What is a farm loan?
Farm loans are a specific type of agricultural loan that resides under the commercial property category because farms produce income. There are many kinds of farms, including family farms, hobby farms, dairy farms, ranches, feedlots, cannabis grow operations, organic farms, farms for poultry, horses and livestock, herb farms, seed farms, crop farms, truck (vegetable) farms, sugar cane farms, as well as water farming, such as fish, oysters and shellfish farms. Agriculture loans are available for all of these kinds of farms, so select the particular farm type in the search engine above that matches your need.
Mortgage loans and farm business loans are available for farmers and ranchers. Residential and commercial lenders offer mortgages to hobby farms and family farms, while commercial private lenders and specialty lenders can finance all loans for all farm types. Specialty loan programs are also available through the government, including USDA small farm loans and FSA new farmer loans.
Common uses of farm mortgages are:
- Loans to purchase a farm, sometimes from relatives
- To refinance with cash out to spend on conservation, seed, equipment, building and expansion
- First time farmer loans to help farmers buy land
- Soil and water conservation
- To set up alternative methods like hydroponic, aeroponic, vertical and freight container farming
- Animal and plant waste processing
- To refinance an existing mortgage to a low interest farm loan and/or shorter term, resulting in lower monthly payments
What are common types of farm loans?
- Land loan financing with adjustable rates that change yearly
- Agricultural real estate loans with fixed interest rates for 10, 15, 20 or 25-year terms
- Farm and ranch purchases up to 70% LTV
- Refinancing existing debt
- Financing for expansion
- Annual, semiannual and monthly payments
- No prepayment penalty; up to 30-year amortization
- Full documentation loans up to 70% LTV, 680 or better FICO and debt-to-asset ratio up to 50%
- $3,000,000 maximum loan amount with maximum LTV of 60%
- Regular wage earner loans for 60 acre (or more) recreational or hobby farms with monthly payments
- Streamlined process with minimum documentation up to 55% LTV and maximum $1,000,000 loan amount
- Bridge loans for distressed operations with little or no cash flow or with serious credit impairment, like bankruptcy
- Specialty farm loans up to 65% LTV
- Private farm loans with terms and rates that compete with USDA
- Private lender for cannabis related enterprises that have strong cash flow and land for collateral
- Loans for small farms
How do I buy a farm?
Borrowers can approach a bank or credit union that serves the agricultural community and submit a loan application. Banks and credit unions require thorough documentation and quality collateral to write a mortgage and they offer conventional financing. Specialty banks and credit unions exist for the sole purpose of farm-related mortgage lending and operate in many states. Non-bank, private and hard money lenders also offer agriculture financing.
What is a hard money farm loan?
Hard money farm loans, ranch loans or other agriculture loans offer faster funding at lower LTVs, ranging from 35% to 50%, than borrowers would receive from a bank. As long as a borrower has sufficient equity in the real estate (land) to assure repayment, the hard money lender may be able to work past a recent bankruptcy, notice of deficiency or even a foreclosure. Since the land is being used as collateral, documentation requirements tends to be less onerous than what a bank requires for a conventional loan. Hard money lenders are also more likely to offer farm loans with bad credit. A cash-out refinance using hard money could get money in the farm’s hands in as little as two weeks.
Which lenders offer farm financing?
Dozens of banks, private lenders and non-banks offer specialty and commercial farm loan programs. Visit LenderSearch.com to explore options for your agricultural client.
