Seven Types Of Farm Loans You Should Know About

Scott Parker, a senior credit manager at AgCredit, guides us through the world of farm loans to shed light on the benefits and considerations associated with farm-related financing options. Whether you’re just starting out or an experienced farmer, understanding these loan options will equip you with the knowledge to make informed financial decisions for your operation.

Here are the seven types of farm loans you should know about:

1. Land Loans

When considering land loans, the functionality of the property, it’s income potential, and how it will benefit the farm operation’s profitability are all assessed. Your cash flow will be taken into account to develop a payment plan that aligns with your financial capabilities.

Whether you’re a first-time farm buyer or a seasoned farmer with additional assets, the loan options can be tailored to fit your specific needs and the loan terms offered can vary based on your goals and future plans for your operation.

It’s also important to keep in mind that unexpected opportunities to purchase land may arise, so striking a balance between term length and payment affordability is crucial.

2. Equipment Loans

When it comes to equipment loans, there are a variety of options available. AgCredit specifically has a dealer program called Farm Credit EXPRESS, as well as a partnership with Farm Credit Leasing, which provides access to top leasing products.

The typical term for equipment loans is around five years, but as equipment has become more specialized and expensive, longer terms of up to seven years are considered, especially for larger assets like combines and newer planters. For used or specialized equipment, the term may be slightly shorter but still typically not less than five years.

Leasing is also an option that provides a fixed cost, which is great for keeping up with the latest technology. It can also be beneficial for operations focused on cost per acre or cost per hour.

3. New Construction & Farm Improvement Loans

Whether you’re looking to build a new farm building or make improvements to your farm, when it comes to new construction and farm improvement loans, the investment’s impact on your bottom line and cash flow situation will be considered.

Under this loan type, livestock barns are also a significant focus. The loan terms vary based on the project’s size and specific circumstances, but for field tile projects for example, loan terms can extend up to 20 years, while pole barns and machine sheds typically have terms ranging from 10 to 12 years.

4. Farm Vehicle Loans

As long as you meet the criteria of just $500 of gross farm income, AgCredit can provide financing for farm vehicles that aligns with your agricultural income or assets. This can include trucks, semis and trailers.

While the terms and pricing may be slightly more conservative for these assets compared to tractors and combines, the loan duration typically ranges from five to seven years. Additionally, vehicle loans are eligible for patronage and can be modified if the rate environment changes.

5. Operating Lines

Operating lines offer flexible terms to fit your specific needs as a farmer. The typical operating loan has a duration of 12 months, aligning with the operating cycle of crops or livestock. In certain cases, such as raising cattle, which may take longer than a year, the maturity of the loan can be extended. However, the maximum maturity for operating lines is usually three years.

6. Grain Inventory Loans

Grain inventory loans serve as a valuable tool for farmers, especially during year-end tax planning. These loans allow you to access capital needed to purchase inputs and reduce taxable income without having to sell grain.

Additionally, AgCredit participates in the Ohio Ag-LINK loan program, offering cost savings to our members through favorable interest rates. In today’s changing interest rate environment, it’s important to consider the cost of carrying grain and explore opportunities to save money.

7. Rural Home Purchase & New Construction Loans

Lastly, if you’re looking to purchase or build a rural home, there are financing options for both. Available for non-farmers as well, AgCredit can provide these loans for those who don’t live in a town or city with a population greater than 2,500.

To learn more about these farm financing options and more, listen to the full podcast episode featuring Scott Parker. As part of AgCredit’s commitment to serving rural America, we understand farmers have specific needs. We’re here to support your agricultural investments. Feel free to reach out to an AgCredit loan officer to inquire about your financing needs.