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As a capital-intensive industry, farming often requires significant upfront spending on land and ag equipment in order for farmers to launch — and scale — their ag operations. To help empower farmers, FBN® Finance is referring those who may not qualify for traditional ag financing to trusted lenders that offer Small Business Administration (SBA) loans.
Below, we’ll provide answers to common SBA questions, including:
What Is SBA Lending?
What Are SBA Loan Types?
What Can SBA Loans Be Used for in Agriculture?
SBA Loans: Pros vs. Cons?
Does FBN Finance Offer SBA Loans?
The U.S. Small Business Administration works with commercial lenders across the country to help provide loans to a wide variety of small businesses, including family farms. As a federal agency dedicated to supporting entrepreneurs and small business owners, the SBA emboldens banks to provide loans to operations they may not typically conduct business with by guaranteeing that lenders will repay funding.
The lender, working with the SBA on behalf of the customer, provides the funding and servicing of the loan. This makes it easier for small businesses, such as ag operations, to access capital.
There are several types of SBA loans, among the most common of which are 7(a) loans, 504 loans, and microloans. The primary loan type for small businesses is the 7(a) loan program, which has a number of its own loan types.
Here are three of the most relevant 7(a) loans for farmers:
Loan amount: $500,001 to $5 million
Interest rates: Negotiable, but will not exceed the SBA maximum
Decision timeline: 5–10 business days
Loan amount: Up to $500,000
Interest rates: Negotiable, but will not exceed the SBA maximum
Decision timeline: 2–10 business days
Loan amount: Up to $500,000
Interest rates: Negotiable, but will not exceed the SBA maximum
Decision timeline: Approximately 36 hours
Farmers can use SBA loans for:
Acquiring and refinancing farmland
Building and renovating farm facilities
Purchasing equipment
Purchasing ag supplies
Accessing working capital
Changing business ownership
When determining if a small business loan is right for you, weigh the SBA loans pros against the cons while keeping in mind your farm’s unique circumstances.
SBA loans are often attractive to beginning farmers because they offer financing opportunities that are not necessarily available to newer operations otherwise. For instance, they may loan to applicants that don’t meet the credit requirements of commercial banks.
The equity requirements for SBA loans, often as little as 10%, are generally lower than alternative financing. Depending on the loan type, collateral may not be necessary. For instance, 7(a) Small loans of up to $50,000 typically do not need to be backed by collateral.
Although SBA loans can have less stringent credit requirements than commercial banks, applicants with low credit scores may not be approved. Some SBA loan types may require collateral. (See collateral specifics on the SBA website.)
To assess loan risk, SBA loans have a long, comprehensive application process. This can slow down an approval decision.
While FBN Finance does not directly offer SBA loans, we partner with lenders who do, and we can refer FBN members to them to further discuss financing opportunities. If you are interested in speaking with one of our ag finance experts, call 866-551-3950 or fill out the form below.
FBN Finance offers a broad range of financing that puts Farmers First®, including:
Farmland loans that can be used for purchasing and making improvements to agricultural land, hunting ground for recreational use, and barns and other ag facilities.
Equipment loans that can be used to purchase new or used ag equipment, finance machinery maintenance and repairs, and purchase such farm infrastructure as irrigation systems.
Farm operating lines of credit that can be used to buy inputs, purchase equipment, cover labor costs, and pay rent.
Farmland capital that provides capital through a minority partner investment.
If you’re a beginning farmer, small farm operator, or family farmer, the familiar adage “you need to have money to make money” may ring true, and the team at FBN Finance can help.
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Financing offered by FBN Finance, LLC and its lending partners. Available where FBN Finance, LLC is licensed. Terms and conditions apply. To qualify, a borrower must be a member of Farmer’s Business Network, Inc. and meet all underwriting requirements. Interest rates and fees will vary depending on your individual situation. Not all applicants will qualify. NMLS ID: 1631119.
The material provided is for information purposes only. It is not intended to be a substitute for specific professional advice. Neither Farmer’s Business Network nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in the material and any liability therefore is expressly disclaimed. The information and opinions expressed by others in this material are their own and are not endorsed or approved by FBN or its affiliates.
Please consult with SBA qualified lenders, and the SBA loan application and loan documentation, to verify information cited herein.