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Posted on: 17 October 2019

When you're just starting out as a farmer, it can be surprisingly difficult to obtain a farm and ranch loan. With no track record of previous success running a farming operation, you have little information to prove that you can run a farm that can generate profit reliably. Thankfully for beginning farmers, the Farm Service Agency (FSA) operates the Beginning Farmer loan program designed for your needs. They partner with commercial farm and ranch loan providers to make it easier for new farmers to get the capital they need to purchase farmland and farm equipment.

Who qualifies as a beginning farmer? Anyone with less than ten years of commercial farming experience. Age doesn't matter—the only thing that matters is that you're just starting out in the world of farm ownership. The FSA's loan program helps you with the down payment for farmland and offers incredibly low interest rates. If you're interested in the program, read on for three things that you should know about it.

1. You'll Need at Least Some Farming Experience

While the FSA's loan program is meant for beginning farmers and ranchers, you do need to have some experience working in the agricultural industry. You'll need at least three years of experience, and some of this experience should ideally be in farm operation and management—for example, purchasing and selling livestock, finding customers and scheduling maintenance for farm equipment.

What should you do if you didn't grow up on a farm? Search your state and county for local programs designed for young or beginning farmers. Many of these programs connect you to older farmers who are nearing retirement, who can act as mentors. Failing that, organic co-ops are always searching for farmhands—just make sure you manage to acquire some management experience while you're working there in order to gain a broader view of how the agricultural industry works.

2. You Also Need a Sustainable Business Plan

Loan programs for beginning farmers and ranchers are designed to help small-time farmers and ranchers get started—they're not aimed at hobby farmers. This means that you'll need a strong business plan in order to qualify for a farm and ranch loan, even if it's through the FSA beginning farmer program.

The most important thing you'll need to prove is that you have consumer demand for your product. An organic vegetable farm, for example, can contact local farm-to-table restaurants and ask about their suppliers. Are there any ingredients that they're having trouble sourcing locally that could represent a profitable place to start with your farm? Farm and ranch loan companies want to know that your farm will be able to generate enough profit to cover monthly mortgage payments, at the very least—your business plan needs to prove your farm can bring in enough revenue to be sustainable.

3. You're Required to Take Management Courses as Part of the Loan Program

Finally, one of the requirements of the FSA's program for beginning farmers is that your lender will need to provide you with some form of borrower training classes. These courses are designed to teach you the skills that you need to operate a profitable farm, which includes training in financial forecasting, sales and inventory management. Taking courses in farm operation should be seen as a major boon, as you'll learn how to turn your beginning farm into one that reliably generates revenue.

If you're interested in joining the agricultural industry, the FSA loan program for beginning farmers is a great place to start. Once you've got some farming experience and have started to generate revenue, you can move on to larger commercial loans that help you acquire more farmland and more equipment. The first step is to contact a farm and ranch loan provider that works with the FSA and ask what you need to do in order to get started with your application.