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Equipment Needed to Start a Farm

americanfarmfi on July 3, 2023

Starting a farm can be an exciting and rewarding venture. Whether you plan to focus on livestock farming or crop production, having the right equipment is key for your success. In this blog, we will explore the various types of equipment needed for a farm, including general farm equipment, livestock farming, and crop farming equipment, as well as other factors to consider when evaluating options.

Determining Equipment Needs

Before diving into the specific types of equipment, it’s essential to assess your farm’s unique needs. Consider factors such as the size of your operation, the type of farming you’ll be engaging in, and your budget. Taking the time to evaluate these aspects will help you make informed decisions when it comes to purchasing a piece of equipment and what farm equipment loan could be best for you.

General Farm Equipment

General farm equipment forms the backbone of any agricultural operation. These versatile tools are used for a wide range of tasks, big and small, and are essential for day-to-day farm operations. Below are the main pieces of equipment and their definitions:

Tractor: Tractors are the workhorses of any farm. They provide the power and versatility needed to perform a variety of tasks, from plowing and tilling to hauling and lifting heavy loads. 

Cultivator: A handheld or machine-operated agricultural tool used for breaking up and loosening soil, removing weeds, and preparing the ground for planting.

Seeder: A device or machine used in agriculture to evenly distribute seeds onto the soil surface for planting purposes.

Sprayer: Used to apply liquid pesticides, herbicides, fertilizers, or other chemicals onto crops or plants for pest control, weed management, or nutrient supplementation.

Baler: A baler is a machine used in agriculture to compress and bind harvested crops, such as hay or straw, into compact and manageable bales for storage, transportation, or feeding livestock.

Implements and Attachments for Various Farming Tasks

To complement your tractor, you’ll need a range of implements and attachments for specific farming tasks. These may include: 

  • Truck with trailer
  • Vehicles
  • Plows: used to turn over the soil, break it up, and prepare it for planting by burying crop residues and weeds.
  • Harrows: consisting of metal discs, spikes, or teeth arranged in a row or frame, used for breaking up soil clods, leveling the ground, and preparing the soil for planting.

Livestock Farming Equipment

If you plan to venture into livestock farming, there are specific equipment requirements to ensure the health, well-being, and efficient management of your animals.

Feeding Systems and Equipment

Proper feeding is vital for livestock health and productivity. Depending on the type of animals you’re raising, you may need feeding equipment such as: 

  • Troughs: Troughs are long, narrow containers or channels used in farming to hold and supply water to livestock, allowing for convenient access to hydration and efficient water management.
  • Feeders: Devices or structures used to store, distribute, and provide feed or fodder to livestock. 
  • Automated systems: Ensure consistent and controlled feeding.

Handling and Animal Health Management Tools

To handle and manage your livestock effectively, you’ll require equipment such as: 

  • Chutes: Chutes are narrow, enclosed passageways or channels designed to guide the movement of livestock, facilitating safe and controlled handling, sorting, or loading of animals.
  • Gates: Gates are movable barriers or entrances typically made of metal or wood, used in farming to control the movement of livestock, restrict access to certain areas, and provide a secure enclosure.
  • Panels: Panels are rigid structures, often made of metal or wood, used in farming to create temporary or permanent enclosures, partitions, or barriers for containing livestock or defining specific areas within a farm or ranch.
  • Scales: Scales are measuring devices used in farming to determine the weight of livestock, produce, or other agricultural materials, providing accurate measurements for monitoring growth, assessing yields, or ensuring proper portioning. 

Additionally, animal health management tools like vaccination syringes, hoof trimmers, and dehorning equipment are essential for maintaining the well-being of your animals.

Housing and Fencing Requirements

Providing suitable housing and fencing is crucial for the safety and comfort of your livestock. This may include barns, sheds, or pens, along with sturdy and secure fencing to contain your animals and protect them from predators.

Crop Farming Equipment

For those focusing on crop production, having the right equipment is essential to maximize efficiency and yield.

Seeders, Planters, and Transplanters

Planting crops efficiently and accurately is critical for successful food crop farming. Seeders, planters, and transplanters are specialized equipment that ensures precise seed placement, optimal spacing, and uniformity. In crop farming, the strategic application of fertilizer plays a crucial role in promoting healthy plant growth and maximizing yields. This requires compact machinery that can efficiently navigate through narrow rows and tight spaces, ensuring precise planting, cultivation, and harvesting operations.

Irrigation Systems for Optimal Crop Watering

Irrigation plays a vital role in crop farming, especially in areas with irregular rainfall patterns. Installing an efficient irrigation system, such as sprinklers or drip irrigation, can help ensure that your crops receive the right amount of water at the right time, promoting healthy growth and higher yields. 

Harvesting Equipment and Grain Storage Facilities

When it’s time to harvest your crops, having the right equipment can make a significant difference in efficiency and quality. Harvesting equipment, such as combine harvesters or specialized machinery for specific crops, can streamline the process and minimize large losses. Additionally, you’ll need suitable grain storage facilities to protect and store your harvested crops.

Evaluating Equipment Options

With a wide range of equipment available, it’s essential to evaluate your buying options carefully. Here are some factors to consider when choosing equipment for your farm.

Factors to Consider When Choosing Equipment

Consider the specific requirements of your farming operation, including the size of your farm, the nature of your crops or livestock, and the tasks you need to perform. Take into account factors like durability, ease of use, maintenance requirements, and compatibility with existing utility equipment. Evaluate the reputation and customer reviews of manufacturers to ensure reliability. 

Quality, Brand Reputation, and Pricing

Investing in high-quality equipment from reputable brands ensures durability, reliability, and long-term performance. Customer service should be a factor when deciding between brands. While quality is essential, it’s also crucial to consider pricing options that fit your budget. Explore different suppliers and compare prices to find the best balance between quality and affordability.  

New vs. Used Equipment and Financing Options

When starting a farm, you may have the option to purchase new or used equipment. Farmers can find used equipment can be more affordable, but it’s important to inspect and evaluate its condition before making a decision. If financing is necessary, explore loan options specifically tailored for agricultural equipment. Evaluate interest rates, repayment terms, and potential tax benefits associated with financing to make an informed choice.

Conclusions on Equipment Needed to Start a Farm

Starting a farm requires careful consideration of the equipment needed for your specific farming activities. Whether it’s general farm equipment, livestock farming equipment, or crop farming equipment, each plays a vital role in your farm’s success. By evaluating your needs, considering factors like quality and pricing, and exploring financing options, you can make informed decisions and set yourself up for a successful farming venture. Remember, the right equipment is an investment that can contribute to increased productivity, efficiency, and profitability on your farm.

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Boost Your Credit Score in Just 30 Days: 7 Effective Strategies

americanfarmfi on June 22, 2023

 7 Effective Strategies

1. Write a Goodwill Letter: If your credit report shows a minor blemish, such as a single late payment, and the rest of your credit history is strong, you can try appealing to the issuer for leniency. Make a compelling case explaining why the negative record should be forgiven and removed from your credit report. You can call the issuer directly or draft an official “Goodwill Adjustment Letter” to formalize your request. This strategy is most effective before the negative record appears on your credit report, but it’s worth a try afterward as well.

Below is a goodwill letter template you can copy and paste into your own word document and fill in with your own details. Having problems? Contact us and we will send you your own file to use. 

Goodwill Letter Template

2. Reduce Your Credit Card Statement Balance: Lowering the balance on your monthly credit card statement can significantly improve your credit score. By decreasing your credit utilization ratio, which is calculated by dividing your balances by your spending limits, you demonstrate responsible credit management. Try spending less, making larger payments, or paying your bill more frequently. Consider paying your credit card bill twice a month, once before your statement is generated and again before the due date, to lower your credit utilization and avoid interest charges.

3. Make a Big Debt Payment: The amount you owe, relative to your income, plays a crucial role in determining your credit score. Lenders assess your risk level based on this information. Paying off a substantial portion of your debt can have a positive impact on your credit score. Aim to reduce your outstanding debt to enhance your financial standing.

4. Dispute Credit-Report Errors: Review your credit report carefully, comparing each item with your financial records. If you come across any discrepancies or suspicious information, investigate further and take action. If there is incorrect or fraudulent data, file a dispute with the credit bureau to have it rectified. Removing inaccurate negative information can lead to significant short-term improvement in your credit score.

5. Become an Authorized User: If a family member with excellent credit is willing, request to be added as an authorized user on one of their credit cards. Ideally, choose an old account with a high credit limit and a clean payment history. While this strategy may take longer than 30 days to process, it can provide a quick boost to your credit score once implemented.

6. Dispute Negative Authorized-User Records: It’s not widely known, but as an authorized user on an account that is negatively impacting your credit score, you have the right to request its removal from your credit report. Since authorized users aren’t responsible for paying the bill, you can dispute its inclusion on your report. File a dispute to address any adverse effects caused by such accounts.

7. Request a Higher Credit Limit: Increasing your available credit can positively affect your overall credit utilization ratio, a key factor in determining your credit score. However, before requesting a higher limit, be aware that some credit card issuers may perform a hard inquiry, which could temporarily impact your credit score. Understand your creditor’s policies beforehand and ensure that your credit limits are accurately reported by asking the issuer to update the information with the credit bureaus. Keep in mind that “NPSL” credit cards may have limitations in this regard.

By implementing these seven strategies, you can work towards raising your credit score within a month. Remember, responsible financial habits and proactive credit management are key to long-term credit health.
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How to Build Credit

americanfarmfi on May 31, 2023

Farmers of all levels of experience have a need for capital, and many times that means they will need to borrow money.  Whether expanding the farm with a purchase of some additional acreage to your third generation family operation or buying your very first tractor, one of the most important factors for getting the purchase made is a farmer’s personal credit score.

Get Your Credit Report and Score

First things first, it’s very important to know where you currently stand on your credit score.  There are tons of free resources online to get a credit report and your score, such as at Experian.  Many times your credit card issuer will also provide you with your credit score.  It’s also very responsible to check your credit report to see if you have any errors, new or old, on your credit history.  This could be self-inflicted, an error with a creditor, or possibly fraudulent activity.

Credit scores range from 300 up to 850.  Below is a description of each range of credit scores:  Poor, Fair, Good, Very Good, and Excellent.

Credit Cards

After you know your current credit score, you can now understand your baseline and where you need to improve.  If you don’t already, getting a credit card is an easy way to start your credit building journey.  The most crucial part of credit card ownership is responsibility.  To increase your credit score with your credit card, you need to pay it off every month.  If you carry a balance month over month, you will be subject to extremely high interest payments, as well as the potential for lowering your credit score.  This is a lose-lose situation.  To be in a win-win situation with credit cards, only spend on the card what you can comfortably afford each month (use it for expenses you would have paid cash for anyway) and pay it off every single month.  This will help you live within your means, build credit, and maybe earn some credit card rewards to treat yourself with for being a good steward of your money.

When getting a credit card to build credit, you can shop exclusively for credit-building cards or products with a credit card company or bank, so be sure to let the vendor you are inquiring with what your goals are for credit building.

Get a Co-signer

If your credit score and history are less than optimal, you might need to start small and make sure you have a quality co-signer to sign on a loan with you to help you get approved.  You and your co-signer also have to understand that if you cannot pay your loan, the co-signer is responsible for the loan repayment.  

Building Good Credit with Good Practices

For those that have and use credit cards, be sure to keep the utilization (how much of the credit limit you spend on the card each month) under 30% on all of your credit cards.  Creditors want you to use your cards, but not too much.  This shows responsible usage and spending habits.

Another way to help your credit score is to minimize applying for multiple credit cards at one time.  If you plan to add another credit card to your total accounts, be sure to space out applications at least 6 months apart.

This leads into our next tip: total credit accounts.  Closing credit accounts and credit cards can actually hurt your credit score.  So if you pay off a credit card and don’t want to use it anymore, it’s a good idea to use it every few months to keep the card active.  Credit scores are built by your average age of credit (how long all of your credit accounts have been open) as well as the total number of credit accounts.  Credit bureaus like to see your average age of credit no lower than 6 years, but 9 years or more is what leads to Excellent ratings.  

It might seem crazy, but creditors also see creditworthy applicants with 12 or more credit accounts.  Now don’t go off the deep end and start getting a ton of accounts open all at once.  Total accounts have a low impact on overall credit scores and credit building.  As we discussed above, opening a bunch of accounts in short succession is very bad for your credit.  

Lastly and most importantly, make your payments on time.  And pay off your credit cards in full each month.  Carrying a balance is bad for your credit and it costs you so much more in interest (credit card interest is usually 24% or more, and interest is charged on your balance, and any interest you carry, so it adds up extremely quickly).  If you are unable to pay the whole card balance back in one month, pay as much as you can, but at least make the minimum payment.  And make a plan to pay the rest of the balance off as soon as possible.

When purchasing homes, real estate, and cars you do have the freedom to apply for more than one loan on a particular purchase and it won’t negatively affect your credit score.  If you apply for a home loan with 3 different lenders within a 14-45 day period (this depends on the credit bureau and the lender) this will only count as one instance of applying for credit.  If you are unsure of your window for rate shopping, stick to the 14 day window for applying for loans.  

If you apply for a home mortgage, it is recommended that you do not apply for a car loan or a new credit card at the same time as this will likely hinder your home loan application and approval.  You should also wait 6 months after a home purchase to apply for a car loan, or vice versa.


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Breaking Down Operating Loans

americanfarmfi on February 3, 2023

 

As a farmer, you have enough to worry about without losing sleep over your operating loan. 

With a new growing season just around the corner, the easiest option is probably to go with your existing loan provider. However, with so many financing tools in the market, there’s no better time to try and save money or lighten your collateral. New online applications can mean getting approved for financing in a matter of days, without ever leaving your home.

Shopping around for an operating loan can help you save money, loosen collateral, and save time. 

Why You Should Shop Around For Your Operating Loan

Here’s How Much The Savings Can Add Up

Let’s say you want to get a fixed term operating loan of $250,000. You head out to your local bank and they offer you a loan with 5% interest, a start date of March 1st, and a repayment date of December 1st (i.e. a single repayment of the full loan plus interest in December).

Still with us? Let’s break it down with some quick math.

For this loan, you’ll end up paying around $9,375 in interest (with monthly compounding interest). Overall, the repayment in December would cost you approximately $259,375.

If you took out the same sized operating loan with an interest rate of 3.5%, the interest charge would only be $6,562.50, with the overall repayment at $256,562. You would save yourself around $3,000, just by taking the time to shop around for your interest rate.

That amount can add up over the years. If this $250,000 loan were for 10 years, rather than 9 months, reducing your rate from 5% to 3.5% would save you more than $114,000 in interest payments. Those savings could make a huge difference in your ability to expand your operations with more land, or save to purchase new equipment. 

Taking a couple of minutes (and it really can be just a couple of minutes) to shop for loans could end up being a game-changer for your farming operation over the long-term.

What Else You Need To Know About Operating Loans

Here are some other factors you should consider when evaluating your financing options:

Is your lender focused on agri-lending?
Farming is a volatile business. Bad weather and commodity prices are unpredictable, and can lead to financially tough years. Lenders who are experienced in the agriculture industry understand these challenges and know that not every year will be a bumper year. If you’re going to borrow money from someone, make sure they understand the nature of your business!


What does ‘collateral’ or ‘security’ mean for my operating loan?
Collateral and security are often used interchangeably. Technically, collateral is what is used by a borrower to secure a loan. For instance, you might pledge a farm as collateral to secure your operating loan. Not all loans require collateral – it depends on the type of loan, the lender, and your creditworthiness (among other things). 

Collateral can consist of a number of different assets. For instance: land, building, equipment, and livestock can all consist of collateral. What you can use as collateral will depend on your lender and the type of loan that you’re taking out. Typically, you will not be able to use the same collateral for multiple loans, although this will depend on the terms of your loans. 

The purpose of collateral is to provide the lender with an alternative source of repayment if you’re unable to make your loan payments. For instance, if you default on your loan, the lender may be able to seize your collateral and sell it in order to receive the payment they are owed and lowering their risk. For this reason, collateralized (or securitized) loans will often have lower interest rates. However, for the borrower, collateralized loans introduce the risk of having your collateral seized if you start missing payments. 


Why are some interest rates higher than others?
Your interest rate will depend on many factors, including the type of loan, size of loan, whether it is collateralized, the lender, and your credit history. As explained above, collateralized loans will typically have lower interest rates than uncollateralized loans. Short-term loans also tend to have lower interest rates than long-term loans (all else equal), although this can vary by lender. 

The best way to make sure you’re getting a fair interest rate is to compare your rates across different lenders. It is usually free to see what rate you are offered by a lender, and while it may have a small impact on your credit score, it can be worth it if you are approved at a lower rate. 


Keep fees in mind
Don’t forget about origination fees! This is usually a small percentage (often 0.5% – 1.0%) of your total loan value charged by the bank in addition to your interest, as compensation for processing your application. Remember to keep this in mind when you’re considering an operating loan and for future payments.

How Can AFF Help?

Did you know we are now offering farm lease operating loans through American Farm Finance with an agricultural-focused loan partner? Here is a snapshot of how we’re trying to take the pain out of your financing experience.

  • All-digital application (no printing or scanning)
  • Collateral generally not required
  • Rates as low as 2.99%

Make sure you’re getting the right rate for the right operating loan, and put in an application to American Farm Finance. Apply online today and you should get a result within 1-2 business days.

Operating Loans?  Term Loans?  Farm Mortgages?  Which Loan do I Need?

americanfarmfi on February 3, 2023

When starting a farming operation and seeking capital to get you in motion, there are a handful of farm loans a new farmer has to get familiar with to be successful.  Let’s discuss these loans and what makes them each a tool in your farm finance tool chest.

Operating Loans

Operating loans are short term loans that help pay for your daily farm expenses.  These expenses are your annual expected costs to run your farm business throughout a growing season.  Below are some bullet points about what you can use your operating loan for, length (timeframe) of the operating loan, what collateral the loans require, and what type of interest rates to expect:

  • Most operating loans are a one-year term.  The loan balance is repaid on the loan maturity date, or the expiration date of the loan.
  • Operating loans are commonly revolving credit instruments:  this means as you use the loan throughout the growing season and make repayments, you can access that capital again if you need to. Here’s an example below:
    • Farmer has a $100,000 operating loan.
    • Farmer uses $25,000 to pay for seed in February, leaving Farmer with a loan balance of $25,000 and available capital of $75,000.
    • Farmer pays back $10,000 of the loan in March and now has a balance of $15,000 on the loan and $85,000 in available capital to use for farm expenses. 
  • Operating expenses usually include seed, fertilizer, labor, cash rent for land, and fuel.  
  • They can have fixed or variable rates of interest.  Interest is paid when the loan matures and final payment is due.  
  • Operating loans require collateral, as do most loans.  Collateral usually includes liens on crops, livestock, and farm equipment if necessary.

Intermediate or Term Loans

Intermediate or term loans are short term loans that help pay for farm equipment or livestock. You can find information below about the characteristics of term farm loans:

  • Term loans typically vary in length of time from one to seven years.  The loan balance is repaid with a structured repayment plan.
  • Term loans are commonly used to buy tractors, combines, implements, livestock, or farm buildings/structures.
  • They can have both fixed and variable rates of interest.
  • Collateral for a term loan is commonly the asset that the loan is used to buy.
  • Term loans generally have a Loan-to-Value (LTV) ratio, meaning a lender will only lend up to a certain amount of the purchase price. 

Farm Mortgage and Refinance Loans

Farm mortgages are loans used to purchase farmland.  Farm refinance loans are used to restructure a current farm mortgage to achieve access to equity to improve the land itself or to acquire a lower interest rate.

  • Farm land loans can be as short as one year long and up to 30 years.  The farm loan balance is repaid with a structured amortized repayment plan.
  • They can have fixed or variable rates of interest.  Usually, variable rate loans have a period of time the rate can be floating (3 or 5 years out of a 30 year loan).
  • Collateral for farm land loans is the land that the loan is used to buy, and any other land that is pledged as collateral to lower the amount due at signing or to help with the down payment requirements.
  • Land loans have a Loan-to-Value (LTV) ratio.  This means that a lender will only lend up to a certain amount of the purchase price of the land.  Below is an example of a common farm loan scenario:
    • Farmer wants to buy 50 acres of tillable land for $500,000.
    • A farm mortgage at this amount typically has a LTV of 75%, meaning that the bank will only lend up to 75% of the land’s appraised value.
    • Farmer secures a loan for $375,000 to purchase the land for $500,000, and either pays in cash the $125,000 down payment; or, uses some of their land that is owned free and clear as collateral to cover the down payment required.

Farm Loans in Minnesota

americanfarmfi on February 3, 2023

Introduction

Farm sale prices are determined by a number of factors, two of which are the productivity (yield) and the rental income.  If a farm is able to produce more bushels of corn or beans compared to the farm down the road from it, it is worth more when it comes time to sell.  The same can be said about the rental income from a farm.  If your farmer pays you a more competitive rent compared to farms in the area, the farm is worth more in a sale.

Minnesota Average Corn Yield for 2021

  County State Year Commodity Average Value
1 Waseca Minnesota 2021 Corn 213.7
2 Watonwan Minnesota 2021 Corn 210.1
3 Freeborn Minnesota 2021 Corn 208.1
4 Steele Minnesota 2021 Corn 206.2
5 Sibley Minnesota 2021 Corn 203.9
6 Nobles Minnesota 2021 Corn 203.3
7 Blue Earth Minnesota 2021 Corn 201.5
8 Martin Minnesota 2021 Corn 195.3
9 Cottonwood Minnesota 2021 Corn 195
10 McLeod Minnesota 2021 Corn 194.4

Minnesota Average Cash Rent for 2021 – $177

Minnesota traditionally has competitive cash rents for non-irrigated tillable row crop farmland in the Midwest.  The average cash rent earned throughout the state in 2021 was $177 an acre.  Below is a chart of the highest average cash rents by county.  2021 Non-Irrigated Cash Rent County Leaderboards

  State County 2020 Avg. Cash Rent 2021 Avg. Cash Rent
1 Minnesota Sibley $249 $250
2 Minnesota Rock $224 $249
3 Minnesota Blue Earth $217 $238
4 Minnesota Faribault $223 $237
5 Minnesota Watonwan $226 $235
6 Minnesota Martin $221 $232
7 Minnesota Dodge $210 $232
8 Minnesota Le Sueur $221 $231
9 Minnesota Jackson $198 $229
10 Minnesota Mower $217 $229

When landowners and farmers calculate cash rent, one common method is the Return on Investment (ROI) approach.  In this method:  Rent = Value of Land/Acre X ROI (~2.5% – 4%) Here is an example of the ROI method:   Rent = $750,000/100 acre X 2.5% Rent = $10,000 X 2.5% (0.025) Rent = $250 per acre.   What this means:  If land has traditionally been under-rented compared to its potential yield productivity (bushels per acre) it can lower the overall value (price per acre) of a farm in the event of a sale.  This is why it is crucial to track cash rent and evaluate it compared to the productivity of the farm and track soil testing and nutrient application.

Minnesota Average Soil Productivity (PI) – 66.36 CPI

Minnesota has very productive soil for an array of agricultural purposes.  Minnesota is known for its corn, soybean, sugar beets, and wheat production. The Minnesota Crop Productivity Index (CPI) ratings provide a benchmark for different soil types and how well they are suited for row crop production. Soil ratings range from 0 to 100 in Minnesota. Like most soil rating scales, the closer to 100 translates to higher potential productivity for that soil. Here are the top 10 Counties by average soil PI in Minnesota:

  County State Crop Productivity Index
1 Nobles Minnesota 90
2 Chippewa Minnesota 89
3 Martin Minnesota 89
4 Traverse Minnesota 89
5 Cottonwood Minnesota 88
6 McLean Minnesota 88
7 Douglas Minnesota 88
8 Sibley Minnesota 88
9 Jackson Minnesota 87
10 Redwood Minnesota 87

Minnesota Average Farm Sales – 2021 – $8,200.93/acre

As one might suspect, the counties with the highest average yields, cash rent, and soil productivity are typically the highest counties in the state for average sale prices for farmland*.  All of these extremely important pieces of data about farmland go hand-in-hand.   Minnesota is known for its soil and crop diversity, growing different crops throughout the state to match the appropriate soil types. Land sale values will vary throughout the state to reflect this diversity.  The average sale price for the top 10 counties in Minnesota in 2021 was $8,200.93/acre.   Below is a chart showing the top 10 counties for average prices of farms for sale in Minnesota in 2021.

  County Sold Year Median Price per Acre Total Acres
1 Carver 2021 10,392.16 2,401.20
2 Scott 2021 9,859.61 4,708.70
3 Sherburne 2021 8,848.43 3,205.90
4 Wright 2021 7,951.09 6,108.10
5 Olmstead 2021 7,754.38 10,182.80
6 Jackson 2021 7,669.40 8,013.50
7 Nicollet 2021 7,512.01 7,131.60
8 Sibley 2021 7,490.18 8,852.80
9 Faribault 2021 7,488.48 10,848.30
10 Mower 2021 7,043.60 11,938.10

*We’ve removed sales of residential and development property to the best of our ability to accurately portray the sale values of farmland throughout the state.

Farm Loans in Minnesota

With all of this data about yield, cash rent, soil, and sale prices, the next step in one’s journey in farmland ownership and investment is, “how do I pay for it if it is such a valuable asset?”  Farm loans and mortgages are very common when investing in farmland or expanding your operation.  Unlike home mortgages, farm mortgages typically require 25%-35% of the purchase price of the farm as a down payment.  This can also be represented as a Loan-to-Value ratio.  Now, if you already own farmland with equity, you are able to pledge farmland as collateral for the new farm purchase which can lower the amount required for a down payment.   If you are ready to purchase your next farm you can explore our farm mortgage rates here and get a decision in 15 minutes without ever having to go to the bank and fill out pages upon pages of paperwork for an approval.

Found the farmland you are interesed in purchasing?

Now find your loan partner that will make it a reality. Get approved in seconds with an all digital application from AFF, who will work with you to make sure you get the best rates possible.

Farm Lenders

americanfarmfi on February 3, 2023

An Overview of Farm Lenders

Farm expansion requires capital.  If a farmer or investor doesn’t have the capital on hand in the form of cash or equity in other assets (i.e. land), they will likely go to a bank to acquire the necessary funds to grow their business.  The question is, what lender is the best to grow your farm?

Hometown Farm Banks

For most farm towns, there is a local bank where farmers can head into town during business hours to set up an appointment with the loan officer to apply for a loan.  

Once the farmer has an appointment with the loan officer, they go through the traditional experience of getting a loan:  filling out standard paperwork, providing information about their personal and business life, and talking to the loan officer about the intended use of proceeds.  Some folks might not feel very comfortable sharing so much information with the banker that they will see at the Friday night football game or at church on Sunday.  Others may appreciate the personal relationship with a local banker that comes along with a hometown farm bank.

Commercial Banks

Other lenders that can provide funds for farmers are larger, corporate, commercial banks.  They can offer competitive rates for loans, but not all of them provide lending for agriculture related borrowing needs.  There are a few commercial banks that specialize in ag lending.  They will have remote offices or branches to provide a local presence to farmers.  Like a farm bank, larger institutions will have written applications and approval processes to give farmers funds for their growing operations.

Farm Credit Banks

Farm Credit was created in 1916 with the purpose of providing lending for rural communities throughout the U.S.  Farm Credit Banks, and their credit associations are cooperatives that lend to customer-owners (borrowers become part owners when they get a loan from a Farm Credit association bank). Farm Credit banks pay patronage dividends back to customer-owners when the banks have had a successful year.  Farm Credit banks are regulated by the Farm Credit Administration.

Government Agencies

If working with the local bank or a larger private commercial bank isn’t the right fit for you, another lender for farm needs is Uncle Sam.  The U.S. Department of Agriculture and Farm Service Agency (FSA) provide a variety of loan programs for buying land, operating loans, microloans, and down payment assistance.

The government lenders are known for having special assistance programs for first time farmers, minority, women, and Native American farmers.  

The FSA offers exceptionally low rates and sometimes lower down payment requirements compared to private lenders, but the application and approval process can be longer to complete.  There are very strict criteria to qualify for government loans and the approval and closing process for these loans are known to be longer than a private bank loan.  For some, the lower rates and special programs are worth it to work through the loan application and approval process.

Digital Intermediaries

The last of the common types of farm lenders are digital intermediaries.  American Farm Financing is a digital intermediary. AFF is not a farm bank or lender and doesn’t actually provide funds to borrowers.  Digital intermediaries provide a quick, easy, digital application and approval process that can set borrowers up with multiple lenders that may best suit their needs.  Instead of driving into town, a digital intermediary takes the most basic information necessary to get a loan and packages it into a quick online form.  A farmer picks out their preferred loan term with the rate that is available  Once you hit submit, a decision can be made.  Once approved, funds can be accessed within days. You may or may not have a designated loan officer for all digital intermediaries – the goal is to get capital to farmers quickly, rather than spend more time working through your operation.

So, there are plenty of ways to get access to capital to buy farm land or get operating funds.  AFF is rapidly providing solutions to simplify and speed up the process for farmers, landowners, and investors alike.

Found the farmland you are interested in purchasing?

Now find your loan partner that will make it a reality. Get approved in seconds with an all digital application from AFF, who will work with you to make sure you get the best rates possible.

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