State raises maximum on loans for beginner farmers


State raises maximum on loans for beginner farmers

A state loan program for beginning farmers has increased the maximum loan amount available to applicants.

The Illinois Finance Authority's Beginning Farmer Bond Program now allows farmers the chance to borrow up to $470,100, up from $250,000.

The Beginning Farmer Bonds program started in the early 1980s, previously under the Illinois Farm Development Authority. Since then, farmland values have risen over the years, but the lending limit had not changed.

At the end of 2009, high-quality farmland in Illinois cost between $5,800 and $7,500 per acre, and mid- to lower-quality land brought in $4,000 to $5,800 per acre, according to a recent report by the Federal Reserve Bank.

"Borrowers and bankers were faced with a program that was out-of-date," said Eric Reed, regional manager with the Illinois Finance Authority.

State agencies called on federal legislators and as part of the 2008 farm bill, the lending limit was linked to an inflationary index, allowing for annual increases. Raising the lending limit also required state legislative approval, which was granted last year.

"This brings it up to date with what's realistic in terms of land costs," Reed said.

To be eligible, an applicant must be an Illinois resident at least 18 years old, be a sole proprietor and have a net worth under $500,000.

The land to be purchased also needs to be in Illinois. And there are some limitations, which vary by county, on previous land ownership. There is no maximum on the applicant's age.

The applicant also needs to have financing approved by the lender of his or her choice.

"Through the tax-exempt benefits of this program, borrowers typically receive an interest rate reduction by 1.5 to 2 percent of a standard or typical interest rate," Reed said, with the underlying interest rate based on the applicant's credit. The rate is generally lower as lenders pass on the savings through the Illinois Finance Authority's tax exempt rate.

The Illinois Finance Authority is a state agency, governed by state law, but it does not receive any state appropriation. It's funded by the fees and interest revenue from its products and services, Reed said.

In addition to working with farmers, the agency offers programs for agribusinesses and other businesses and industries in the state.

The Farm Beginning Bond Program is one of the most popular ag programs.

The "bread and butter client" tends to be someone who has returned to the family farm after college, worked a few years in farming and then has the opportunity to buy land, Reed said.

In the past five years, there have been 291 transactions worth $54.6 million dedicated to new or first-time farmers through the Beginning Farmer Bond program.

More information about the program is available at


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