NIFA Financing for Beginning Farmers

For over 20 years, the Nebraska Investment Finance Authority has helped beginning farmers in the state access agricultural loans at reduced interest rates

Since the early 80’s the Nebraska Investment Finance Authority (NIFA) has been assisting agricultural Nebraska with its Beginning Farmer/Rancher Program. Not to be confused with the Nebraska Department of Agriculture’s program by the same name (a tax credit rental program), NIFA’s program is for purchase of agricultural real and personal property.

Agricultural Purpose Only
NIFA loan proceeds need to be used for an agricultural purpose in Nebraska, and the borrower must materially and substantially participate in the agricultural operation. Unlike some other agricultural assistance programs, though, there are no age (other than being at least 19) or experience requirements. The borrower’s main or sole source of income doesn’t need to come from agriculture.

Interest Is Tax-Exempt
If a borrower can find his/her own lender and can meet the program definition of a beginning farmer or rancher, interest income on the loan will be tax-exempt (both federally and Nebraska state) to the lender, thus enabling them to offer the borrower a reduced interest rate.

That rate and all other loan terms are negotiated purely between the borrower and lender. The loan cannot go beyond 30 years, and the lender’s interest rate offered to the borrower has to be below their normal interest rate. Anyone can be the lender: a lending institution such as a bank, a private seller-lender using a land contract, or a private investor lender.

Beginning Farmer Definition
For the borrower to be defined as a beginning farmer or rancher, her/his net worth cannot be greater than $500,000 and she/he cannot already own substantial farmland. Substantial farmland is defined as greater than 30 percent of the farm median size for the county the land is in, or at any time valued at greater than $125,000. Acre size limits are based on census data, are periodically updated, and are listed in the NIFA program information.

This is referring purely to land used for an agricultural purpose. The value of a homestead on an acreage, for example, is not something that’s held against the borrower in comparing to previous ownership limits.

Reduced Interest Rate
Using NIFA’s program, the borrower can receive a reduced interest rate on up to $250,000 for land or permanent agricultural improvements to the land, and on up to $62,500 for used equipment/machinery or breeding livestock.

The purchase price of the deal may be greater than these amounts, but the amount that exceeds these limits would be financed in a separate loan at the lender’s normal rate. Loan proceeds must be going solely to the benefit of the borrower (the loan must be made to an individual borrower/spouse) and not to a partnership or corporation.

Find Out More
Going through the NIFA Beginning Farmer/Rancher Program can take as little as 30-45 days, depending on when an application is submitted in relation to NIFA’s regularly scheduled Board of Director’s meeting to pass the bond resolution. For more information, contact Dudley Beyer at NIFA, dudley.beyer@nifa.org.





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