FSA loans?

fffarmergirl · #1 06/02/12, 05:20 PM

Is there anybody on here who has recent experience with FSA loans?

Our son is 21 and has been dreaming about going into farming full time. We just have a little 20-acre hobby farm here and we've only raised meat chickens, egg chickens, rabbits, a garden. He worked on an alpaca farm in high school but does not have any actual farming experience.

There's a really big farm for sale nearby - 228 acres. It has big barns and a big dairy barn, silos, hay fields, pastures, etc. It was a working farm until a couple of years ago when the owner had to retire due to health problems. I actually met the owner when I went to his house to take care of him as a home health nurse. He's not living on the farm any more.

The owner was saying that it's easy for young men to get FSA loans now and that our son could probably get an FSA loan and keep working at his welding job for 6-7 years while he builds up a herd of beef cattle and gets experience. He says the payments are very low and that he could get a loan for the farm plus equipment and still afford to make the payment. He says his 26-yr-old nephew got a million dollar farm loan and his payments are low enough to make it possible for him.

Our son is only making $12 an hour as a welder. Is this guy pulling my leg? The farm plus equipment would probably be half a million dollars!

rancher1913 · #2 06/02/12, 08:56 PM

i've personally never had much luck with them. they advertise all the time but when you call the number you get a run around. I'm talking about the beginning farmer program and its not really with fsa but an offshoot of the ag department. the fsa loans are for existing farmers and are a lender of last resort, meaning you have to be turned down by everybody else.

fffarmergirl · #3 06/02/12, 08:59 PM

Oh - I meant the beginning farmer program. I don't know what I'm talking about, yet, obviously.

nancy237 · #4 06/02/12, 09:05 PM

No way would I want my son to get started with that type loan to repay.
I would suggest a small farm while he learns the lessons on a smale scale.
I also don't see how he would work a farm that size while working full time.

fffarmergirl · #5 06/02/12, 09:11 PM

Quote:

Originally Posted by nancy237

No way would I want my son to get started with that type loan to repay.
I would suggest a small farm while he learns the lessons on a smale scale.

I talked to him about that and he says he wants to farm full time, and you can't farm full time on a small farm? He wants a big farm or no farm at all, says he doesn't want to spend his life working two full-time jobs, he'd rather be poor and be a full-time farmer. He's willing to work his welding job while he builds up his herd, but does not want to continue working two jobs.

I heard the payments are low and you never actually repay the loan - you just make the payments and then pass the farm on to your kids, who might at some point get the farm paid off. Or, alternatively, you go bankrupt.

How do the big farmers do it? I always thought they all just inherited their farms but somebody was telling me that nobody wants to inherit the family farm anymore, which is why they've started this beginning farmer program.

Molly Mckee · #6 06/02/12, 09:50 PM

I'm not sure how the loans work now but 10 or so years ago our neighbors wanted to get one but could not qualify because they had no hands on experience. Basically you had to grow up farming with your Dad or other relative, not simply work part time for a few years.

I certainly would not want one of my children to take on that kind of debt. I don't think half a million dollars is enough to buy land, equipment, and start a herd. It is expensive to plant 200+ acres in crops or pasture as well. I don't know where you are, but there are not many, if any areas of the country where you can buy farm land for 2,000. an acre.

In the farm families I know the farm is inherited. Most of them start estate planning when the kids are small so they can afford to take over the farm later. If land is not inherited, it often belonged to a family member and is priced well below market. There is a lot you learn about farming by farming, even if you have a degree. It can be a very expensive education, one best not learned when you are hundreds of thousands of dollars in debt.

Your son might want to start buying a few cows or heifers now and rent pasture. Maybe he can find a few acres with a barn and house in a few years and build from there.

plowjockey · #7 06/02/12, 10:09 PM

Quote:

Originally Posted by fffarmergirl

The owner was saying that it's easy for young men to get FSA loans now and that our son could probably get an FSA loan and keep working at his welding job for 6-7 years while he builds up a herd of beef cattle and gets experience. He says the payments are very low and that he could get a loan for the farm plus equipment and still afford to make the payment. He says his 26-yr-old nephew got a million dollar farm loan and his payments are low enough to make it possible for him.

Maybe this farmer got his FSA loan, when cropland was $300 acre, a good tractor was $800 and cattle was $15 head.

Most people cannot afford to buy even a starter home, on $12/hr wages.

He would probably like to sell the farm, might be a reason for his statements.

Not too many ventures more risky, IMO, than borrowing money for absolutely everything, to get a business going, then not having working capital, to keep it going.

Tread very lightly here.

plowjockey · #8 06/02/12, 10:12 PM

Quote:

nobody wants to inherit the family farm anymore

I'll take it.

fffarmergirl · #9 06/02/12, 10:22 PM

Quote:

Originally Posted by plowjockey

Not too many ventures more risky, IMO, than borrowing money for absolutely everything, to get a business going, then not having working capital, to keep it going.

Tread very lightly here.

That's what I'm afraid of - that he would get the cows and then not be able to feed them, or not be able to make repairs etc.

ErinP · #10 06/02/12, 10:30 PM

Quote:

Originally Posted by rancher1913

i've personally never had much luck with them. they advertise all the time but when you call the number you get a run around. I'm talking about the beginning farmer program and its not really with fsa but an offshoot of the ag department. the fsa loans are for existing farmers and are a lender of last resort, meaning you have to be turned down by everybody else.

We haven't had much luck with the Beginning Farmer program either. Near as I can tell it's nothing more than feel-good legislation. The only "beginning farmers" who ever seem to qualify are those who are buying out Dad or Grandpa's place.

fffarmergirl, in order to qualify you have to have 5-10 years of direct management experience (I can't recall exact number) of a farm or ranch, you also have to have ag.-related assets that are equal to something like 20% of the loan, AND you have to be able to make the loan payment with ag. income. Your off-farm job won't count.

I guarantee your son will NOT qualify.

nancy237 · #11 06/03/12, 12:12 AM

But I was thinking about what you said & maybe there are other ways for him to get a good start.

What if he worked full time on a farm to learn ..

BetsyK in Mich · #12 06/03/12, 08:00 AM

Have your son go directly the the USDA Farm Services Agency and ask lots of questions. There is a brochure available with some info but a face to face is much better. Warn him that he will have to ask lots of questions and perhaps return a couple times. Shows he is serious. I have heard of the program but am not knowledgeable enough to advise. If you know the property he is looking at then the Natural Resources/Conservation Services may be able to help too and the Conservation District is an invaluable asset.

So many young farmers get discouraged because of the "nay sayers", it is a challenge but can be done. Does he have anyone who is actively farming he can spend time with? Most farmers are more than happy to help out a young person, but he'll have to ask. You don't need to inherit the farm to get started but it is a hard tough life for a while until he gets his feet under him. I've seen it done.

If the farm he is interested in is just coming up for sale perhaps he should go and have a talk with the owner. He may find that he can work out a land contract deal with the owner that will benefit both of them.

This country so desperately needs young people in the farming business, average age of a farmer today is something like 62 years.

BetsyK in Mich · #13 06/03/12, 08:01 AM

Sorry, it posted double, don't know what happen.

This country so desperately needs young people in the farming business, average age of a farmer today is something like 62 years.

FarmboyBill · #14 06/03/12, 08:07 AM

U might see if the owner would work with your boy. If your boy could rent the place from the owner a couple years, than, maybe he and the owner could go to a lending place and the lender see that the owner has confidence in the boy. The boy has experience farming the place, and has shown that he can farm it and< in doing so, he could raise hay to put up for when he gets cows, hell have the hay ready for wintertime, or sell it.

fffarmergirl · #15 06/03/12, 09:00 AM

I was thinking the owner might be willing to work with him. The place has been on the market for over a year, I think, and he's already come down 25% on his price. The owner's brothers are full-time farmers and his nephew just bought a big farm. His brothers are old, of course, and his nephew is one of very few young farmers around.

I was just visiting this guy as his nurse and we were chitchatting and I mentioned my son was dreaming of being a farmer. He mentioned his place that was for sale and I said I'd seen it and drooled over it but that I'd also seen the price. He said it was appraised at half a million and he'd already come down to $345,000 and I said "it's well worth that price, but who in this area could ever afford a place like that? Anybody around here who has that kind of money doesn't want to farm, and farming won't make the payment on a place like that." He said "your son could afford it," and I said "yeah right. He's working for $12 an hour as a welder." That's when he told me about the beginning farmer program, and said there are mentors and all kinds of assistance available.

Maybe my son could work for this guy's brothers for three years and then get a farm . . . . . maybe rent the place or something.

Pie in the sky dreams, I know - but it doesn't hurt to dream.

I like your suggestions.

frankva · #16 06/03/12, 12:13 PM

Wonder why the nephew didn't buy the place.

InvalidID · #17 06/03/12, 12:31 PM

Quote:

Originally Posted by fffarmergirl

I was thinking the owner might be willing to work with him. The place has been on the market for over a year, I think, and he's already come down 25% on his price. The owner's brothers are full-time farmers and his nephew just bought a big farm. His brothers are old, of course, and his nephew is one of very few young farmers around.

I was just visiting this guy as his nurse and we were chitchatting and I mentioned my son was dreaming of being a farmer. He mentioned his place that was for sale and I said I'd seen it and drooled over it but that I'd also seen the price. He said it was appraised at half a million and he'd already come down to $345,000 and I said "it's well worth that price, but who in this area could ever afford a place like that? Anybody around here who has that kind of money doesn't want to farm, and farming won't make the payment on a place like that." He said "your son could afford it," and I said "yeah right. He's working for $12 an hour as a welder." That's when he told me about the beginning farmer program, and said there are mentors and all kinds of assistance available.

Maybe my son could work for this guy's brothers for three years and then get a farm . . . . . maybe rent the place or something.

Pie in the sky dreams, I know - but it doesn't hurt to dream.

I like your suggestions.

How old is the fella selling? If he's got a few years left maybe he could work out a profit sharing deal with your son? Your boy could work the farm picking up skills and such and his half of the profit could go towards the down payment. After 3 years he's worked a farm and has the needed skills for an FSA loan and he's got a sizable down payment.

Of course you'd want to work out the details down to the smallest possible, and you'd want it all in writing an notarized.

ETA: I meant to say that your son would work the farm and his normal job until he had the down payment and or experience needed to get the FSA loan. I'm sure you knew that but for the sake a clarity.

pumpkinlady · #18 06/03/12, 12:42 PM

Quote:

Originally Posted by nancy237

No way would I want my son to get started with that type loan to repay.
I would suggest a small farm while he learns the lessons on a smale scale.
I also don't see how he would work a farm that size while working full time.

My husband worked 7 days a week for years in a mill and farmed our 90 acres and his father's 80 acres that was 2 miles from our house. He did all this work by himself. It is possible but takes a lot of dedication so it can be done.

We only had the mortgage on our farm, had to buy almost all our equipment and livestock. No way would I have wanted to take a loan out for everything and I still wouldn't.

Tana Mc · #19 06/03/12, 01:02 PM

We have an FSA loan for 1/2 of our farm. Tell your son to go to their local office and talk to them.

Our off farm income DOES count. We also had to have a business plan for the farm and update it periodically. We also have to give them copies of our income tax forms. Our farm wasn't quite the price of the one you are looking at but close.

We could have gotten the loan for the entire farm but it would have taken up to a year to get everting approved and we needed to move more quickly than that.

We had 20 head of cows on rented ground that helped as collateral.

This loan is at an incredibly low interest rate for 40 years..... NO WAY are we going to make payments for that long. They are very happy to take any extra money and apply it to the pricipal and actually hope that in a few years, we will refinace and get it off of their books after we have built up more equity and have things running.

The main drawback is that want to know EVERTHING about your finances but I use Dave Ramsey budget forms and that is not a problem for us. I had copies of our household budget for the last year and it qualified me to be exempt from the budgeting/economics classes they sometimes require. Depending on your son's experiences, they may have other clases that they will require him to attend. We both have AG college degrees so we were exempt from those.

Also, it takes a very long time for them to get all the paperwork done and processed.

Read ALL the fine print.

I know of two differnent young men who borrowed money from FSA to get their start. One for land and the other for cattle.

I am concerned about the "big farm or no farm" attitude...... Very few of the "big" farmers that I know depend entirely on farm income...... they all have learned the hard way to not put all their eggs in one basket.

If he is primarily interested in raising cattle, I would encourage him not to buy land. We started by renting and leasing smaller acreages from older farmers or farm widows. We did that for nearly 10 years and were able to build a small herd and make a little money. That allowed us to buy some equipment and avoid a huge amount of debt.

Our plan is basically staying the same. We will own the "home farm" but plan to lease rent more pasture as we grow. With good management and a lot of luck, we might buy more land but realize that it will probably be our children that add to the enterprise when they buy their own "home farms".

Good luck to your son!!

Tana Mc

fffarmergirl · #20 06/03/12, 01:37 PM

The nephew bought an even larger farm - a very successful well-known commercial farm, and if I heard right he went into it in partnership with the current owners.

The guy selling is in his late 60s. He most likely has many years left - just not doing anything physically strenuous. He's made his $ (owns two other businesses) and seems to be enjoying his house on the lake. Maybe he will offer a profit sharing deal. He seemed disappointed that his nephew didn't buy his place, but happy that he got a bigger place and that their family will be part of the larger operation.

Tana - with raising cattle on land you're not living on, do you just drive out to tend them every day? What happens when they're calving? How about wolves/bears/cougars? I would think a person would have to live on their farm so they would hear the dogs barking when a big predator was around. We have about 10 acres he could raise cattle on but we'd have to fence it and he doesn't live here. It's something he's thinking about doing for the experience.