier and allows farmers to maintain their operations while they are waiting for payments from customers or other sources of income. 

Flexible Terms

Another benefit of taking out a farm loan is that it comes with flexible terms which can be tailored to fit the needs of each individual farmer or operation. For example, some lenders offer shorter repayment periods or deferred payments if necessary in order to accommodate different types of farming businesses and situations. 

Taking out a farm loan has many benefits for agricultural businesses. From access to capital and improved cash flow to lower interest rates and flexible terms, there are plenty of reasons why taking out a farm loan may be beneficial for your business. So if you're looking for financing options for your farming operation, consider researching different types of farm loans today!

Tips For Farmers Who Want to Take Out a Farm Loan

If you're thinking about taking out farm loans, there are some tips and tricks to prepare for the process. Below we've listed out things to gather before you start applying. Keep reading to learn what you should do.

Research Farm Loans

Before taking out a loan for your farm, it is important to do your research in order to learn about the different types, terms, and rates of farm loans that are available in your area. Familiarizing yourself with the information can help you make an educated decision on which loan will best suit your financial requirements and needs. Looking at various loan options also gives you the added benefit of understanding what type of repayments are required and if you will be able to cover them within an allotted time frame. Researching loan options can also save you from being taken advantage of by lenders who might not have your best interest in mind. Therefore, before applying for a farm loan, make sure to dedicate some time to researching the different types of loans and lenders that are available so that you can feel confident when making the right choice for yourself and your future.

Gather Financial Documents

Before applying for a farm loan, make sure you have all the necessary financial documents in order. This includes things like your credit score, tax returns, business plan, and balance sheets. All of these documents are needed to prove that you are a viable borrower and can manage farm finances responsibly.

Know Your Farm's Needs

Applying for a farm loan can be a daunting process, but having an accurate assessment of your farm's needs will make the whole process easier and more beneficial in the long run. By assessing your needs beforehand, you will be able to determine how much you need to borrow, what type of loan is best suited for your farm's situation, and if there are other financial options available to you. Having this information on hand can help prevent expensive loans that don't actually solve any of your farming problems down the line. From crop insurance to basic operational costs, it is important to know what kind of financial assistance your farm truly requires.

Compare Lenders

Once you've researched different farm loans and collected the necessary financial documents, it's time to start comparing lenders. Take the time to read through each lender's farm loan terms and rates in order to find the best farm loan option for your farm's needs.

If you choose Farmers Bank for your farm loans, you'll need to provide a current financial statement, which your bank should be able to provide for you or help fill out. You will also need three years of IRS federal tax returns and state returns or profit and loss statements. If you are getting an operating loan, you will need a budget of projected income and expenses. If a term loan is something best suited for your needs, then you will need the description of the purchased item(s) and what collateral you will offer. And then, for any loan, you will need a legal description and/or address of the property to secure the loan.

By taking the time to research farm loans, gather financial documents, know your farm's needs, and compare lenders, you can ensure that you're able to find the best farm loan option for your farm.

Repayment Plan

​Once you've taken out a farm loan and received your funds, it's important to develop an effective repayment plan in order to stay on top of payments and avoid any financial difficulties in the future. Here are a few tips for farm loan repayment:

Automate Payments

Setting up automated payments for farm loans is a great way to secure yourself financially. Not only will you reduce the risk of missing payments, but it also takes away the stress associated with having to remember due dates. Automation of this kind can help minimize fees and prevent damage to your credit score — both of which are just as important as paying off the loan itself. Using this system can ensure that your loan remains in good standing, so you can focus on running a successful farm without worrying about being late on payments.

Make Extra Payments

Paying off a loan for your farm can be a huge relief. This is why making extra payments on your farm loan, if possible, is always recommended. Not only will this benefit you by reducing the overall cost of interest that you must pay, but it can also shorten your repayment period and give you a sense of satisfaction that the loan has been taken care of expediently. Therefore, think about how an additional payment today might benefit you in the future. It's always worth considering!

Monitor Farm Expenses

Keep track of all your expenses. It's essential to budget for the costs you know will come up, like fertilizer, seed, and farm equipment. You should also include extra expenses that may arise throughout the year. By monitoring your spending and keeping an eye on the account balance, you can make sure that you don't exceed the planned-for amount. This will help ensure that you have enough money on hand to cover farm loan payments at the time they're due while also averting any financial issues down the road.

By following these tips, you can ensure that farm loans are not a burden and that you're able to efficiently manage farm loan payments over time.

Get the Most Out of Your Farm With the Right Loan 

Are you a farmer looking for ways to maximize your profits and efficiency? One of the best ways to do this is with the right loan. There are different types of farm loans available, and each can be used to help you reach your goals. Let's take a look at some of the most popular types of farm loans and how they can help you. 

Agriculture Operating Loans 

Agriculture operating loans are short-term loans that provide farmers with capital that can be used to purchase inputs such as seed, fertilizer, and equipment rentals. These loans can also be used to pay for labor costs or to purchase livestock or supplies. Agriculture operating loans typically have repayment terms of up to seven years, depending on the lender. 

Agriculture Term Loans 

Agriculture term loans are longer-term financing options that provide farmers with capital over an extended period of time. These loans may be used for a variety of purposes, including buying land or building new structures on an existing property. They may also be used to purchase large items such as barns, tractors, and other equipment or machinery necessary for farming operations. The repayment terms for these types of loans can range from 3-30 years, depending on the size and scope of the project being financed. 

Agriculture Real Estate Loans (Farm Ownership Loans) 

Agriculture real estate loans are long-term agricultural financing solutions designed specifically to help farmers purchase land or improve their existing property by constructing buildings or making improvements such as fencing or drainage systems. These types of loans also come with long repayment terms ranging from 10-30 years, depending on the amount being borrowed and the intended use of the funds.  

Farm Services Agency (FSA) Guaranteed Loans 

The Farm Services Agency (FSA) guarantee loans and ensures that agricultural loan packages are offered through local lenders, which makes it easier for some farmers to obtain financing even if they have less-than-perfect credit scores. With an FSA-guaranteed loan, lenders agree not to hold borrowers personally responsible in case there is a default on payments; instead, they will receive compensation from the government's guarantee program if necessary. The repayment terms vary depending on how much money is being borrowed but usually range between 5-25 years depending on what type of loan is being applied for.  

No matter what type of farm you own, there's likely a loan that meets your needs perfectly! From agricultural term loans and agriculture real estate loans (farm ownership loans) to FSA-guaranteed loans—there's something out there that can help you get more out of your farm operation while still staying within budget! With so many different types of farm loan options available today, it's easy to find one that works best for your situation. Start researching today.

FAQs About Farm Loans

If you're considering applying for a farm loan, you likely have some questions about the process. To help you make an informed decision, we've put together this guide to answer some of the most common questions about farm loans. Read on to learn more! 

How Do I Know If I'm Eligible For a Farm Loan Program?

You'll know you're eligible if you are a U.S. citizen or a legal resident of the U.S. or any U.S. territory. And you have to have three years out of the past ten years working as a family farmer or in the agricultural production industry. You can't be "delinquent" in any federal debt or receive any debt forgiveness, with an exception to certain situations.

What Types of Collateral Are Required For a Farm Loan Application?

Collateral is something your loan provider can seize if you default on your payments. Things that can be put up for collateral include physical property such as equipment, inventory, products, etc. Collateral can also be intangible such as a deposit account or investment property, etc.

Can I Get a Deferral on Payments If Something Unexpected Comes Up?

If you're in a situation where unexpected expenses have come up, and you need a deferment on your farm loan payments, you may be eligible to make such an arrangement with your lender. Taking steps like this can help ensure that you're able to stay current on your loan without having to miss payment deadlines or take other drastic measures. To find out if a deferral is possible for you, it's best to contact your loan provider directly for more information about what options are available. They will be able to explain their specific policies and whether options like a payment deferral are available for certain circumstances.

What is the Maximum Borrowing Rate?

This varies depending on the type of loan requested. Certain FSA programs can range from $400,000, all the way up to $2,000,000. Direct loans through a bank may be much higher. It just depends on which loan you apply for and how much you request/get approved for.

What Are the Interest Rates?

The interest rates can change at the beginning of each month, but they will typically be the lowest interest rate offered at the time of the loan approval. To view this month's current interest rates, click here.

Taking out a farm loan is an important decision that requires careful consideration. Knowing what types of loans are available and understanding what is required for qualification are essential steps in ensuring that you make an informed decision when it comes time to apply for one. With this guide in hand and further research into available options in your area, you should have no problem finding the right kind of farm loan for your needs. If you have a question that wasn't answered here, contact a Farmers Bank branch. We'd be happy to answer any other questions you may have.

Choose Farmers Bank For Your Farm Loans

When you're in the market for a loan to help with your farm operations, you have a lot of different options available. But if you want a loan that's tailored to your specific needs as a farmer, then Farmers Bank is a perfect choice. 

At Farmers Bank, we understand the unique needs of farm operators, and our experienced loan officers are here to help you secure the loans you need. We offer competitive rates to qualified borrowers, in addition to personalized service and guidance throughout the entire loan process. Our loans can be used for a variety of purposes, from purchasing land to purchasing equipment and supplies or facility upgrades. Not only do we provide sound advice that is tailored to your individual needs, but all of our employees are always striving for quick loan approvals so that you can put your funds to work quickly. Above all else, we make sure that every decision is made with your best interests in mind.

Farmers all over the world rely on farm loans as a key source of capital for their operations. Whether you need financing for equipment purchases, land expansion projects, marketing initiatives, organic certification costs, or livestock purchases - there's a loan program out there that can help you get the funds necessary to bring your project to fruition. Understanding the various loan options available can be complex, but it is essential for farmers who want access to the resources needed for success. 

Knowing what farm loans cover is just one step in securing funding - it's also important to have a clear understanding of your own financial situation so that you can make informed decisions about which loan programs are right for you. With this knowledge in hand, you will be better prepared when seeking farm finance. Choose Farmers Bank for all of your farm loan needs.