FSA microloans an opportunity for small, beginning farms

By Chris Zoller, Ohio State University Extension educator, ANR, Tuscarawas County

Housed in the U.S. Department of Agriculture (USDA), the Farm Service Agency (FSA) provides loan opportunities for agricultural producers. Microloans were developed for and are available to better serve the unique financial needs of new, niche, and small to mid-sized farm operations.

Microloan types

There are two types of microloans available through FSA: Farm Operating Loans and Farm Ownership Loans. Specifics about each are provided below.

Operating microloans can be used for all approved operating expenses, including but not limited to: start-up expenses; annual expenses such as seed, fertilizer, utilities, land rent, marketing costs, family living expenses, purchase of livestock or equipment, minor improvement costs, hoop houses, tools, irrigation, and delivery vehicles.

Ownership microloans can be used for FSA Farm Ownership Loan approved expenses, such as the purchase of land or a farm, construction of new buildings, improvements to existing buildings, pay closing costs, and implement conservation practices.

Application process

FSA has simplified the application process. Requirements for management experience and loan security have been made to accommodate veterans, smaller farms, and beginning farmers. Details about the operating loans and ownership loans include the following.

Those applying for a microloan operating loan will need to have some farm experience; however, FSA will consider small business experience or self-guided apprenticeships. The apprenticeships will provide an opportunity to gain farm management experience while working with a mentor.

For the farm ownership microloan, applicants need to have farm experience three of the last 10 years prior to the application being submitted. One of the years can be substituted with any of the following experience:

  • At least 16 semester hours of post-secondary education in ag-business, horticulture, animal science, agronomy, or agriculture-related fields.
  • At least one year of management experience in a non-ag-related field.
  • Military leadership and management.
  • Successful repayment of an FSA youth loan may partially satisfy the experience requirement.

Security requirements

A first lien on farm property or agricultural products having a security value of at least 100% of the microloan amount is required for operating microloans for annual operating expenses. Ownership microloans are secured by the real estate being purchased or improved. The value of the real estate must be at least 100% of the loan amount.

Rates and terms

Farm ownership loans and farm operating loans are available up to $50,000 for each, with a maximum loan amount of $100,000. Repayment terms for operating microloans vary and will not exceed seven years. Annual operating loans are repaid within 12 months or when products are sold. Interest rates are based on regular FSA operating loan rates.

Repayment terms for farm ownership loans vary, but do not exceed 25 years. Interest rates are based on regular FSA operating loan rates.

Who is eligible?

An applicant must not be larger than a family-sized farmer, have satisfactory credit history, be unable to credit elsewhere at a reasonable rate, and meet all other eligibility requirements.

What happened after the loan application is submitted?

FSA will review the application to determine whether the applicant meets the qualifications and is eligible for the loan. Applicants receive written notification during each step of the process. Upon approval, FSA will make the loan funds available as needed. If denied, applicants are notified in writing of the specific reasons for the denial and provided reconsideration and appeal rights.

How to apply

Microloan applications are available from the local FSA office or can be printed from the USDA website at: https://www.farmers.gov/loans. Not sure where your local FSA office is located? Click this website: https://www.farmers.gov/working-with-us/service-center-locator.

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