Do you have a dream of starting (or buying) and then running your own farm? Or are you trying to save the farm you have and bring in more income? Farming is a tough business that a lot of people love – and a lot of people fail at. Those who fail often go into it without realizing what it will be like and how much work it will take. Going In – or hanging on – armed with knowledge, information and sufficient financing could make all the difference for you.
Running a farm is like running a business. You may be getting in to farming to get away from business, but you must recognize that you are in fact starting and managing a business operation. You need many of the same skills business entrepreneurs and managers need— plus others unique to farming. Read on to understand them.
We are here to give you some of the basic information you need to succeed. That includes what information about your farm you should know and have on hand, how and where to find the funding you need, and what other resources and knowledge will be important to your success.
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This review of resources for new or existing farms is organized around two main topics: (1) managing and presenting your farm like a business to increase your chances of getting a loan and (2) where to look for farming loans and grants.
Cash Flow: OK, you get the fact that this is a business, but are you treating it that way? You may be getting by each month but you also need to track your income and expenses so you can estimate your cash flow. And you need to understand it well enough explain it to a lender (even if that potential lender is a friend or family member).
Manage Your Market Mix: Farms enjoying the most success have learned to focus. They do just one or two things and try to do them well in terms of production and sales and marketing activities. Too many products can spread your resources thin and raise a red flag for lenders. Again, be able to explain to a lender why you grow and sell the products you’ve chosen and how your choices take advantage of your strengths. If you do that, the person considering giving or lending you money will have more confidence that you will be successful.
Know the Market Be aware that little if anything is guaranteed in the farming business. The Wall Street Journal reported a little earlier this year that 2016 farm incomes in the U.S. are likely to reach their lowest level since 2009. Big harvests in corn and soybeans have increased inventories and lower prices. Exporting is harder because the dollar is strong. Farm income is projected to be down over 11% this yea, from $80.7 billion last year to $71.5 billion this year. The good news is that that is actually an improvement over the estimates made by the USDA in February of 2016.
Understand What You’ve Got: Lenders make decisions based on your ability to repay a loan. Part of their decision will be based on the value of what you own (your assets) and its resale value (in case you stop making payments). So take the time to list your assets such as your land, any buildings on the land, machinery, animals etc. in addition to your financial holdings. Estimate the value of each and be prepared to explain what those estimates are based on.
Are you interested in farming — specifically organic farming — and want to know more before you try and start your own farm? You might want to check out “WWOOFing.” There is a non-profit organization called WWOOF which helps interested people and organic farmers all over the world to get together. Individuals sign up as “WOOFERS” and can connect with WWOOF Hosts in the geographic area they choose. You basically offer to help out on a farm in exchange for meals and a place to sleep. In general you must be at least 18 years old. You pay your own travel expenses as well as any travel you do in your destination area. Discover more by checking out the wwoof website.
Update March 2018 You can also look for help getting into farming by checking out programs at colleges and universities. For example, Cornell University has a program called the Small Farms Program. It’s being funded by the Department of Agriculture to encourage more young people to get into farming and ranching. Though they are located in New York they have some online courses, lots of resources listed on their website, and they also put on some events. They’re also trying to establish some partnerships with other organizations so the program may become more widespread. And the New England Small Farm Institute also offers the “Small Farm Dream” which helps beginning farmers. You can geta self-study version of the course at no cost.
Update October 2017 The USDA recently (October 2017) released its 2017 RFA for the Beginning Farmer and Rancher Development Program. This means funds are available and people and organizations can start submitting applications. The standard grant amounts are available for up to $200 thousand per year for three years or a total of $600,000 and the Small Standard loans go up to $100 thousand per year for 3 years or a total of $300,000. A number of different land grant institutions as well as Hispanic-Serving Institutions as well as private higher education schools and some others are eligible to apply. Others could be a partnership or network or other collaboration among state, community and private organizations and schools. Applications are due by December 8, 2017.
Update June 2017 The Farm Service Agency also provides loans - and guarantees them, to eligible would-be farmers. Those who are considered to be “socially disadvantaged” are the target for these loans. The aim to help them buy and manage farms and/or ranches. The eligible groups include Blacks/African Americans, Asians, American Indians and Native Alaskans, Pacific Islanders, Hispanics, Native Hawaiians and women. In addition to providing help with financing they also offer training in proper farm operating methods and in learning how tosses problems and use resources for best results. If an eligible party wishes to purchase a farm they can use the agency’s downpayment program as long as they are able to make a down payment - in cash - of a minimum of 5% of the purchase price.
News February 2017 Do you dream of having your own organic farm — but the costs are too steep? This opportunity could be for you! How about writing an essay about why you want to own a farm? You could win a 13-acre organic farm in North Carolina, valued at $450,000! Bluebird Hill Farm in North Carolina is ready to be passed on to a new owner. It’s already certified USDA-certified growing a variety of vegetables, herbs and more. The owner wants to determine who will own it next by having individuals submit an essay about their goals and why they’d like to own the farm. You must have a partner and not trying to go it alone — she says it can’t be done! You have to enter by June 1 so you have some time to think about it. But be sure to spend some time on it — this could be a life changer! Just search for Bluebird Hill Farm Essay Contest to learn more! (Note that there is a $300 entry fee and winner must pay closing costs and some other fees. If they receive enough entries you could also receive $50,000 for costs incurred during the ownership transition.
News March 2016 Some large education-related grants have recently been announced by the Department of Agriculture. They aim to increase diversity in the areas of farming, food and science. To that end they are awarding $18 million to a number of historically black land-grant schools. Never heard of them? There are actually some big names in the group! If this is your field of study – or if you or someone you know wants to learn more about farming and science, see more details in our Free Government Money article. These schools could have some additional funds available for grants and scholarships…
News November 2015! In our September Free Money Newsletter we talked about a special opportunity to win a great goat farm in Alabama. The deadline for that contest has passed, but there's another amazing opportunity now! This goat farm is located in Central Virginia and it's called Newstead on the James. The current owner has run it for 21 years and is ready to retire. So she is running an essay contest to find a young, energetic and capable younger person to take it over. The farm includes 50 acres, mostly pastures but also a barn that has a tack room and stalls for 8 animals, a shed with a garage and four more stalls, a little cabin and a huge 6,000 square foot, 18th century brick house. The whole place has a value of $1.5 million! And it could be yours if you write the best essay. Just 200 words or less, communicating why you'd like to own and run the place. There is a $233 entry fee. And if they meet their goal of 7000 entries the new owner could end up with $100,000 in cash in addition to the entire farm (which includes the sheep and Morgan horses if the new owner wants them). The deadline for entries is September 21, 2016 so you have some time to put your thoughts together and submit an entry that could totally change your life!
Back to our main topic of finding farm loans and grants: All the above introductory information is critical to being prepared to get a farm loan. Be sure your records are organized and in writing and that they go back several years( if your farm has been around that long). If you are just starting a farm and have no historical data then prepare financial reports based on projections you can explain and defend. Here are some places to look:
The Farm Credit System is a nationwide system of cooperatives owned and managed by their customers. They are managed by local boards of directors. These lenders usually have farm backgrounds and understand what you need. They typically lend to full time farmers. Do an internet search to find the Farm Credit Association in your area.
The Farm Service Agency: makes direct loans and also guarantees loans to family-sized farms. FSA is a part of the U.S. Department of Agriculture. They also have a focus on youth and encourage young people to enter farming. They make direct loans to rural youth between the ages of 10 and 20 for small income-producing projects they're involved in through 4-H clubs. And they sponsor programs to help young people looking for a career in farming and agriculture.
These programs include special loans to help with farm down payments and loans for operating farms. They can make all the difference in a young person’s ability to get into farming with the financial and technical help they need.
Down payment loans are also available to adults. For more information and to apply for a loan contact the FSA office in your county. You can find it in the government section of your phone book or through an internet search.
Beginning Farmers and Rancher Loans is another offering of the FSA. It sets aside funds to lend to “small and beginning farmers and ranchers.” These are individuals with less than ten years operating a farm or ranch that is smaller than 30% the average size in their county. And the FSA’s Microloan Program facilitates loans to smaller family operations and to “newbies” who otherwise have difficulty obtaining traditional loans. This program also provides easier access for those without much (if any) farming experience – they will consider business experience and apprenticeships as qualifications for the farming loan. Learn more at your local FSA office (see above) or on the USDA website.
The National Sustainable Agriculture Coalition (NSAC) is a group of organizations that provide resources/education/training and public information about funding opportunities. They do not provide any funding themselves.
State Programs and Grants
Always go to your state’s website and local offices to find out what loan and/or grant programs may be available to encourage and support farmers and ranchers. Particularly in states where agriculture is a major part of the economy there may be lots of opportunity here. This is the most likely place to find grants related to farming.
Specialty Crop Block Program The availability of farming programs and grants available from individual states is partly due to the federal government’s Specialty Crop Block Grant Program (learn more about Block Grants). This Farm Bill created funds to provide money to the states to “enhance the competitiveness of specialty crops.” While specialty crops sound like something rare, they include “fruits, vegetables, tree nuts, dried fruits, horticulture, and nursery crops.” Not much is left out! You can find a list of examples – and excluded items - on the USDA website. Any state department of agriculture can apply for funds. Find out more about what your state has to offer by contacting your state department of agriculture.
Other Business Loans – Including Family and Friends: Since farming is indeed a business you can get more more tips in our article called Fund A Startup Business.