There are also conventional ag loans, made by banks who lend to farmers. The Federal Land Bank/Production Credit Association are nationwide and makes these loans and there are regional banks who do so as well. Most of what I call the “Sunday paper banks” do not loan on land. If you talk to one of them or a mortgage broker be sure they understand very clearly your intentions and that part of their collateral will be land, cattle and machinery. Expect to pay a bit higher interest rate than the Sunday paper banks advertise - an ag loan is more like a commercial loan than a home loan. As always the interest one pays is inversely proportional to how much you need lower payments, which is backwards until you realize that this is all about risk to banks - someone who doesn’t need money has the least risk. Those to whom they've loaned before, successfully, also have less risk.
In the American West, insurance companies are large lenders, but I have not heard of one such loan being made in New York, but it might be worth inquiring into.
Locally, besides the FSA, there are really just 2 choices who cover my whole area: NBT (Norwich Bank & Trust - ask for the Ag Department, which is located in the Canajoharie office) and Pioneer farm Credit (part of the FLB/PCA system) who has offices in Cobleskill and Sangerfield. In addition there are several local banks who do make ag loans, but cover only a limited area, so it’s hit or miss with them. In general you want a bank which services their own loans and does not sell them to others.
These banks all vary in what they are looking for, but in general they want 25% down. That is not a hard and fast figure. If they want to make the loan, they might do 20%, and if they feel there is more risk than they are fully comfortable with, they may ask for a higher downpayment. If you have off-farm income, that may count towards the repayment capability that you have, but it may not count on a 1 for 1 bats. Here’s an example we see from time to time. Suppose you owned an apartment building that you were not going to sell as you like that $3000/month coming in and figure with the farm you may need it. They may only credit $2500 of this toward your farm loan repayment ability as they know that sometimes tenants leave, creating a vacancy for a period, and sometimes you need to remodel after they leave or make repairs.
If you have a written business plan and have obviously thought through very well what you will need and how you are going to pay it back, your application will receive greater consideration. After all, it’s a business you will be running. It is also a lifestyle and a home, but they are interested in it as a business which is going to make money for both you and them. There are figures lenders use to quickly determine the suitability of a buyer and their purchase. These benchmarks vary from time to time as economic conditions vary, but here are some of them. Debt per cow, the borrower's percentage of equity in that total operation, and the percentage of the milk check which can be devoted to debt repayment are three that used to be widely employed on dairy farms.
Be aware that a lender will not get too far into the process if you do not have a Purchase Contract on a specific farm. They have all done so in the past and then heard from the borrower that while he was doing his bank thing, it got sold to someone else. Or, worse yet, the borrower tells them that the owner wants more money than they “thought” they could buy it for. But you do need to talk to lenders beforehand to see what they feel you “qualify” for, so you don’t waste your time and your emotional energy on something that will never come to be.
Another source of funding, used less often in these days, is owner financing. Most often this is employed when an owner sells to a trusted employee, but sometimes, not often, it is done for relative strangers. In general there are 2 things needed for this to happen. First, the owner should be pretty much debt-free. He can't give clear title unless his debts are paid off first. And his bank won’t let him sell without being aid at the closing. Secondly, at the very least the owner will ask for enough money down to buy his new (to him) home and to cover his closing costs which include various taxes, legal fees, and my services, perhaps more. Almost zero owners will finance the sale of chattels as they all know too well how many things can go wrong with poor or uneven management. They’ve seen it happen to neighbors in the past and are not going there. So you should expect to be able to get these vital components in another way, cash or borrowed. All these things coming together are rare anymore, but it can still happen once in a great while.
What is more likely with owner participation is for them to sell one component to a buyer and plan to sell the rest over time while leasing it to them. That could be cows one year, machinery another, and the farm later on. Or it could be part of the farm now and part later. Often, that’s how he acquired it. He bought a small farm and as his business expanded, added more land, more cows, more buildings, and more machinery. so it sometimes make sense to divest himself of it in the same (reverse) way. A good broker will be able to explore these kind of options with both parties. Beware: the seller’s lawyer will nearly always advise against it. He doesn’t have to sell anything himself and doesn't know how hard it is to do without fire-sale prices, plus they always think of the worse case scenarios; it’s their job.