National Sustainable Agriculture Coalition

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

Microloans

Microloans

Streamlined small loan options for operating costs, land, or equipment purchases

While there are a variety of financing options available for farmers today – including private banks, Farm Credit, and the Farm Service Agency (FSA) – beginning farmers, smaller-scale and, diverse operations often struggle to find appropriate credit options that reflect their financial goals and business aspirations. These farmers may have difficulty obtaining financing due to a lack of credit history, the increased risk associated with lending to a new or young farmer, or a lender’s unfamiliarity with non-traditional types of operations. FSA Microloans are specifically designed to serve these beginning and smaller-scale farms.

Learn More About FSA Microloans:

Program Basics

The purpose of the FSA Microloan Program is to meet the credit needs of young, beginning, socially disadvantaged, and veteran farmers through a simplified loan application process. This program may also be appropriate for farmers serving local and regional food markets, including urban and small-scale, diversified operations.

Microloans may be used to cover both annual operating expenses (e.g., seeds, animals, small equipment) and to purchase farmland. Microloan repayment schedules and loan terms are similar to those of Direct Operating and Ownership Loans. Loans may be made for up to $50,000, and farmers can apply for both an operating and an ownership microloan for a combined maximum of $100,000.

Eligibility

The same eligibility criteria for FSA Direct Operating and Ownership Loans apply to microloans.

However, unlike other direct loan programs operated by FSA, microloans made to beginning or veteran farmers do not count toward the total number of years that a farmer can receive assistance through FSA’s direct loan program. For all other farmers, microloans do count toward the seven-year term limit during which a farmer can receive FSA direct loan assistance.

Loan recipients must be able to repay and provide enough collateral to secure the loan on at least a dollar-for-dollar basis, and must use the loan for authorized purposes. Similar to other FSA loans, a third party pledge of security or co-signer may be accepted to meet security requirements.
In order to be eligible for an FSA microloan, a farmer must have sufficient prior experience working on a farm. Qualified experience can include small business experience, participating in a self-directed apprenticeship, or having prior involvement with an agricultural organization (e.g., 4-H, FFA, farm incubator programs, or farm training organizations).

FSA will no longer require an itemized cash flow budget for microloan applicants. This was previously required, but was eliminated because it made it difficult for diversified fruit and vegetable growers and community-supported agriculture farmers to participate.

The Program in Action

Since the microloan program launched in January 2013, local FSA offices across the country have provided over $570 million in financing to beginning, minority, and operators of small-scale farms. Those small loans have helped 25,000 farmers in almost every state across the country; many who had previously had very few credit options other than high-interest credit cards to cover ongoing farm expenses.

Examples of how farmers have used the FSA Microloan Program include:

  • In New Mexico, a Native-American couple used their microloan to purchase 25 breeding cows, and also to rent a bull in order to expand their grazing herd. The FSA loan opportunity was incredibly valuable to them because many private lenders aren’t able to make farm loans on tribal lands. Without programs like this, many tribal farmers who have grazing and farming permits would find no way to purchase animals or equipment to utilize the land.
  • In South Carolina, two young brothers used a microloan to purchase a 10,000 bushel grain bin with auger, which provided additional storage just in time for the harvest season. Because they were younger and had little collateral and no credit history, finding options through traditional lenders had proved a challenge for these farmers. If it weren’t for the microloan program, they would have suffered a significant crop loss with nowhere to store their crop after harvest.

To read more about how this program has increased access to credit in different regions, check out this microloan analysis on NSAC’s blog or this analysis from USDA’s Economic Research Service.

How to Apply and Program Resources

The FSA Microloan Program uses a streamlined application process that requires less paperwork than other federal lending programs, appropriately reflecting the smaller loan amount. Microloan application forms are available online but farmers must apply in person at an FSA county office or USDA Service Center.

This program is administered by FSA, and information about the program is posted on the FSA website under Farm Loan Programs.

For information and applications, go to your FSA Regional Service Center, or to your state FSA office. You can locate all of the contact information by using the FSA Service Center Locator.

Find the latest news about FSA microloans on our blog:

Program History, Funding, and Farm Bill Changes

FSA began making microloans in 2013 through the existing authority of FSA’s Direct Operating Loan Program. The 2014 Farm Bill created a permanent authorization for microloans, and also made additional changes, such as exempting beginning and veteran farmers from term limits and providing these farmers with an optional lower interest rate (applicable in years when regular interest rates are high) and creating a pilot program to allow FSA to work with a third party intermediary lender to make microloans on FSA’s behalf (which has not been implemented to date).

The 2018 Farm Bill made only a few changes to FSA Microloans, including an important technical change to allow farmers to receive both an operating and an ownership microloan.

Microloans are funded through FSA’s Direct Operating and Ownership Loan Programs, and funding levels for these loans are established in the annual appropriations process. In recent years, Congress has appropriated roughly $3 billion for direct operating and ownership loans – of which over $161 million went to FSA microloans. These funding levels are expected to continue in future years, but it is also expected that FSA will increase the number of microloans made each year as more outreach is done to farmers on this loan program.

Authorizing Language

Section 5202 of the Agricultural Act of 2018 amends Section 313(c) of the Consolidated Farm and Rural Development Act, to be codified at a note to 7 U.S.C. Section 1943.

Last updated in March 2022.