Financial issues are an important concern for all farmers, but young, beginning, and small farmers often face unique challenges and obstacles in funding their operations. Private loans are an option that many consider for purchasing land, buying equipment, improving farm infrastructure, or meeting other needs. With that in mind, we have invited Gary Matteson, Vice President for Young, Beginning, and Small Farmer Programs at the Farm Credit Council to describe Farm Credit cooperatives, how they work, and the best ways to take advantage of their services. What follows is his overview and advice.
The Farm Credit System was chartered in 1916 by Congress in order to provide sound and dependable credit to American farmers, ranchers, and their cooperatives. We do this by lending to qualified individuals and farm businesses at competitive rates and by providing financial services. Farm Credit is a nationwide network of 90 customer-owned lending Associations that understand agriculture, recognize the dynamic needs of the agricultural marketplace, and are specialists in rural and agricultural financing. Farm Credit is not a government agency and does not receive any federal budget dollars.
Farm Credit institutions are leading providers of credit to young, beginning and small farmers. In the year 2008, Farm Credit Associations nationwide provided some $7.7 billion in new loans to young farmers, $12 billion in new loans to beginning farmers, and $14.2 billion in new loans to small farmers.
As cooperative institutions owned and directed by farmers, we are very sensitive to the needs of the next generation of producers because Farm Credit’s customer-owners know from personal experience the challenges of starting out. Farm Credit offers a unique opportunity for the next generation of farmers and ranchers—when they borrow from Farm Credit they become the owners of their lending institution since it is organized as a cooperative.
Every Farm Credit institution has its own unique program tailored to meet the local needs of young, beginning, and small farmers. Since these programs vary greatly among Farm Credit Associations, it is necessary to contact your local Farm Credit branch office or check out their website to find out what special considerations may be given to young, beginning, and small farmers.
Farm Credit finances all types and sizes of farms in all sectors of agriculture, but generally does not have any grant programs. However, Farm Credit Associations often work closely with the USDA Farm Service Agency’s Beginning Farmer and Rancher loan guarantees and programs that require the participation of a private sector lender.
As a supplier of commercial credit to farmers, we generally look for loans to be repaid from farm business income. Off-farm income is a valid source of repayment capacity, and is certainly important for someone just starting out. All loans that a Farm Credit Association makes must be “constructive credit”, which means that the borrower will have a good chance of paying back the loan and will avoid destructive levels of debt.
If you are a part-time farmer or even just thinking about starting out in farming you should be writing down what you expect to produce, how you will sell it, and how you will be able to earn enough money to repay a loan. The best way to show that your farm operation can repay a loan is to have a clearly written and complete farm business plan that demonstrates with confidence how you will succeed in farming.
The best preparation for applying for a loan is to make sure you can effectively describe your farm business idea with a written business plan before you visit any lender. Don’t be intimidated by the thought of writing a business plan because there are a lot of people, programs, and other resources out there to help you write one. You’ll have a lot more success getting assistance if you treat your farm as a serious business enterprise. Farm Credit has confidence in young, beginning, and small farmers and ranchers—we’re ready to talk about your future in agriculture whenever you are.
Visit www.farmcredit.com and click on “locations” to enter your state and county and find the office nearest you.
VP Young, Beginning, Small Farmer Programs and Outreach
50 F St. NW, Suite 900
Washington, DC 20001
Phone: 202-879-084/Fax: 202-626-8719
For More information on Farm Credit cooperatives and other funding sources, visit beginningfarmer.org’s Financing (Loans/Grants) Page