Beginning Farmer FAQ
Whether you grew up on a farm or are looking to enter the agriculture industry for the first time, buying a farm as a young or beginning farmer comes with many questions. Many of our team members are farmers themselves and have been in your shoes. Since we specialize in agriculture financial services, we work with young and beginning farmer loans every day. Our team is here to guide you through every step of the process.
We’ve compiled some of the most frequently asked questions to guide you in the right direction as you start thinking about how you will purchase and finance your future farm.
1. Are there loans for beginning farmers?
One of the more popular loan options for young and beginning farmers is the Down Payment Loan through the Farm Service Agency. This program requires the beginning farmer to pay a 5% down payment then FSA will finance 45% at a reduced interest rate and an FSA approved lender, like Compeer, will finance the remaining 50% (or remaining balance) at the current interest rate. It is important to note this loan program has a number of requirements and can take longer than a traditional loan application. You should contact your financial officer and local FSA office to get more details on the program and if it is a good option for you.
Compeer also offers a beginning farmer grant program and other tools and resources to help you succeed. This program can help cover FSA guarantee fees, tax preparation, accounting services, attorney fees for farm transition and more.
2. Who qualifies for the beginning farmer loan through FSA?
FSA defines a beginning farmer as someone who has not operated a farm for more than 10 years, substantially participates in the operation and does not own more than 30 percent of the average farm size in the county (according to most recent USDA census data).
It is also important to note that if an entity is applying, all members must be related through blood or marriage and must all qualify as a beginning farmer.
The maximum farm ownership loan amount is $600,000 but there are other options including operating loans, microloans and a down payment program. You can learn more from this FSA beginning farmer loan overview.
3. What is the timeline for a beginning farmer loan through FSA and Compeer?
We estimate the entire process taking roughly six months – of course this is dependent on your situation. Going into this, it is important to understand this will not be a quick process and will require quite a few different forms to be completed and past or projected records to be shared. That being said, the time can be well worth it in the end when you consider the interest rate savings overall. Your Compeer financial officer can help guide you through the process and answer questions that come up along the way.
4. How much can I afford?
To figure this out, it is best practice to review your balance sheet, cash flow and income statements (if you’re already farming) or have a reasonable estimate for your projected expenses and income plus any off-farm employment you plan to maintain. Then you can use that information with a loan payment calculator to better understand the overall cost of the farm you’re considering and how that will cash flow with your current or projected balance sheet. There are many variables that can impact the loan payment amount including the loan term, interest rate and payment schedule. Your Compeer financial officer can help you evaluate what options can work best for your situation.
Buying your first farm will be exciting and challenging. Surrounding yourself with a team that can guide you through the process will take some of the headache out of the paperwork requirements and get you back to what you love – farming.
Get connected with a Compeer team member today to get started!