Halderman Real Estate sells farms weekly and this time of year we may have 3-4 farm auctions in a week.  A majority of our buyers are farmers 65%+, and the remainder are land investors, most of them are local to the farm.  Often, I receive questions about where a buyer can secure financing for a farmland purchase.

Here are the main financing options for purchasing farmland, along with key pros, cons, and strategic notes for each:

1. Traditional Bank Loans

Description: Conventional loans offered by commercial banks.

Pros:

• Competitive fixed or variable interest rates.
• Familiar process for most borrowers.
• Long amortization periods (15–30 years possible)

Cons:

• Require large down payments (20–40%).
• Approval can be strict—banks prefer strong credit and cash flow.

Best for: Established farmers or real estate investors with solid financials.

2. Farm Credit System (FCS) Loans

Description: Loans from cooperative institutions specializing in agricultural lending.

Pros:

• Tailored for farmland and ag operations.
• Lenders understand agricultural cycles and collateral values.
• May offer patronage dividends (reduces effective rate).

Cons:

• Approval standards still apply; not for distressed borrowers.

Best for: Farmers and agribusinesses seeking flexibility and agricultural expertise.

3. USDA Farm Service Agency (FSA) Loans

Description: Government-backed loans for beginning or underserved farmers.
Programs include:

• Direct Farm Ownership Loans: Up to $600,000 (as of 2025 limits).
• Guaranteed Loans: Up to $2.3 million, backed by USDA but issued by banks.
• Down Payment Loans: Designed for new farmers (requires only 5% down).

Pros:

• Low down payment and interest rates.
• Flexible terms, great for first-time or small-scale farmers.

Cons:

• Slower approval process.
• Paperwork-heavy and limited availability.

Best for: Beginning farmers or those without access to traditional credit.

4. Seller Financing (Land Contract/Purchase Money Mortgage)

Description: The seller finances part or all of the purchase price directly.

Pros:

• Flexible terms and faster closing.
• May require smaller down payments

Cons:

• Higher interest rates.
• Risk if the seller still has a mortgage.
• Limits the IRC 1031 exchange options for a tax deferred exchange.

Best for: Deals between individuals or family farm transfers.

5. Private or Investor Financing

Description: Loans from individuals, investment groups, or farmland investment funds.  Fractal Agriculture is an example of an option in this space

Pros:

• Flexible deal structures (joint ventures, lease-back, etc.).
• Can close faster than banks.

Cons:

• Often higher rates or equity sharing required.

Best for: Investors or operators partnering with capital sources.

6. Agricultural Real Estate Investment Trusts (REITs) or Partnerships

Description: Buying into farmland through a REIT or syndicated partnership. AcreTrader is an example of a platform where you can gain exposure to farmland investments.

Pros:

• No need for direct management.
• Diversification and liquidity (for some REITs).

Cons:

• Limited control.
• Returns depend on management and market performance.

Best for: Investors seeking exposure to farmland as an asset class.

There are dozens of alternatives in each of the six categories.  Halderman Real Estate has contacts within each option and can help you find the financing source that works best for you and your operation or opportunity.  If you want help, choose someone with local knowledge combined with the “world” view of developing trends and issues that impact your farm.   Please reach out to us at 800-424-2324 or www.halderman.com to explore the options.