Important Financial Resources for First-Time Farm Buyers

June 07, 2022
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Get direct help if you are a beginner farmer from first-time ranch loans and beginning farmer grants.

Important Financial Resources for First-Time Farm Buyers

The land-buying fever of ranches and farms has steadily stayed its course.  More and more people are considering buying farmland and ranches where they can produce their own food and stay away from the hustle and bustle of the city.

However, there are also pitfalls in farm buying because of the amount of money that is needed to buy a farm or ranch.  There is hope!  

If you are a new or beginning farmer, there are many financial resources that can come to your aid when you don’t have enough in your bank to purchase the farm of your dreams.

  1.  First Time Ranch Loans

The U.S. Department of Agriculture offers beginning farmers and ranchers loans that have direct and guaranteed loan programs that aim to support the country’s next generation of farmers and ranchers.  These loans are:

  • Farm ownership loans give access to land and capital.  The maximum loan amount is $600,000.  It should be used for the following purposes:

  • To buy a farm

  • To enlarge an existing operation

  • To make a down payment on a farm

  • To purchase easements

  • To construct, purchase or improve farm dwellings, service buildings, or other facilities and improvements essential to the farm operation

  • To promote soil and water conservation and protection

  • To pay loan closing costs

  • Operating loans that are focused on assisting beginning farmers in becoming prosperous and competitive by:

  •  Helping to pay for normal operating or family living expenses

  • Opening doors to new markets and marketing opportunities

  • Assisting with diversifying operations

The maximum loan amount is $400,000.

  • Microloan Programs provide an important source of financial assistance during the start-up years.  The maximum loan amount is $50,000 each for operating and farm ownership.

  • Guaranteed farm ownership or operating loan with a maximum loan amount of $1,776,000.

  • EZ Guarantee with a maximum loan amount of $100,000 ($50,000 if the lender is a microlender)

Owning and operating a farm is a huge financial investment that should not be taken lightly.  

It can be challenging to pull resources together when you are yet to start.  The Farm Service Agency of the Department of Agriculture has provided ways to provide loans to those who want to begin farming.

Farm Loan Requirements

These first-time ranch loans and beginning farmer loans are applicable to farmers and ranchers who are in their first 10 years of operation.  

The USDA-FSA lists these qualifications of a beginning farmer as an individual or entity who:

  • Has not operated a farm for more than 10 years

  • Substantially participates in the operation

  • For farm ownership loans, the applicant cannot own a farm greater than 30% of the average size farm in the country, at the time of application.

  • If the applicant is an entity, all members must be related by blood or marriage, and all entity members must be eligible beginning farmers.

The general eligibility requirements for Ownership Loans and Operating Loans that you will need to meet in order to secure these loans include:

  • Not having federal or state conviction (s) for planting, cultivating, growing, producing, harvesting, storing, trafficking, or possession of controlled substances.

  • The legal ability to accept responsibility for the loan obligation.

  • An acceptable credit history.

  • Be a United States citizen, non-citizen national, or legal resident alien of the United States, including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, and certain former Pacific Trust Territories.

  • Being unable to obtain sufficient credit elsewhere, with or without an FSA loan guarantee

  • No delinquency on the federal debt, other than IRS tax debt, at the time of loan closing.

  • Not being ineligible due to disqualification resulting from a federal crop insurance violation

  • Have sufficient managerial ability to assure a reasonable expectation of loan repayment

  • Other requirements that your loan officer will discuss with you

  1.  Beginning Farmer Grants

There are several grants offered to new owners of farms and ranches to help with the operation of the farm.  This can help secure the equipment needed for the daily operation and maintenance needs.  

Government grants like The Sustainable Agricultural Research and Education (SARE) give grants that fund research and education projects in several selected areas in the country.  A portion of this grant fund can be used to purchase new farm equipment. 

Another grant for new farmers is the Texas Department of Agriculture’s Young Farmer Grant awards dollar-for-dollar matching grant funds.  

The grant ranges from $5,000 to $10,000 and is only given to applicants who are 18 to 46 years old.  

Individuals who apply for this grant should be currently creating or expanding an agricultural business in Texas.

  1.  Aggie Bonds

These are bonds that are tax-free that can be utilized by farmers who are new in the industry.  

It can be used to acquire land and purchase farm equipment and other farming necessities.  It is available only in 16 states.

  1.  Farm Credit Services of America’s Young and Beginning Program

If you are 35 years old or younger and have 10 or fewer years of agricultural experience, you are eligible for financial assistance such as competitive loans to use for purchasing land, insurance, or equipment.

  1.  Lakewinds Organic Field Fund (LOFF)

Farmers who would like to transition from traditional farming to organic farming or who would like to build an organic farm can avail of the grant from LOFF.  

LOFF provides funds to farmers “working on the development and sustainability of organics.” 

  1.  New Spirits Organic Farm Succession Program

Another option for farm resources for new farmers is the New Spirit program that links new farmers to investors who are committed to land stewardship and sustainable agriculture.  

The program aims to help “young farmers by allowing them to take over a mature, certified, organic operation from retiring farmers who want to keep their land in organic production.”

There are more resources than there are on this list that can help young farmers who are starting to build their dream farms. 

 These grants and programs provide financial resources that can ease the burden of starting a new venture in the farming industry.