A farm loan made and serviced by a bank, credit union or Farm Credit lender, on which the USDA Farm Service Agency covers most of the lender's loss if the borrower defaults.
With an FSA guarantee the farmer borrows from an ordinary lender, not from the government. The lender makes the loan and services it; the Farm Service Agency promises to cover a set share of any loss. The rule says that share will not exceed 90 percent in general, and is 95 percent in named cases, including a farm ownership or operating loan to a qualified beginning farmer.
Two loan types matter most. Farm ownership loans buy or enlarge a farm, pay for capital improvements or refinance that kind of debt. Operating loans pay yearly costs and buy livestock and equipment.
The dollar limit moves. The rule set it at $1,750,000 for fiscal year 2019 and raises it each fiscal year by the change in an index of prices paid by farmers; FSA publishes the current figure.
Eligibility has a test that surprises people: the farmer must be unable to get enough credit elsewhere at reasonable rates and terms without the guarantee. The borrower must also operate a farm no larger than a family farm. A guarantee is often how a bank says yes to a request it would otherwise decline.
How it shows up in the data here
No file used here says which loans carry a Farm Service Agency guarantee, and FSA does not publish lender-level loan records the way SBA does. The nearest signal is who holds farm real estate debt: see farm lenders by state and the farmland books ranking, then ask the lender whether it makes loans with an FSA guarantee and whether it has FSA preferred or certified lender status.
Go further
- Farm lenders by state: Banks and credit unions holding farmland loans.
- Farmland books, ranked: The largest farmland balances held.
- Farm loan package checklist: A farm lender reads a balance sheet, a production record and a cash flow budget. The land is the collateral. The crop or the herd is the repayment, and it comes in once or twice a year.
- What to do after a bank says no to a business loan: One bank's no is one lender's answer, and the reasons are yours to ask for. They usually point to a constraint you can name.
Related terms
- Farmland loan: A loan secured by farm or ranch land and its improvements, usually made to buy or refinance the land and repaid over many years from farm income.
- Farm operating loan: A short-term loan or line that pays a farm's yearly costs, such as seed, feed, fertilizer and rent, and is repaid when the crop or livestock is sold.
- Farm Credit association: A borrower-owned cooperative lender in the Farm Credit System that makes loans to farmers, ranchers and other eligible rural borrowers.
- USDA Business and Industry loan (B&I): A business loan in a rural area, made by a private lender, on which USDA Rural Development guarantees part of the lender's loss.
- Credit elsewhere test (SBA): SBA's rule that a loan is eligible only if the business cannot get some or all of the money on reasonable terms elsewhere. The lender must certify it and explain why in its credit memo.
- SBA guaranty percentage: The share of a 7(a) loan that SBA guarantees to the lender: up to 85 percent of a loan of $150,000 or less, up to 75 percent of a larger loan, and 50 percent on SBA Express.
Sources
- 7 CFR 762.129, Percent of guarantee and maximum loss, retrieved .
- 7 CFR 761.8, Loan limitations, retrieved .
- 7 CFR 762.120, Applicant eligibility, and 762.121, Loan purposes, retrieved .
Plain definitions for orientation, not legal, tax or credit advice. A lender's own policy decides what it will do.