The ideal of living on a small farm and enjoying a measure of self-sufficiency may still reign; however, the days of homesteaders staking a claim are long gone. In the modern era it costs money to buy good farmland and turn it into a productive enterprise. Just as they do for a home mortgage, aspiring small farmers must often find a loan to buy their acreage and make it productive.
Do Your Diligence
Before you begin the process of finding a loan for your farm, take the time to do some planning. First, it's important to understand how much work is involved in farming. Talk to farmers in your immediate area and arrange to spend a few days with them, getting a feel for the daily routine. The New England Small Farm Institute has a workbook that will help you assess your skills and attitudes to see if you're a good fit for the farming life. Decide whether you'll farm full time or retain your current off-farm income. The U.S. Department of Agriculture offers a number of tools for creating a farm business plan.
The most straightforward approach to financing your farm is through your existing banking relationships. If you plan to continue with your current employment and your credit is sound, your current banker should be willing to entertain a mortgage for your small acreage. If you're currently a homeowner, your existing equity might serve as an adequate down payment. A realistic business plan showing enough revenue to cover the loan payments will make it easier for the bank to justify lending you money. Remember you'll need enough to equip your farm as well, not simply buy the property.
Farm Credit System
The Farm Credit System is a network of funding cooperatives, essentially a credit union, set up in 1916 to provide credit to farmers. Working with young farmers and novice farmers is an important part of Farm Credit's mandate, and its website boasts that nearly half of all farmers under 50 years of age do business there. Farm Credit provides a variety of loan options. Those purchasing a farm can take advantage of long-term loans ranging from 10 to 30 years, while shorter-term loans and revolving credit plans can help with ongoing operational needs. Some areas also have similar, smaller regional cooperatives.
The USDA's Farm Service Agency provides a number of loan services to would-be farmers. Depending on your situation, they might offer a direct loan or might provide loan guarantees to a conventional lender. A portion of the FSA budget is set aside every year by law to fund farm purchases by novice farmers. Targeted funds are also available for farmers in specific demographic categories, referred to as socially disadvantaged applicants. This includes African-Americans, Asian-Americans, Native Americans and Hispanics, among others.
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