How Do You Finance an Organic Farm Purchase?
Question: How Do You Finance an Organic Farm Purchase?
After searching for, and finding the perfect organic farmland, no small feat in itself, you'll have to figure out how to purchase the land. Unless one happens to be independently wealthy or very lucky, cost is a huge hurdle for most new organic farmers.
That said, financing a farm shouldn't hold you back forever, if you really want to be an organic farmer.
Just know going in that it won't be a cake walk. Your first step is to find a lender, so we'll look at some of those options below.
Banks and credit unions
Most national and well known banks won't give out loans for agricultural land, or they may be willing to give you a loan, but for extremely high interest rates. A better choice is to back away from mainstream lenders and look at smaller locally owned banks and /or credit unions.
Member Lenders of Farm Credit System
Farm Credit System is a government sponsored system that includes nationwide network of cooperatively organized banks and associations established by Congress in 1916. Their job is to provide a reliable source of credit for U.S. farmers and ranchers.
This system has the specific needs of beginning farmers in mind. Learn more about how Farm Credit System works.
The U.S. Department of Agriculture's Farm Service Agency (FSA)
This USDA agency offers and guarantees loans to family farmers and ranchers. This program is not meant to be long-term. FSA's goal is to help farmers get started before they're able to borrow from the commercial lending sector.
FSA's loans can also help farmers who may have suffered financial setbacks due to problems beyond their control, such as natural disasters. Go to FSA'a website and search the sidebar for fact sheets to learn more.
The Aggie Bond Loan Program
This is a federal bonding program administered by different states and offers affordable financing for qualified beginning farmers. First, check to see if your state has an Aggie Bond Program, and if so, type, "Aggie Bond Program [your state here]" into Google to get more information.
Guarantee Loan Programs
Several states have state-backed guarantee loan programs in place that may be able to help you out. These are loans are made by local lenders who get up to 85% guarantee of principal and interest.
State Departments of Agriculture Loans
Many states run various loan and grant programs for new farmers. Contact your State Department of Agriculture to see what programs exist in your area. Private Contracts or Lenders Working directly with a private land owner could work for you. Often, property owners will contract directly with a new farmer for sale of land, machinery, livestock, or other assets for a set amount of cash or shared rent and work deals.
For example, your labor could pay for part of a piece of land. The Center for Rural Affairs has an excellent page on their website that's a must read - six examples of successful linking between new farmers or ranchers and existing landowners.
- Farmer's Guide to Agricultural Credit (pdf): Explains how to prepare for the credit application process.
- Farm Bill Programs and Grants.