Financing agricultural land is by no means an easy feat. There’s a great deal of planning and weighing of options that goes on.
That being said, the general process goes something like this:
- Budget. Creating a budget for your land purchase is absolutely necessary. Do some ballpark budgeting and play with mortgage calculations to get an idea of your payment schedule.
- Discover Your Farmland Financing Options. There are many different paths to financing farmland:
- You could consider a farm loan from the USDA. The USDA’s FSA loans can be used to finance farmland, livestock, equipment, feed, seed, and supplies. Also, these farm loans can be used to construct buildings or make farm enhancements. The downside? These loans usually have long waiting periods combined with laborious paperwork that can really exhaust and delay the process of getting your agricultural operation up and running. Sometimes a government-backed loan just isn’t going to cut it. If you’re not able to acquire a government-backed loan – USDA loans or FSA loans – or if these ag loan programs are not a good fit, you fortunately have other options.
- Another option is to consult a bank (perhaps your existing bank or a smaller, local bank near the property you are considering purchasing); however, this route is also a lengthy, paper-heavy process and can take months when you are dealing with those without an agricultural background. You need a lender that works primarily with farmers and ranchers and understands the cash-flow requirements an ag operation requires.
- The last approach involves financing your land through a company that specializes in financing agricultural land, such as Bankers South. At Bankers South, we offer ag loans through our AgAmerica Lending Program; without the hassle of the USDA, but with the hometown feel of a local bank. In addition, we offer short term “bridge” loans to hold over farmers until they can secure long-term conventional financing again through the Transitional Lending Program.
To determine what approach works best for you when it comes to purchasing your land, it may be helpful to consult an accountant and/or financing advisor.
To discuss your ag loan needs and options, don’t hesitate to contact Bankers South for more information.