Contributor, Benzinga
April 26, 2022

Creating your farm can feel difficult to achieve, but you can attain the goal of vast acreage and growth. Consider farm loan options that accommodate a wide range of needs from lower credit scores to higher anticipated budgets. Before taking out a farm loan, consult with multiple professionals and receive several estimates about the desired financial amount for your loan. In addition, speak with farm professionals to better understand if the property or tools that you intend to finance with a loan will best fit your needs. Know your options before entering into a farm loan because these specific loans can last decades. A farm loan can help you achieve your dream of becoming a profitable farm owner. 

Quick Look: Best Loans for Farms

7 Best Loans for Farms

Farm loans accommodate a wide range of credit scores and budgets, so you want to determine what you are looking for in a loan before narrowing down your research and exploring available options. Loans that sound attractive on paper might not always be the best fit for your needs. 

Farm Credit Mid-America

Farm Credit Mid-America began over 100 years ago in 1908. Currently, the company is backed by over $20 billion in assets and similar services. 

Farm Credit Mid-America is unique because it offers a wide range of farm loans from short-term loans to equipment financing. The website offers a section that allows interested borrowers the option of potentially calculating future loan payments. The company specializes in farm-related needs and focuses on the activities that a farmer might need to fund. Farm Credit Mid-America provides a wide range of specific farm loans such as business loans and agriculture real estate loans. In addition, the company also offers additional tools such as crop insurance. 

The loans are only available in Indiana, Tennessee, Ohio, and Kentucky. Such a limited amount of accessibility hinders how many potential farmers can receive these loan options. In addition, a minimum credit score is not clearly stated for loans.

American Farm Mortgage & Financial Services

American Farm Mortgage & Financial Services is a subsidiary of Legence Bank. Legence Bank has a financial history spanning 100 years. 

The American Farm Mortgage & Financial Services is unique in part from a deep understanding of American agriculture. Although American Farm Mortgage & Financial Services was created in the late 1980s, it’s backed by the power and history of a strong agricultural bank. The company strives to work with farmers and ranchers to provide competitive financing options. 

Some loans include a revolving line of credit. Revolving lines of credit differ from lump-sum loans that only give one amount for the entire loan. In addition, some loans are available at fixed or adjustable rates to better work with borrower needs. Financial documentation is required. The use of loan funds is not specifically restricted. 

However, the company has a relatively high requirement for a borrower’s credit score, which makes it ideal for those with excellent credit, but not for fair or bad credit. 

Camino Financial

Camino Financial has funded over 8,000 businesses. The company focuses on funding companies often ignored by other potential lenders. It’s located in Los Angeles, California, and integrates the use of AI technology within the company. 

What makes Camino Financial unique is its focus on smaller potential borrowers and minority-owned businesses. 

However, Camino Financial stipulates that businesses looking to obtain loans should be in business for a minimum of 9 months before seeking a loan. In addition, Camino Financial also places sales expectations of a minimum of $2,500 a month or $30,000 a year on the specified business. The loans include exceptionally higher APR rates, making them more difficult to pay in the event of an unforeseen financial crisis. 

AdvancePoint Capital

The company is based in the United States and is a BBB-accredited business. What makes the company unique is that it offers a wide range of loans such as business loans specifically designed for bad credit. Although the loans are not specific to farms, the wide range of options such as same-day business loans and woman-owned business loans allows for a different approach to lending.

AdvancePoint Capital points out that potential borrowers with bad credit should likely look at short-term business loans for bad credit where terms of repayment are typically less than three years. Bad credit rates are typically accepted.

Farm Service Agency 

The Farm Service Agency’s roots date back to the early 1930s under President Franklin Roosevelt. The agency includes five sections such as Farm Loans and Farm Programs with an emphasis on loans to beginning farmers.

The United States Department of Agriculture offers specific farm ownership loans, which at times help to offer full funding to obtain a farm. These specific loans are intended to support farmers faced with additional financial needs such as soil and water conservation, construction and farm operations. Loans vary widely and offer options such as Native American Tribal Loans and Youth Loans.

Research loan options and consult with a financial advisor before taking a loan. 

Farm Plus Financial 

Farm Plus Financial was first founded in Colorado and has over 15 years of experience. The company offers a wide range of farm loans and financing options. 

What makes Farm Plus Financial unique is that it offers specialized loans to farmers and ranchers. The company focuses on addressing the needs and specific problems that arise when running a farm. In addition, the company provides a wide range of loan options such as prime and fast track. Farm Plus Financial even offers loans to part-time farmers.

Loan funds take up to three months to finally be received and are secured loans that require collateral such as real estate. Collateral such as agricultural real estate is offered as a form of security, meaning that if a borrower cannot repay the loan then the collateral is forfeited to the lender. Collateral helps to lessen the amount of risk taken on by the lender but is much riskier for the borrower.

AGAmerica Lending

AGAmerica Lending offers a wide range of financial assistance for ranchers and farmers that are interested in expanding. The company is located in Florida with an additional presence in Idaho. What makes the company unique is that it’s able to offer more flexible terms than traditional lenders. However, AGAmerica Lending requires a higher credit score. 

Frequently Asked Questions

Before getting a loan, research frequently asked farm loan questions. These answers may potentially help to address your questions or provide you with a better understanding of the farm loan process. Consult a farm loan professional. In addition, examine multiple estimates on the items that you want to purchase for a farm to have a better idea about the potential costs and risks. 

What are the Terms of a Farm Loan?

The terms of farm loans vary depending on the amount of your loan as well as your credit score. In addition, loans for purchasing farms extend over decades because of the larger amount of the loan as well as the specific terms. For example, some farm loans have terms that extend to 40 years. 

What is the Difference Between a Farm Loan and a Mortgage?

A farm loan and a mortgage are two different ways to obtain funds. Mortgages focus on residential properties such as homes. In contrast, farm loans focus on agricultural needs and farmland. 

Mortgages are secured loans because the home or residential property is used as collateral. If you are unable to pay your mortgage, then lenders have the option to take the residential property that was placed as collateral. 

Certain farm loans are secured and require collateral, including land, livestock and crops. Typically, secured loans offer an increased amount of risk for potential borrowers and should not be entered into lightly. 

Farm Loan Requirements and Criteria

Farm loan requirements and criteria vary depending on the specific farm loans and individual borrowers. However, people with strong credit scores are more likely to obtain loans with better terms and rates. In addition, certain loans require proof of steady farm income or evidence that your farm has operated for a minimum amount of time.

Research the requirements and criteria to see if you qualify for a farm loan. If possible, consult an expert to better understand the options available to you. 

Things to Consider Before Getting a Farm Loan

Before getting a farm loan, evaluate your ability to repay and your credit score. 

Farm loans from government entities have specific interest rates, repayment terms and eligibility requirements. Before deciding on a farm loan, research the eligibility requirements to see if a particular loan is right for you. For example, some loans stipulate the need for farm management experience or eligible farm enterprise. Reference eligibility requirements and ask questions to better gain an understanding of your specific situation. Consult a farm loan professional before taking a loan to better understand the terms, interest rates and repayment expectations. Farms can be risky given that the success of each harvest isn’t guaranteed because of unforeseen incidents such as bad weather. 

In addition, figure out the anticipated financial amount needed for your loan. Although there are larger farm loans, it’s advised to examine your personal needs while also actively accounting for unforeseen errors and incidents within the process. Farms require substantial funds and because a large amount of work is subject to the elements, you’ll need to factor in additional loan funds for when events such as harvests don’t pan out exactly to plan. Before taking out a loan, make sure you will be able to consistently repay the loan if finances change. It’s recommended not to take out a loan that stretches your finances too thin, so consult with several knowledgeable professionals within both the financial and farming realm to gain a better idea of your position. 

Before entering into a farm loan, be aware of how your credit score could potentially impact the terms and interest rates available to you. Lower credit scores indicate to lenders a lessened ability to repay loans. To compensate for the perceived higher risk, lenders typically increase interest rates and offer less flexible terms to borrowers that are viewed as higher risk. Overall, it’s a good idea to work on your credit score to see if you can increase it before entering into a farm loan.