Aggie Bond Beginning Farmer Loan Programs

Several states operate special loan programs for beginning farmers and ranchers. One of the most common types of beginning farmers programs are called “Aggie Bond” programs. Through these programs states can assist beginning, first-time farmers to purchase land, farm equipment, farm buildings and breeding livestock through reduced interest rate loans. Through an Aggie Bond program, the state coordinates the creation of a bond that allows lenders to earn federally-tax exempt interest income on loans to eligible beginning farmers and ranchers. The tax-savings allows the lenders to provide the loans at a reduced interest rate to the first time farmer., while the credit decisions and financial risk remain with the local lending institutions. Aggie bond programs are federal-state, public-private partnership programs that provide a cost effective way for states to assist beginning farmers.

History of Aggie Bonds

Agricultural loan programs based on the use of tax-exempt bonds began in 1980 with the passage of legislation to create pilot Aggie Bond programs in Georgia, Alabama and Iowa. Activity peaked in the mid-eighties and abruptly leveled off in response to interest rate adjustments and other limiting factors contained in the 1986 tax bill. In the peak year of 1984, 24 states had tax-exempt bond agricultural loan programs or capabilities.
In 1988, commercial lenders renewed their interest in the use of Aggie Bonds as a way to support rural economic development efforts in their communities as well as support agriculture. The 1993 tax bill granted a permanent extension for the use of Aggie Bonds. This action greatly improved the availability of the program to eligible participants and allowed beginning and first-time farmers, lenders and state agencies to use the program more fully

The Aggie Bond program was further expanded on August 20, 1996 to allow state loan programs to finance beginning farmer purchases of agricultural property from their grandparents, parents and/or siblings. The definition of first-time farmer also was revised, so someone may own as much as 30 percent of their county median farm size and still be eligible for a beginning farmer loan.

In June 2008, as part of the 2007 farm bill, Aggie Bonds were further enhanced by increasing the maximum bond amount to $450,000. In addition the maximum amount was indexed to inflation and will adjust annually on January 1. The stipulation that the value of previously owned real estate could not exceed $125,000 was removed from the requirements.

Several states have established state-backed guarantee loan programs with small issues of activity bonds and taxable bonds to restore, revitalize and promote the states' agricultural and industrial businesses. Loans are made by local lenders who receive up to 85 percent guarantee of principal and interest. Several states originate and service loans through a statewide agency using federal guarantees of 90 percent of principal and interest provided by the Farm Service Agency (FSA), United States Department of Agriculture (USDA).

The following states have a guarantee loan program:


Direct Loan Programs

Many state legislatures have appropriated funds so that direct financial assistance, in the form of direct loans, can be provided by the state agricultural agencies or authorities. The purposes of these loans include ethanol production facilities, value-added agricultural products, livestock expansion, agricultural production, aquaculture development and others.

These programs help low equity farmers and ranchers obtain agricultural loans when the state agency/authority purchases a portion of a loan from a local lender. The procedural guidelines are similar to the guarantee loan programs, but in these instances, the state disburses funds to buy a portion of the loan instead of guaranteeing loan payments.


The following states have a loan participation program:



Other Agricultural Development Finance Programs

Several states also operate specialized loan and finance programs serving a variety of targeted purposes, including programs for livestock and poultry producers, horticulture, value-added processing enterprises, cooperative development, aquaculture, irrigation, conservation, environmental protection, and more.

To learn about other farm and agricultural development programs, go to the NCOSAFP Directory of State Programs to learn about unique programs that may be available in your state.

Federal USDA Farm Service Agency Agricultural Loan Programs

Producers should also check with their local USDA Farm Service Agency (FSA), which offers guaranteed and direct loan programs, including some at favorable interest rates, for eligible farmers, ranchers, and first time beginning producers.

Go here to learn more about USDA Farm Service Agency loan programs.


All contents copyright National Council of State Agricultural Finance Programs.