Knowing financial resources when starting a small agricultural operation can be key to getting it off the ground. This is why the U.S. Department of Agriculture, through the Farm Service Agency, has developed a sector of loans designed for new, niche, and small – to mid-sized farm operations called Microloans. These loans can offer those operations crucial financial support, with loans up to $50,000 and $100,000.
What Are Microloans? Under the microloans title, there are two separate loan opportunities: Operating Microloans and Ownership Microloans. Operating loans are for the development and starting of the operation. These developments can include start-up expenses, annual expenses – seeds, fertilizer, utilities, land rents – family living expenses, purchase of livestock, and many more.
Ownership loans are to be used for physical operation instead of development. These loans can be used to purchase a farm or farmland, expand a current farm, construction of new buildings, make improvements on buildings, pay closing costs, and for the implementation of soil and water conservation and protection practices.
Individually, each of these loans can provide up to $50,000 a piece, additionally, owners and operators can be eligible for a maximum combined loan total of $100,000. Repayment options can vary for operating loans, but the term will not exceed seven years. As for ownership loans, the term can last up to 40 years. Rates can vary but are based on the regular FSA operating loan rate hat. For beginner and veteran farmers, rates will be capped at 5%.
Are You Eligible? The eligibility requirements for obtaining these loans are straightforward, however, applicants must meet the specific areas to qualify. For both loans, the following are general requirements.
• No larger than a family-sized farmer
• Have a satisfactory history of meeting credit obligations
• Unable to obtain credit elsewhere
• Meet the eligibility requirements for the specific loan you plan to apply for
Ownership
• 3 years of farm management experience within 10 years of the application date.
• 1 year of management may be substituted with:
• 16 credit hours of post-secondary education in an agriculture-related field
• Military leadership or management
• Successful repayment of an FSA Youth Loan
Operating
• Need to have some farm experience
• Have the option of working with a mentor during the first production and marketing cycle
Application Process: Compared to other loans you might submit, microloans are much simpler. They require less paperwork, which coincides with the small loan amount. After determining if you and your operation are eligible for the loan comes the application portion. Applicants should download and print the form from the USDA website or visit the local FSA office to pick up a physical copy.
Following the submission of your application the FSA will review your application and determine if you are eligible. You will receive a notification when each step of the application is processed, from when it is received, and if the application was approved or not. If approved, the FSA will distribute the loans as they are needed. If denied, you will be notified will the exact reasons as to why and your appeal rights.
The Benefit: The USDA microloan offers a valuable opportunity for farmers and ranchers with a small operation by providing resources to help them succeed. This could be a vital resource for those just beginning or looking for a way to grow their operation and ownership.
To learn more about microloans and their benefits on operations, visit https://www.fsa.usda.gov/tools/informational/fact-sheets/microloans-2024pdf or reach out to a local county extension agent.
