RFA established the Beginning Farmer Loan Program to help people who want to farm in Minnesota. The program offers affordable financing, a reasonable down payment, and built-in safeguards, such as farm business management training and financial planning to help minimize the risk all farmers face. This is a partnership approach backed by the State's financial participation used to finance a purchase or possibly refinance an existing farm debt. Funding an improvement may be possible if done in conjunction with the requested financing package.
Eligibility Requirements
A beginning farmer is a person who intends, over time, to become a full-time farmer. This may exclude some established farmers who are expanding their operations. Land speculators and investors looking for tax advantages are not eligible.
The RFA recognizes that many farmers will need off-farm incomes to supplement farm earnings, especially in the early years of farm operations. To be eligible for this loan program, the borrower and their spouse may have off-farm income, but they must prove with cash flow statements that more than 50% of their gross income will come from the farm operation. These eligibility tests allow beginning farmers to be eligible for RFA loan participation and work toward becoming full-time farmers.
The farmer candidate must also meet the following eligibility tests which were established to protect them as well as the lender and the state. A farmer must:
- Be an individual who is a resident of Minnesota, a domestic family farm corporation, or a family farm partnership.
- Have sufficient education, training, or experience to succeed in the type of farming that they intend to practice.
- Have a total net worth of less than $979,000 in 2023 (indexed annually for inflation), including the assets and liabilities of their spouse and dependents.
- Have the financial need for a loan and the ability to repay the loan.
- Agree to be the principal operator of the farm to be purchased and intend to make farming their principal future occupation.
- Agree to consult with a local farm management instructor and enroll in an approved farm business management program for at least the first three years of the loan, if an approved program is available within 45 miles from the borrower's residence.
- Agree to consult with a local Board of Water and Soil Resources office or the county Natural Resources Conservation Service.
- Agree to obtain credit life insurance for the amount of the debt incurred to purchase the property.
Participating Lenders
This loan is a participatory loan. RFA partners with local lenders to purchase a portion of a farmer's loan at a lower interest rate. We utilize the local lender's supporting documentation, so farmers have limited application paperwork with us and only make payments to their bank. While all lending institutions are eligible to be part of the program, they are not required to do so. Their decision to join the RFA program is voluntary. Once they agree to join, each lender must enter into an agreement with the RFA and offer basic farm loans based upon certain pre-established rules in order to qualify for RFA participation.
Interest rates and other specific terms will vary from lender to lender depending upon the conditions of its agreement with the RFA. The RFA suggests that applicants contact more than one lender to determine the best available terms. Search for lenders who work with RFA by county with our List of Participating Lenders.
Loan Terms
Under the program currently being offered by the RFA, each loan will have a loan-to-value of no more than 90%. In most cases, the loan-to-value will be determined by the lender. Loan amortization will be scheduled on a flexible term of 15, 20, 25, or 30 years negotiated between the lender, applicant, and the RFA. However, loans will balloon and require full payment of the RFA loan in 10 years from the effective date of the loan. At the time of the balloon, the RFA participation will end, and the borrower will repay the loan. Loans carry a prepayment penalty equal to 10% of the outstanding balance in the first 5 years. The penalty is decreased by 2% annually. There is no maximum on the size of loan that a participating lender may make under the program. However, the RFA participation in a qualifying loan is limited to 45% of the lender's loan up to a maximum of $400,000.
The RFA will take a full $3,500 debt per acre on the RFA portion of the loan. An example of this would be: 80 acres X $7,777 per acre X 45% = $279,972 or $3,500 per acre for the RFA’s 45%.
The RFA will charge a reduced interest rate (call for a quote) on its portion of each loan. Each buyer should confirm the RFA's current rate when making application with the lender. The RFA interest rate is basically fixed for 10 years. However, the RFA rate may change at any time for failure to remain in compliance with the rules or statutes that govern the program.
The originating lender will retain the balance of each loan. The borrower must satisfy the local lender's guidelines. The local lender will control the day to day operation of the loan. Participating lenders are allowed to charge either fixed or adjustable interest rates consistent with their normal farm real estate lending practices and their agreement with the RFA. Therefore the actual interest rate paid by the farmer will be an average of the RFA and lender rates. For example, if the loan to purchase a farm was $300,000 after down payment, the RFA could purchase a $135,000 participation interest (45%) in the loan.
A borrower may use the program more than one time to an aggregate amount of $400,000. For example, a borrower could have two loans - one for $225,000 and one for $175,000 or four loans of $100,000 loan from the RFA.
A borrower would have to make a new application for each loan. Approval would be determined by the current guidelines in effect at the time of the application.
Find current interest rates and more information about RFA loans on our main page, here.
