Small Loans For Small Farmers: What The Microloans Program Can Do For You

Looking for a boost to your farm business? A microloan could be what you need.

by Lisa Kivirist
PHOTO: WFIU Public Radio/Flickr

The USDA’s Microloans Program is a loan opportunity that specifically targets small farms of all types, especially those run by young and beginning farmers growing for local and regional food markets. It’s administered through the Farm Service Agency, the USDA’s credit and lending division. The microloans program illustrates a small but significant positive shift in funding opportunities within the FSA as the agency embraces and supports the growth of small-scale farm operations that often have smaller credit needs.

Specifically, these microloans are offered up to $35,000, which is much lower than the $300,000 maximum for the regular FSA farm-operating loans. Small loans mean less paperwork and a simpler, streamlined application process. Intended for smaller purchases that invest in and grow your farm business, these funds can be used for things like seed, livestock, equipment, marketing and distribution. You’ll still need collateral in the form of farm property worth a minimum of the loan amount. If you don’t have that, you can have a third party with collateral co-sign.

Additionally, you must show sufficient prior-farming experience to prove this loan is a solid investment in your business. However, on a good note, the FSA has flexibility in determining what this experience is. For example, you don’t need an agriculture degree—your experience could consist of internships, classes and on-farm employment. Interest rates are based on the regular FSA rates at the time of your closing, which are much lower than a regular bank loan—as low as 1 to 2 percent.

Matt and Peg Sheaffer, of Sandhill Family Farms in Brodhead, Wis., tapped into the FSA microloans program to purchase a refrigerated box-delivery truck to help support their growing community-supported-agriculture business.

“This new truck now helps us improve the quality and freshness of our farm produce when we deliver into the Chicago market,” explains Peg Sheaffer. “We also diversified to add cheese, meat and fruit shares, and this truck supports us in these added deliveries, as well.”

Sheaffer found the process for their $25,000 loan straightforward:

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“Our local FSA representative talked us through the process, and it wasn’t that daunting,” she says. “We needed this truck and would have figured out a way to purchase it eventually, but thanks to this new microloans program, we were able to do it quicker and take advantage of terrific terms and interest rates.”

For more information, contact your local FSA office. The Farmers’ Legal Action Group also offers a free Farmers’ Guide to the Farm Service Agency Microloan Program, written by farmers to help navigate the microloan process.

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