Lenders, Leasing & Capital Providers Category Guide

Understanding Dairy Farm Financing

Dairy operations are capital-intensive, requiring significant investment in land, facilities, equipment, and livestock. Finding the right financing partners—whether for operating loans, equipment purchases, facility construction, or real estate—is critical for both day-to-day operations and long-term growth.

Types of Agricultural Lenders

Farm Credit System

The Farm Credit System is a nationwide network of borrower-owned lending institutions specifically serving agriculture. As a cooperative, profitable operations return patronage dividends to borrowers. Farm Credit offers competitive rates and deep understanding of agricultural businesses.

Commercial Banks

Local and regional banks with agricultural lending departments can be excellent partners. They often value long-term relationships and local market knowledge. Community banks may be more flexible than larger institutions.

Farm Service Agency (FSA)

The USDA's FSA provides direct loans and guaranteed loans for farmers who may not qualify for commercial credit. FSA is often essential for beginning farmers or those recovering from financial difficulties.

Equipment Dealers and Manufacturers

Major equipment manufacturers like John Deere Financial, AGCO Finance, and CNH Industrial Capital offer equipment financing, often with promotional rates on new equipment purchases.

Types of Loans

Operating Loans

Lines of credit for day-to-day expenses—feed, supplies, breeding, labor. Typically renewed annually with variable terms.

Term Loans

Fixed-term financing for equipment, livestock purchases, or facility improvements. Terms typically match the useful life of the asset.

Real Estate Loans

Long-term financing for land and permanent structures. Terms of 15-30 years are common.

Leasing

Equipment leasing can preserve capital and provide flexibility. Operating leases keep assets off balance sheets while capital leases lead to ownership.

What Lenders Look For

• Repayment capacity: Cash flow to service debt
• Collateral: Assets that secure the loan
• Equity: Your investment in the operation
• Management ability: Track record and skills
• Production history: Past performance data

Cost Considerations

Interest rates vary by lender, loan type, term, and borrower qualifications. Operating loans may run Prime plus 0-2%. Equipment loans typically range from 4-8%. Real estate rates are often lower due to strong collateral. Always compare total cost including fees, not just interest rates.