Financing Agricultural Land 101

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:

  1. 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.
  2. 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 AgAmerica Lending. At AgAmerica, 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 AgAmerica Lending for more information. Info@AgAmerica.com or 844-516-8176

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Government Shutdown Delays USDA Farm Loans

In response to the government shutdown, the U.S. Department of Agriculture (USDA) has closed its operations, thus costing many farmers their farms and farming dreams.

As of now, the general public can’t even access the USDA’s website for information regarding funding and farmland loans:

“Due to the lapse in federal government funding, this website is not available. After funding has been restored, please allow some time for this website to become available again.”

Many farmers have already been waiting months to receive government farm loans, including USDA direct farm operating loans, direct farm ownership loans, and guaranteed ownership loans. This shutdown will prolong the waiting game for 1,800 of the approximately 29,000 farmers expected to receive USDA farm loans this year. These delays, resulting from the government shutdown combined with the fact that Congress has yet to pass a budget, will likely cause many farmers to lose their farms or let go of their farming dreams. It’s clear that the path to receiving a USDA farm loan will be a long, taxing, and unreliable one for many farmers. Congress really needs to pull through with a budget.

It’s evident that farmers are in a somewhat hopeless state of affairs due to many issues beyond their control. Stress and uncertainty abound, as they do their best to deal with these delays and doubts. Delays can be just as damaging to farmers as not receiving ag loans at all. For example, maybe the farmer isn’t able to invest in crops or farm equipment in a timely fashion. Time is often of the essence in the agricultural industry. As Congress continues with its indecision, farmers will continue dealing with consequences.

In the throws of this government shutdown, it may make sense to seek funding elsewhere. Agamerica Lending offers non-conventional agricultural land as well as conventional ag loans. These farm loans come in handy when borrowers are facing special circumstances. It never hurts to explore your farmland financing options. Contact us to see if we can meet your financing needs. 

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13 Tips for Starting a Hobby Farm

Before we dive in, first things first: What is a hobby farm?

A hobby farm is an agricultural operation that isn’t traditionally run as an “agribusiness.” Hobby farms can, and usually are, self-sustaining, and most generate a profit. However, hobby farms are not the commercial farms covering thousands of acres that you generally think of when you consider a standard farm. Hobby farmlands are typically small in size – between roughly 40 and 100 acres – and many are committed to sustainable agriculture, eco-conscious practices, and fair, friendly animal treatment.

Though they aren’t full-blown commercial farms, hobby farms still require a lot of preparation, work, and financial support to run successfully. Before you decide to pursue such an endeavor, cover your bases:

  1. Determine your farming objectives. What do you want to raise? What do you want to plant? Do you want to be off the grid?
  2. Check out the zoning laws. Land doesn’t necessarily come with “all rights.” To be sure you’ll be able to do what you want with your land, you must look into this. Using a real estate agent well versed in agricultural land law is a sure way to know what you’re getting.
  3. Write a business plan. Strategically develop a vision for your farming operation.
  4. Select appropriate, good quality fencing.
  5. Test your farm’s soil for quality, texture, and contour.
  6. Figure out your water management and pasture management plans.
  7. Determine feeding for livestock (if applicable).
  8. Assess your target market and market to this audience creatively.
  9. Determine your farm equipment needs.
  10. Go green. This can actually save your ag operation money. Limit your expenses by implementing energy conservation tactics that enhance your farm’s efficiency while helping to reduce negative impacts on the environment.
  11. Reduce, reuse, and recycle. Reduce costs and support the earth.
  12. Become a sponge for information. Read up on all things farming. Know your pastures (what grows, what doesn’t, what is potentially poisonous, etc.). Network with local farmers and other hobby farmers. Watch. Listen. Question. Learn.
  13. Don’t fear failure. There’s so much to learn! Realize that nothing replaces the real experience of actually following through and starting your farm. Also realize that no matter how much research you do, you will make mistakes. Don’t let mistakes frustrate you too much. Consider them lessons.

 

Need assistance with hobby farmland financing? Contact AgAmerica Lending – an Ag lending company – for information regarding our hobby farm loan and other farm loan services. Info@AgAmerica.com or 844-516-8176.

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Good News for Young/Beginning Farmers

Oftentimes, farm loans are difficult to access for young or beginning farmers. Many agricultural loan programs have proven effective in financing farmland – FSA (Farm Service Agency) loans for example – yet now there is an additional, promising solution.

With the Senate passage of the Farm Bill, also came the potential for a new amendment – the Casey-Harkin-Johanns Microloan Authorization Amendmentthat offers young and beginning farmers up to $35,000 to get their agricultural operation up and running. This amendment has the power to allow young and beginning farmers to get the ball rolling and offers a plan to effectively realize their number one biggest concern: financial capital to start and sustain their farm businesses.

The Casey-Harkin-Johanns Microloan Authorization Amendment offers new and beginning farmers promising potential including:

  • Less heavy paperwork
  • An extended payment period
  • Low-interest farm operating loans for military veterans
  • A quicker turnaround in profit (fingers crossed!)

To be eligible for such government backed farm loan programs you must classify as a beginner or new farmer. To qualify you must:

  • Have not operated a farm or ranch for more than 10 years
  • Not own a farm or ranch greater than 30 percent of the median size farm in the county as described by the most recent Census for Agriculture
  • Meet the farm loan eligibility requirements of the program to which you are applying
  • Heavily participate in the farming operation

The number and types of farmland financing programs vary for new and beginning farmers. It’s good to be aware of your options so you’re able to get the farm loan that’s best for you and your farming operation. Sometimes, however, a government backed loan 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, contact us to determine a better solution. A part of our focus and concentration is getting beginning farms, ranches, and young producers the agricultural loans they need to get started with their business.

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