If you’re running an agribusiness, your land is probably your most vital asset.

Farm real estate financing is key in helping farmers and ranchers grow their operations. Unlike regular mortgages, farm real estate loans are tailored to the unique needs of agricultural enterprises and the seasonal and cyclical nature of their revenue streams. Below, we’ll cover five things you need to understand about farm real estate loans to make an informed decision about your situation.

1. 1. Loan Types
   Farm real estate loans are designed to help purchase farmland, construct or upgrade buildings, purchase easements, install irrigation and erosion control, and refinance existing debt. Additionally, emergency loans provide critical financial assistance during natural disasters or market disruptions.
2. 2. Government-Guaranteed Loans
   The U.S. Department of Agriculture (USDA) offers several loan programs supporting small and midsized agribusinesses. Farm Service Agency (FSA) loans provide financing for farm ownership and operations, and they often have more flexible requirements and lower rates than conventional loans. USDA Business Programs provide financial backing and technical assistance to stimulate business growth in rural areas.
3. 3. Eligibility Requirements
   To qualify for a farm real estate loan, borrowers typically need solid credit, a proven track record in the industry, and sufficient income to make the monthly payments. Lenders may calculate your debt service coverage ratio (DSCR), which is your net operating income divided by total debt service. Most lenders like to see a DSCR of 1.2 or higher.
4. 4. Rates and Terms
   These vary widely by lender and loan type. Interest rates for farm real estate loans may be fixed or variable, with repayment terms ranging from 10 to 30 years. Most lenders will require a down payment of 5% to 35% of the purchase price. A larger down payment may help you secure a lower rate and reduce your payments.
5. 5. Application Process
   You’ll begin by getting pre-qualified with a lender, which will give you a sense of how much property you can afford. Next, you’ll submit a formal application, which may require financial statements and a business plan. If approved, you’ll receive a loan commitment detailing the terms, rate, repayment schedule, and conditions that must be met before closing.

Ready to take the next step? Talk to our team about finding a financing solution that fits your needs and goals.