For many people, living in a home set in a wide open space means living their American dream. Farming or ranching on that land also could provide the necessary income to provide for their families. To help them pay for or even grow a family home and farm, the best farm loans provide much-needed financing for such necessities as equipment, building improvements, seed, and livestock.
Just as farms range in size, value, and operational costs, the best bank for farmers to find a loan varies based on loan options, interest rates, loan terms, and other factors. It’s important to review all these factors when shopping for a farm loan in order to get the best one available for each farm operation.
- BEST OVERALL: Farm Credit Mid-America
- RUNNER-UP: Farm Plus Financial
- BEST EMERGENCY LOAN: American Farm Mortgage & Financial Services
- BEST ONLINE EXPERIENCE: Farm Credit Services of America
- BEST LINE OF CREDIT: AgAmerica Lending
What to Consider When Choosing the Best Farm Loan for You
When shopping for the best agricultural banks to get a farm loan, it’s important to look for banks that service the area where the farm is located. This criteria alone can eliminate several options from consideration. It’s also important to look for banks that make getting a loan quote quick and easy, without having to jump through a lot of hoops such as providing personal information or calling a bank representative.
Service Area
While many banks serve consumers nationwide, that’s not always the case for every best agricultural bank. Therefore, when searching for a bank, the first step should be seeing if that bank services the area where the farm is located. If not, the borrower can cross it off their list and move on. For banks that do service the area where the farm is located, finding one that is willing to come out to the farm also could be beneficial given it’s sometimes difficult for farmers to find the time to make it to the bank for a lengthy meeting typically required for a loan application.
Quote Process
When shopping for loans for the best farmland in America, it’s important to shop around with at least three lenders and compare the loan terms to find the best option. One way to do this is by comparing loan quotes. The best lenders for farm loans will make it easy to get a quote online by submitting some basic information on the farm or ranch. For borrowers who prefer to speak to a bank representative, many lenders offer the option to get a quote by phone. It’s possible the quote received over the phone could be more accurate as the bank representative can give out more customized information than an online portal can.
Types of Farm Loans
When searching for financing for a farm or ranch, there generally are three options: loans guaranteed by the U.S. Department of Agriculture’s Farm Service Agency (FSA), private loans, and lines of credit. FSA loans are backed by the government and typically feature lower down payment requirements and interest rates than many private farm loans.
With private lenders, farm loans often have higher interest rates, shorter loan terms, and higher down payment requirements. Many farm loan lenders also may offer the option for a line of credit instead of a traditional loan. Lines of credit work like a credit card, wherein the borrower has a maximum limit they can borrow, but may borrow just what they need when they need it. Once that amount is repaid, they can then borrow up to the maximum once more.
Term Options
When it comes to borrowing money for a farm or ranch, it could be challenging to repay that money sooner rather than later. That’s why it’s important to find a loan term that contains a reasonable repayment schedule. Many of the best farm loan lenders offer loan terms up to 30 years, but it depends on the individual loan and lender. When shopping and comparing loans, it’s important to review the length of the loan to make sure repayment on time is possible. While the other loan terms may look great, if the loan can’t be repaid within the specified time frame, it’s best to look for another loan option.
Loan-to-Value Ratio
When determining how much money the borrower will qualify to receive, the lender will look at the loan-to-value (LTV) ratio of the loan. This means the lender will compare how much money the borrower wants with the appraised value of the property. For instance, if the property appraises for $500,000 and the loan is for $375,000, that is a LTV ratio of 75 percent.
When shopping for the best farm loans, borrowers should look for lenders who offer loans with the LTV ratio needed. Many banks offer LTV ratios up to 75 percent, so it’s important to find out exactly what each bank offers when comparing loan terms.
Payment Options
With traditional loans, it’s common to make monthly payments throughout the loan term. However, with farm loans, the payment options are more varied. While some loan options do include monthly payments, many also offer quarterly, semiannual, and annual payment options. This could be especially handy given many farming operations have differing periods for generating income. For instance, major livestock sales may occur just once or twice a year, so those borrowers generally have to wait until after those sales to make their loan payments.
Our Top Picks
When shopping for the best farm loans, it’s important to look for lenders that offer a variety of loan options, good loan terms, and low interest rates.
Photo: e-farmcredit.com
Why It Made the Cut: Farm Credit Mid-America offers a large range of loans to suit a wide variety of borrowers. In addition, customer service representatives will travel to borrowers’ homes to assist with loan applications.
Because farmers and ranchers have different needs, Farm Credit Mid-America offers many types of farm loans, including agricultural real estate loans, operating loans, short-term loans, facility and equipment leasing, business loans, farm cash management, and equipment financing. For borrowers who need just a little help, the lender also has a quick online application for loans up to $75,000.
While Farm Credit Mid-America does not offer information about qualification requirements and LTV ratios on its website, it has the option for representatives to travel to a customer’s home to discuss their loan options and help them complete their loan application, resulting in a much more personalized experience. In addition, customers can also get crop insurance through Farm Credit Mid-America, which helps them cut back on the number of financial institutions they do business with.
Specs
- Service area: Indiana, Kentucky, Ohio, Tennessee
- Quote process: Online, phone
- Term options: 5 to 25 years
- Loan-to-value ratio: Not specified
- Payment options: Biweekly, monthly, quarterly, semiannually, annually
Pros
- Wide range of farm loan types available
- Quick online application for loans up to $75,000
- Convenient customer service with representatives able to travel to the potential customer’s home
- Insurance coverage for crops available
- Five payment frequency options
Cons
- Information about qualifications and loan-to-value ratio not readily available online
Photo: farmloans.com
Why It Made the Cut: Farm Plus Financial offers a high maximum loan amount, specific loans for part-time and hobby farmers, and no prepayment penalties for most products—and it’s available nationwide.
Running a farm costs a lot of money, and Farm Plus Financial provides high-value financing, with loan amounts ranging from $200,000 to $50 million to suit a variety of needs. For hobby farmers who generally bring in less revenue than commercial or full-time farmers, Farm Plus Financial provides loans to help them expand their operations without having to turn to full-time farming. When potential customers are shopping around, this lender also offers an intuitive online loan comparison calculator to make it easy to compare loan terms.
Farm Plus Financial lends nationwide, which means it is available to a large number of customers. While most loans do require a relatively high minimum credit score of 660, Farm Plus Financial does not have a prepayment penalty for most of its loans, meaning that borrowers can pay off their loans early without fear of being hit with additional charges.
Specs
- Service area: 50 states
- Quote process: Online form, phone
- Term options: 10 to 30 years
- Loan to value ratio: Up to 75 percent
- Payment options: Monthly, semiannually, annually
Pros
- $50 million maximum loan amount
- Loan options for part-time or hobby farmers
- Intuitive online loan comparison calculator
- No prepayment penalty for most loan products
- Nationwide availability
Cons
- Relatively high minimum credit score requirement of 660
Photo: americanfarmmortgage.com
Why It Made the Cut: American Farm Mortgage & Financial Services offers the AgXpress loan, which can be approved in 1 business day or less to provide customers with funds quickly in an emergency.
Finding the best farm loans is essential for every farmer and rancher; finding the best farm loan in an emergency can be much more difficult. However, through its AgXpress loan, American Farm Mortgage & Financial Services offers approval in 1 business day or less to quickly provide qualified borrowers with the funds they need, provided they have at least a 720 credit score.
Whether or not it’s an emergency, borrowers looking for financing don’t have to wait for more information regarding their loan. With American Farm Mortgage & Financial Services’ 24-Hour Response Promise, borrowers can confirm that their loan application was received or get much-needed answers.
Specs
- Service area: 18 states
- Quote process: Online form, phone
- Term options: 1 to 30 years
- Loan-to-value ratio: Up to 70 percent
- Payment options: Not specified
Pros
- Relatively fast approval time of 1 business day or less for the AgXpress loan
- Guaranteed fast follow-up of 24 hours or less
- Additional competitive loan options for beginner farmers and ranchers
Cons
- Relatively high minimum credit score requirement of 720 for AgXpress loan
Photo: fcsamerica.com
Why It Made the Cut: Farm Credit Services of America has a lot of resources to help customers understand the loan process, such as a payment calculator and educational resources like blogs and podcasts.
Shopping for the best farm loans can be overwhelming, especially for borrowers new to the process. While information about loan term and LTV ratio is not readily available on its website, Farm Credit Services of America offers many resources to help customers understand the loan process, such as a payment calculator and educational resources like blogs and podcasts. In addition, the lender responds to online loan applications within 3 hours, so borrowers aren’t left wondering if and when their loan application was received. Loan approval can take up to 10 business days, but customers will be kept informed of their application status during that time so they aren’t left in the dark.
Farm Credit Services of America also lives up to its commitment to farmers through volunteering, making local contributions, providing grants, and other actions in the farming community.
Specs
- Service area: Iowa, Nebraska, South Dakota, Wyoming
- Quote process: Online
- Term options: Not specified
- Loan-to-value ratio: Not specified
- Payment options: Monthly, quarterly, semiannually, annually
Pros
- Intuitive online payment calculator
- Relatively fast online application process with 3-hour response time
- Extensive and comprehensive online farm loan education resources
- Available insurance coverage for crops, hail, and livestock
- Commitment to supporting rural communities
Cons
- Relatively long standard loan approval of up to 10 business days
- Information about term options and loan-to-ratio value not readily available online
Photo: agamerica.com
Why It Made the Cut: AgAmerica Lending offers a 10-year line of credit option, which has no mandatory pay-downs and no annual paperwork, as well as interest-only payments and a 25-year amortization.
For borrowers looking for a line of credit instead of a traditional farm loan, AgAmerica Lending offers a 10-year line of credit option, which has no mandatory pay-downs and no annual paperwork requirement. In addition, borrowers can choose interest-only payments and a 25-year amortization, which can increase liquidity. To qualify for this line of credit, borrowers must own a minimum of 25 acres of agricultural land, so part-time or hobby farmers may need to look elsewhere.
AgAmerica’s line of credit is available nationwide, and customers have the option to convert the line of credit to a term loan in the future if they so choose.
Specs
- Service area: 50 states
- Quote process: Online, phone
- Term options: 18 months to 30 years
- Loan-to-value ratio: Up to 75 percent
- Payment options: Monthly, quarterly, semiannually
Pros
- No mandatory pay-downs or annual paperwork on 10-year line of credit
- Interest-only payments and 25-year amortization
- Option to convert line of credit to a term loan
- Nationwide availability
Cons
- Customers must own at least 25 acres of agricultural land to qualify
Our Verdict
We chose Farm Credit Mid-America as our Best Overall choice for a farm loan because borrowers can choose from many loan options to get just what they need. Farm Plus Financial is our Runner-Up choice because it offers a high maximum loan amount.
How We Chose the Best Farm Loans
To pick the top farm loan providers, we looked at things like the types of loan options available, types of payment options, service area, term options, and quote processes. We also looked to see whether there were any unique offerings to determine which awards to give. Although we recognize that only two of our choices are available nationwide, their offerings made them more than qualified as some of the best farm loan providers for most borrowers. Likewise, while two of the lenders don’t specify their LTV ratios, that information can be obtained with a phone call to a representative for a more personalized quote.
Before You Choose One of the Best Farm Loans
As with all financial products, the best farm loans and lenders are not necessarily the best for every borrower. Therefore, it’s important to shop around and carefully compare loan options and terms before signing on the dotted line. It’s also crucial to find a lender who makes the borrower feel comfortable asking questions and requesting information so they understand the loan process. Any lender who is not forthcoming with information or patience likely is not a good fit.
Cost of Choosing One of the Best Farm Loans
Every loan includes costs, from loan fees to closing costs to accrued interest, and the best farm loans are no different. Therefore, it’s important to shop around and carefully compare the costs of each loan before choosing one. Typically, FSA loan interest rates are the lowest, which can help keep the loan balance down. It’s also important to compare the fees included in the closing costs, such as appraisal fees, title fees, and origination fees to find the lowest closing costs. In addition, choosing a farm loan with no prepayment penalties can save borrowers more than just interest if they pay off the loan early.
The Advantages of Choosing One of the Best Farm Loans
Choosing one of the best farm loans can be a tremendous financial tool for farmers and ranchers looking to grow their operations, buy new equipment, or purchase more livestock. The best farm loan lenders are well versed in providing loans that meet farmers’ needs, such as a variety of loan products, high loan amounts, and long loan terms.
- The best farm loan lenders offer several payment options so borrowers can meet their obligations based on their farm operations.
- Many of the best farm loan lenders offer loan terms up to 30 years.
- Many of the best farm loan lenders provide resources to help borrowers get the information they need before signing a loan application.
FAQs
Shopping for the best farm loans requires time and research to find the right loan for any farming operation. When shopping for farm loans, these are some of the most frequently asked questions by borrowers. Although it’s not all the information borrowers will need, it’s a good place to start.
Q. Do I need good credit for a farm loan?
Credit score requirements vary by lender. FSA-guaranteed loans don’t use credit scores, instead looking at the borrower’s entire credit history, but private lenders typically do rely on credit scores.
Q. How do I start a farm with no money?
Talk with a lender that specializes in farm loans to see what loan options are available to help you start a farm. However, you’ll have difficulty finding a loan if you don’t have any money to put toward a down payment.
Q. How can I qualify for a farm loan?
Qualification requirements for farm loans vary by lender and loan type, so it’s important to shop around so you can get an idea of the best farm loan for you based on your financial situation.
Q. What kind of financing is available for farms?
Farm loans are available in the form of FSA loans, private loans, and lines of credit. Each has different benefits and can be used for different purposes by farm owners.
Q. What credit score is needed for a farm loan?
Credit score requirements vary by lender. FSA-guaranteed loans don’t use credit scores, but private lenders typically do. For borrowers with fair credit scores, it’s important to ask lenders about their requirements to get a better understanding of your options.
Q. What is the difference between a farm loan and a farm line of credit?
Farm loans work like regular loans with a fixed loan amount and repayment terms. A farm line of credit works like a credit card; borrowers use what they need and repay that amount. Each can be beneficial to farmers in different circumstances.
