Grant and Loan Opportunities for Starting your Farm

You may have heard that there are many opportunities for grant funding for starting your farm. There are some available, however, loan opportunities are more numerous.

Grants

There are few grant opportunities available for agriculture that do not require a research component. Keep in mind that you may find grants listed; however, they may not be awarding funds at the time. Read the grant thoroughly to make sure you are eligible to apply, then check with the granting agency before completing the application to see if the grant has current funding.

The Small Business Innovation Research (SBIR) grants are available for operations that are for-profit, United States (U.S.) owned and operated, and employ under 500 people. The work must be completed within the U.S. and focus on research and development. It is advisable to work with a Small Business Development Center (SBDC) or someone trained by the SBIR program when completing the application. These people will be able to assist and advise but not write the grant for you. More information about the programs can be found SBIR Website.

The Northeast Sustainable Agriculture Research and Education (SARE) program offers grants for farmers interested in testing new ideas and farm techniques. There are four regions for the Sustainable Agriculture Research and Education with Pennsylvania being in the Northeast. SARE grants are not used to start your farm but may be used for projects involving research and education. You can purchase items necessary for the research but large ticket items (land, equipment, or capital investment) are not allowed. Any findings you discover from the research must be made public and shared. Please contact your SARE region for more information.

The United States Department of Agriculture's (USDA) Alternative Farming Systems Information Center (AFSIC) has an index of federal grant and loan programs for agriculture and rural development. The site contains links for grants and loans for farmers and additional information for farmers who are also Veterans, among others.

The USDA Value Added Producer Grants that are to assist farmers who want to begin adding value to their production. An example of adding value may be to convert your apples into applesauce. The program suggests working in two phases with the first being a planning grant with a maximum award of $75,000 and then working capital grants for up to $250,000. Both phases require a match from the awardee of 50%. If you receive a $50,000 grant, you must contribute $25,000 of your own funds for the project. These are competitive grants, and you should work with your local USDA representative.

The planning grants are used mostly for a feasibility study, business plan, or marketing study while the working capital is used to implement the findings from the results of the research conducted in the planning process. The capital expense grants are available for processing costs, marketing, and advertising expenses, or some inventory and salaries. Land Grant Universities and Non-profit organizations are eligible to apply for USDA Beginner Farmer Rancher Development Grants which are designed to benefit new and beginning farmers. Many times, these grants are research focused however, they work with farmers to develop the programs covered by the grant. If approached by an entity like a University Extension office who is applying for one of these grants, you may see potential benefits from working together.

In Pennsylvania there are several Economic Development Corporations and Districts. The Pennsylvania Economic Development Directory can be found online. Your county may also have an Economic Development Corporation that can partner with lenders and the PA Department of Community Development to access funds for farmers. Please check with your county government office to determine if there is an Economic Development office near you.

Cost Sharing

Conservation Districts and the Natural Resources Conservation Service (NRCS) offer cost-share programs that may help you pay for fencing, integrated pest management, and other conservation efforts.

County Conservation Districts work closely with their Federal counterparts the Natural Resources and Conservation Service but administer programs within the county in which they are based. Find your local conservation office by visiting the Pennsylvania Association of Conservation Districts Inc. or by contacting them at 717-238-7223. You can also find your local Pennsylvania Conservation District online.

For information about the  USDA Natural Resource Conservation Service (NRCS) visit their State Offices Directory. NRCS can provide the most up-to-date information on cost-share programs and conservation opportunities available in your county. Find your local office in PA online.

NRCS has many programs designed to conserve soil and protect clean water. They provide technical assistance and cost sharing for many conservation practices. You may be required to fund the practice and then apply for reimbursement for their portion of the cost.

Through their Conservation Innovation Grants, NRCS provides grant funding for approaches or technologies that have a high chance for success. Find more information about the financial assistance NRCS offers online.

For example: The Environmental Quality Incentives Program (EQIP) provides financial and technical assistance to agricultural producers in order to address natural resource concerns and deliver environmental benefits such as improved water and air quality, conserved ground and surface water, reduced soil erosion and sedimentation, or improved or created wildlife habitat.

Loans

Many commercial lenders, from large to regional and local banks lend money to farmers. You will need to develop relationships with these banks and provide the documentation they require to assess your ability to repay the loan. If you and your family have patronized the same bank for many years, you may already have the relationship developed. If you are working with a bank for the first time, it may take longer to develop a rapport and complete the loan process.

If you are a first-time borrower and want to fund an agricultural operation, you may be directed to the Farm Service Agency (FSA) for help. FSA loans money to agricultural operations when another lender has rejected that operation.

Farm Service Agency operates several farm loan programs and loans money for land purchases, operating costs, and can also guarantee loans made by other lending institutions. The funding comes from Congressional appropriations and when the funds are exhausted, you may need to wait until the next round of appropriations.

FSA's Direct Farm Ownership loans provide farmers and ranchers the opportunity to:

• Purchase farmland
• Construct and repair buildings
• Make farm improvements

A specific portion of their funding is designated for women, African Americans, Alaskan Natives, American Indians, Hispanics, Asians, Native Hawaiians, and Pacific Islanders.

FSA's Operating loans are designed to be repaid within a twelve-month time and may be used to purchase items such as:

• Livestock and feed
• Farm equipment
• Fuel, farm chemicals, insurance, and other operating costs, including family living expenses
• Minor improvements or repairs to buildings
• Refinancing certain farm-related debts, excluding real estate

FSA's Microloans are direct farm operating loans with a shortened application process and reduced paperwork designed to meet the needs of smaller, non-traditional, and niche-type operations. These microloans may also be used for land purchases.

The FSA apprentice and mentorship programs, non-farm business experience, and farm labor experience are acceptable alternative solutions for helping to meet farm experience and managerial requirements. You can now apply for and receive two micro-loans at one time. Find more information covering the microloan program online.

FSA will guarantee farm loans made by other lenders. The lender lends you the funds and FSA will provide a guarantee that the loan will be repaid. They can guarantee 90% of the loan in most cases and up to 95% in special circumstances. FSA charges a nominal interest fee for the guarantee. Find more information covering the FSA loan programs online.

Beginning Farmers and Ranchers loans are also available through FSA. Congress targets a specified percentage of FSA loan funds to beginning farmers and ranchers. There are restrictions to qualify for the loans and can be found online. For a listing of the loan programs offered, please go online.

Many loans are now written as a combination of a loan from a commercial lender, a contribution from a local economic development corporation, and a guarantee from FSA. These institutions are very familiar with working together and have the borrower's interests at heart. They want the borrower to succeed as they do not want to see farmers fail. Be flexible and provide any documentation required. If you approach your lender with a written business plan, you will demonstrate that you have considered many of the pitfalls that may be in the future. You will also show you are serious and are willing to work to satisfy the codicils of the loan(s). Contact your local financial institutions about mortgages and commercial loans.

For more information about financing your farm business or enterprise see Penn State Extension's Financing your Farm Business or Enterprise.