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Q&A: Other sources of loans for beginning farmers

Agriculture.com Staff 07/07/2010 @ 9:08am

Q: "I'm a new young farmer (27 years old) and have been raising cattle for about 4 years. I went to a University and have a degree in Animal Husbandry. I worked outside the cattle industry to supply start up costs. My father owns the land and I own the livestock. I have 215 mother cows and raise about 50 replacemants a year. I want to purchase my own land eventually and grow the herd. I have heard all the talk of getting government assistance to help in purchasing land, livestock, and equipment but the truth of the matter in my case is it is impossible to acquire that money. If you don't fit into their little form you fill out in their office, you don't qualify and they don't want to help. Am I the only one with this problem? Is this talk about helping new farmers just political smoke screens?" -- Wyatt

A: Wyatt, you're absolutely right. FSA beginning farmer loans aren't designed to help everyone. I don't know if that's a smoke screen or not, but it's definitely political. Congress wants to help a few young people get started, without spending too much money or being accused of lending to "fat cats" who don't need help. With no land and 215 cows, you're hardly a fat cat.

And you're not alone if you've been turned down by FSA, whose lending service used to be called Farmers Home Administration. FSA loan criteria is set up so that you have to be so small and have so few financial resources that you would have a tough time getting a commercial bank or Farm Credit Services loan. Yet you have to cash flow and be profitable enough to pay the loan back. Needless to say, that's a pretty small group of people.

There are several other potential loan sources that you should try, if you haven't already:

Aggie Bonds. These are loan programs set up by states that allow lenders to use tax exempt bonds to lower the interest rates they charge you on land loans by a point or two. Missouri has an aggie bond program. Generally, if you have too much equity to qualify for FSA, you may still be able to get an aggie bond loan. Here's the contact information for Missouri's program:

Missouri Agricultural and Small Business Development Authority P.O. Box 630 Jefferson City, MO 65102 Phone (573) 751-2129 Fax (573) 751-1784 Contact: Terry Stafford

(For those of you in other states with a similar problem, here's a list of most state aggie bond programs. It's a couple years out of date. The group that compiled it is putting together a new one, which we'll post soon.)

Private banks. Locally owned and smaller rural banks have a strong vested interest in helping new farmers and ranchers get started. They can use loan guarantees from FSA to lower their own risk with beginning farmer loans. I know that FSA hasn't been helpful, but you might want to contact a group that is an informal network of country banks that specialize in FSA guaranteed loans. A good contact person is:

Mike Jorgensen Nebraska State Bank Oshkosh, Nebraska (308) 772-3234

Mike's bank in this small western Nebraska town is actually a national leader in using FSA guarantees. They've made loans in nearby states as well as Nebraska, but not Missouri. Mike may know of banks in your area willing to use FSA guarantees.

Farm Credit System. This is a farmer-owned, farmer-run national system of lending co-ops. It is required by law to have programs that serve the credit and other needs of young, beginning and small (YBS) farmers and ranchers. Many leaders in the system want to do even more, as should be apparent from sponsorship of this site by its nonprofit affiliate, the Farm Credit System Foundation.

To find an FCS lender in your area go to the website.

Information about the system's lending to young farmers is on the webpage.

In recent years, FCS lending standards have required a relatively high level of equity. Some FCS lenders have programs to relax those standards slightly for beginning farmers.

Another note about politics: You'll find people in the lending community who will be critical of Farm Credit or banks. My feeling is that this competition between both types of credit is good for the farmer. You should check out all of your options and compare what they offer.

Please let me know if any of these leads pan out for you, Wyatt. This country needs a lot more ambitious young farmers and ranchers like you.

Dan Looker: dan.looker@meredith.com

You'll find people in the lending community who will be critical of Farm Credit or banks. My feeling is that this competition between both types of credit is good for the farmer. You should check out all of your options and compare what they offer.

Q: "I'm a new young farmer (27 years old) and have been raising cattle for about 4 years. I went to a University and have a degree in Animal Husbandry. I worked outside the cattle industry to supply start up costs. My father owns the land and I own the livestock. I have 215 mother cows and raise about 50 replacemants a year. I want to purchase my own land eventually and grow the herd. I have heard all the talk of getting government assistance to help in purchasing land, livestock, and equipment but the truth of the matter in my case is it is impossible to acquire that money. If you don't fit into their little form you fill out in their office, you don't qualify and they don't want to help. Am I the only one with this problem? Is this talk about helping new farmers just political smoke screens?" -- Wyatt

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