Whether you’re looking to retire in the countryside, start a community supported agriculture (CSA) business, or open your own winery, a farm is a significant purchase that shouldn’t be pursued lightly. Unless you’re independently wealthy, chances are you’ll need financial help to make your dream of owning a farm a reality. Here are a few of the safest and most popular methods for financing your farm purchase.
Traditional Loan or Mortgage
The most popular method for financing an agricultural property, and the first option you should consider, is a loan from a private financial institution. When seeking out a lender, it’s important to remember that a standard residential mortgage lender isn’t necessarily the best choice. Instead, you should work with a lender who specializes in financing rural land. This will ensure you get the best terms and that your loan doesn’t fall through due to unforeseen circumstances.
Unlike standard residential mortgages, agricultural mortgages are designed for properties whose value is largely tied to the land and your ability to work it. That means means that to qualify for a loan, you’ll likely have to demonstrate experience in running a farm property. If you can’t, you may have to supplement your purchase with alternatives.
Farm Service Agency (FSA)
The US Department of Agriculture offers down payment assistance programs for agricultural property buyers. Known as Farm Service Agency (FSA) Direct Farm Ownership Loans, these are generally reserved for beginning farmers who are having trouble securing a private loan. The program loans farm buyers up to 40% of the down payment on a purchase of a farm. In addition to direct loans, FSA also provides loan guarantees, which enable a buyer to secure a traditional loan by guaranteeing it against loss up to 90 percent in most cases.
Farm Credit System (FCS)
The Farm Credit System is a national network of local and regional borrower-owned lending institutions primarily geared toward farm buyers and operators under the age of 35, with 10 or fewer years of experience. FCS institutions operate similarly to private banks: applicants can receive agricultural property ownership, operating, and equipment loans. Many FCS organizations also offer additional programs, such as business consulting, crop insurance, tax services, and financial record-keeping assistance.
Other Financing AvenuesIf the above financing sources aren’t enough, there are other avenues for raising the funds necessary to purchase and start a farm. From local and national nonprofits like ShadeFund, to crowdsourcing platforms like Indiegogo and Fundable, aspiring farm and ranch owners have a variety of emerging options for filling the resource gaps in their plans.