FSA Microloans for Beginning Farmers


In the last decade or so, there has been, and will continue to be, a shift in American agricultural trends. The first is a generational transfer of land that will need to occur in the next few decades, as almost 80 percent of farm owners are over 45 years of age, and the 65 years and older demographic, currently 25 percent of all farmers, is the fastest growing age group according to the 2007 Census of Agriculture.
The second shift regards the make-up of farms themselves. U.S. has seen structural changes in the past, usually involving the consolidation of farms into fewer and larger agricultural operations, but there has been a recent surge in demand for smaller parcels of farmland.
Accounting for a large portion of this new demand are urbanites looking to move away from the city and cultivate hobby farms, as well as the growing popularity of local Community Supported Agriculture. While these farms are only responsible for a small fraction of America’s total agricultural production, many of them barely turn a profit, they now outnumber large commercial farms, and are thus an important part of our agricultural landscape.     
One of the biggest challenges these beginning farmers face in starting a successful operation is getting access to capital. Because these farmers typically start out small and with limited experience, it is hard for them to obtain financing from commercial lenders.
Fortunately, the USDA’s Farm Service Agency (FSA) offers a Microloan program to better serve the unique financial operating needs of beginning, niche and the smallest of family farm operations.
To help these farmers start, maintain, or enhance their agricultural operations, the FSA has modified its standard Operating Loan requirements to create a program with easier access to capital, a less rigorous application process and modified security requirements.
If eligible, applicants may obtain a microloan worth up to $35,000 to be used for initial startup expenses, such as the purchase of livestock, equipment, and other materials essential to farm operations, as well as annual operating expenses, including seed, fertilizer, utilities and land rents, in addition to marketing and distribution expenses.
While most FSA loans require applicants to have farm management and operating experience, the Agency understands that many beginning farmers are just that; they are beginners without the experience of being raised on a farm or in a rural agricultural community, and the FSA has adjusted the application process accordingly.
Applicants will still need some farm experience to secure a loan, but the FSA will consider small business experience towards meeting the requirement, as well as assisting “applicants who have limited farm skills by providing them with an opportunity to gain farm management experience while working with a mentor for the first production and marketing cycle.”
As we begin to see a migration of urbanites to rural communities with the intent of becoming small-scale farmers, and a general movement towards small, community oriented farms, the FSA’s microloan program is becoming an important tool in making a successful transition possible.
Additional information on this and other USDA/FSA farm loan programs can be found here, and we also encourage you to visit your local FSA office for firsthand professional advice.