National Sustainable Agriculture Coalition

Supporting the economic and environmental sustainability of agriculture, natural resources, and rural communities.

Conservation Loans

Conservation Loans

Helping farmers and ranchers finance natural resource conservation projects on their land

Farmers are first and foremost stewards of the land. They are an invaluable asset in conserving our nation’s precious soil, keeping our waterways clean, and fostering habitat for wildlife and biodiversity. However, many farmers (particularly, young and beginning farmers) who want to implement conservation measures (e.g., water conservation systems or fencing and watering systems for rotational grazing) on their farms do not have the upfront funds to do so. Federal low-interest conservation loans can help to fill this credit gap by assisting farmers and ranchers in meeting conservation compliance requirements and establishing permanent conservation practices on their farms.

 Learn More About Conservation Loans: 

Program Basics

Conservation loans are administered by the U.S. Department of Agriculture’s (USDA) Farm Service Agency (FSA), but available through a commercial lender (e.g., private bank, Farm Credit) who participates in FSA’s guaranteed loan program. Conservation loans are made to eligible borrowers to cover the costs of qualified conservation projects. A conservation project is “qualified” for a loan if it is included in a conservation plan that is approved by the Natural Resources Conservation Service (NRCS), and can include a range of practices, including: establishing structural practices like installing a water-conserving irrigation system, vegetative practices like creating permanent pasture, or management practices like an integrated pest management system.

Currently, farmers are only able to obtain “guaranteed” conservation loans from a commercial lender, and these loans are currently capped at $1.75 million (the rate is adjusted annually for inflation). While the farm bill authorizes both direct and guaranteed loans, in recent years Congress has only provided funding for guaranteed loans. Farmers needing direct loans for conservation projects can generally through the regular FSA direct operating loan program.

Conservation loans operate under the same rules and loan limitations as regular FSA farm ownership loans, with two exceptions. First, for guaranteed loans FSA can guarantee no more than 80 percent of the principal amount of the loan (lower than the normal rate) or 90 percent in the case of a beginning or socially disadvantaged farmer. Second, the borrower does not have to be a family-sized farm, does not have to demonstrate an inability to secure credit from private sources at reasonable terms, and does not have to apply for commercial credit during the term of the loan should it become available at reasonable terms.

Eligibility

Farmers or ranchers who are eligible to apply for a conservation loan include: sole proprietors, farmer cooperatives, private corporations, partnerships, or limited liability companies. Although the program is open to any eligible farmer or rancher, priority is given to:

  • Qualified beginning or socially disadvantaged farmers and ranchers.
  • Owners or tenants who use the loans to convert to sustainable or organic agricultural production systems.
  • Producers who use the loans to build conservation structures or establish conservation practices to comply with highly erodible land “conservation compliance” requirements for obtaining commodity program or crop insurance subsidies.

In addition, USDA gives strong consideration to applicants who are on waiting lists to receive farm bill conservation program financial assistance, like the

The Program in Action

Since 2008, FSA has provided over $16 million in loan funding to farmers through its direct conservation loan program, and has guaranteed over $3.5 million in additional loan capital. This translates to over 230 loans made to farmers and ranchers to help them finance conservation efforts on their farms.

Conservation loan funds can be used to implement a conservation practice approved by NRCS, such as: reducing soil erosion, improving water quality, and promoting sustainable and organic agricultural practices.

Interested applicants who do not already have NRCS-approved conservation plans should work with the local NRCS staff to develop a conservation plan. New or existing conservation plans must be NRCS approved before FSA can provide financing.

Examples of some of the conservation practices that could be funded through this loan program include:

  • Installation of conservation structures or water conservation systems.
  • Establishment of forest cover.
  • Establishment or improvement of permanent pasture.
  • Transitioning to organic production.
  • Manure management (including manure digestion systems).
  • Conservation practices needed to comply with highly erodible land “compliance” requirements.
  • Conservation buffer practices such as grassed waterways, shelterbelts, windbreaks, riparian buffers and filter strips, and living snow fences.

For example, a second generation family farm that has a 75 cow dairy operation and bottles and sells its own milk, used a conservation loan to install a NRCS designed and approved manure storage facility on the farm. They used the loan to purchase and install a state of the art system which will help them manage manure and minimize nutrient leaching on their farm.

How to Apply and Program Resources

Program History, Funding, and Farm Bill Changes

Conservation loans have been reauthorized in each farm bill since the program was created in 2002. In 2008, the farm bill eliminated the outdated $50,000 limit on direct conservation loans and lowered the limit on the guarantee amount to 75 percent. It also, unfortunately, removed the requirement that borrowers had to operate farms not larger than “family-sized” farms, and also that they demonstrate an inability to get credit elsewhere. The 2008 Farm Bill also added language prioritizing support for beginning and socially disadvantaged farmers and ranchers. The 1990 Farm Bill created the priorities for sustainable and organic farming systems and for farmers needing to implement conservation compliance.

The 2014 Farm Bill left the conservation loan program mostly intact, but increased the guarantee rate for beginning and socially disadvantaged farmers to 90 percent, which was in line with other FSA guaranteed loan programs. The 2018 Farm Bill increased the maximum loan amount on conservation loans to $1.75 million, adjusted annually for inflation.

All loan programs administered by FSA – including conservation loans – are funded through the annual agriculture appropriations bill. The 2018 Farm Bill reauthorizes an appropriation for the Conservation Loan program for each year between 2019 and 2023. Although Congress has historically provided appropriations for both direct and guaranteed conservation loans, in recent years, Congress has only provided funding for guaranteed loans.

Conservation Loan Historical Funding Levels

Fiscal Year Funding (in millions)
2015 $150 (guaranteed)
2016 $150 (guaranteed)
2017 $150 (guaranteed)
2018 $150 (guaranteed)
2019 $150 (guaranteed)

For the most current information on program funding levels, please see NSAC’s Annual Appropriations Chart

Authorizing Language

Section 5102 of the Agricultural Improvement Act of 2018 amends Section 304(h) of the Consolidated Farm and Rural Development Act of 1972, to be codified at 7 U.S.C. Section 1924(h).

Last updated in June 2019.