What Is An Agricultural Loan

What Is An Agricultural Loan? Everything You Need To Know

Running a farm or any agricultural operation has its specific demands, and perhaps one of the most challenging ones is financing. Due to the particularity of the farming activity, to get funding via loans, there is a particular loan category for this: agricultural loans. 

Whether starting or expanding your farm operations, an agricultural loan is the best way for farmers and ranchers to get what they need to sustain their business. In this blog, we go in-depth on agricultural loan FAQs and other helpful information you may need.

What Is An Agricultural Loan?

Essentially, an agricultural loan is a particular type of loan destined for farm and agricultural operations. Within this, there are many uses for an agricultural loan:

  • To start or expand land and operations.
  • Purchasing land, infrastructure, tools, machinery, or storage.
  • Cover operating costs.
  • Purchase seeds and other supplies.

If you were eager to know, “Can I get a loan to start a farm?” the answer is yes. All you have to do is learn if you are eligible, which we will cover next.

Who Is Eligible For Agriculture Loan?

There are no general criteria for eligibility for an agriculture loan because it will depend on your lender. Each lender can have their requirements, so you should get informed about the specific loan product of your interest. 

Agricultural loans are meant for farm activity and operations. Because of this, applicants should be farmers, dairy owners, orchard owners, or related borrowers that look to expand or start a farm, purchase agricultural land, etc. The requirements for an agricultural loan can be stricter or more flexible, depending on your source. We will touch more on that below.

Where Do You Obtain An Agricultural Loan?

There are different entities you can get your agricultural loan from:

  1. Banks & Other Traditional Lenders: Local banks or other financial institutions often count on agricultural loan products that you can apply to. It is convenient to get a loan from your local bank. Most banks require you to have a good credit score.
  2. Government AG Lending Programs: Sometimes, it may not be viable for a farmer to acquire an agricultural loan from a traditional lender due to a bad credit score. Still, there are government programs designed to help in these types of cases. The Farm Service Agency (FSA) provides agricultural loans based on a partial repayment guarantee so lenders can accept someone without an ideal credit score. It is good to keep in mind there will still be other requirements to qualify for an FSA loan.
  3. Alternative Lenders: When the previous options aren’t available, farmers still have the chance to recur to alternative lenders. These private companies are more flexible in terms of eligibility based on farm income rather than credit score. Many people wonder, Is it hard to get a farm loan?With an option like this, agricultural loans are more accessible and quicker to obtain.

An Overview of FSA Agricultural Loans

Let’s understand what an FSA loan is.  The FSA, a U.S Department of Agriculture (USDA) agency, offers different farm loans. In simple terms, an FSA loan is a farm loan provided by this agent. They have several loan products. Some are farm ownership loans, farm operating loans, guaranteed farm loans, microloans, etc. 

If you are curious, “How much can I borrow from the FSA?” Again, it varies depending on the loan product. For instance, a guaranteed farm loan can let borrowers $1,825,000.

How Do I Get Accessible Agricultural Loans?

If you aren’t only trying to understand what an agricultural loan is and want to get one, we help with both at Janus AG Finance. We offer our perspective not only as lenders but as farm operators in every agricultural loan solution.

Contact us today!