Poultry Farm Loans: Six Important Things You Need to Know

9 min read. October 11, 2022 by Phil Fernandes

Looking for poultry farm loans? Here are some of the most important things you’ll need to know before applying for one. 

Poultry and eggs are a staple in the American diet. Farmers in the industry have an essential role to play in the economy and our way of life, especially considering that Americans consume 288 eggs per person and 8 billion chickens annually.

The U.S. Department of Agriculture (USDA) touts that the poultry industry provides 240,000+ jobs, and as we move further away from the lockdowns of the pandemic, that number is expected to rise.

The USDA’s Farm Service Agency prioritizes farmers in this industry because of their importance, which is why they offer competitive financing options to help farmers grow and increase their productivity, profitability, and influence within the industry. 

Getting financing for a poultry farm

Despite their role, managing a poultry farm is no easy job. Your output depends on many factors you often can’t control, including the animals you raise, the weather conditions in your area, and the price of equipment, supplies, and the farm you operate upon.

Much like other businesses, cash flow is crucial to your success, and you can expect to encounter problems when managing your revenue at some point over the lifetime of your operation.

Some entrepreneurs in the industry choose to cut costs in other areas of their business to free up cash or afford a growth opportunity, but you can preserve the integrity of your farm and make your operation stronger by securing financing to support you as you grow.

Whether you need to purchase new equipment, stock up on inventory for an upcoming busy season, or hire additional staff, getting poultry farm loans could be what you need to take your business to the next level. Here are ten things you need to know when it comes to applying for poultry farm loans:

1. How to get financing for a poultry farm through FSA

The FSA, or the Food Standard Agency, offers numerous programs for new poultry farmers looking to enter the industry and existing farmers who need additional capital to manage their operations. Here are a few poultry farm grants that you can seek:

1.1 Farm Operation Loans

Purchase livestock, equipment, and inventory with the help of a farm operation loan. You can borrow up to $400,000 with one of these financing products, and the repayment terms vary between one and seven years.

1.2. Farm Ownership Loans

Farm ownership loans are used to purchase a new farm, expand a current farm, improve your current operations, increase productivity, or preserve farmland for future generations, according to the FSA. The maximum borrowing limit is $600,000, and the maximum repayment terms are 40 years from the start date of your financing.

1.3. Microloans

When it comes to poultry farm loans and grants, FSA offers minor financing instruments, known as microloans, to give entrepreneurs a small influx of capital to help them tackle challenges. Microloans are characterized by limited borrowing limits, up to $50,000, and repayment periods of up to 25 years. 

1.4. Emergency Loans

Natural disasters can turn your poultry farm into a nightmare in a matter of seconds, but the FSA has proactively established programs to help.

Emergency loans are designed to help farmers recoup their losses after inclement weather or natural disaster, but they can only be used if the Secretary of Agriculture declares an event as a natural disaster or if the President establishes a state of emergency.

There are other poultry loans programs, like youth loans and Native American Tribal loans, that specific groups of people can leverage to support their farms and ranches. For more information on these programs and their benefits, visit the FSA website.

2. Getting poultry farm loans with FSA: maximum interest rates

When it comes to poultry farm loans, all FSA loans contain a maximum interest rate that lenders can charge. The FSA sets the rate in accordance with the Secured Overnight Financing Rate (SOFR) and the Daily Treasury Par Yield Curve Rates. Here are the details according to the FSA:

• For loans with rates variable or fixed for less than five years:  The previous business day’s SOFR plus 6.75%. 
• For loans with rates fixed for five years or more:  The previous business day’s 5 Year Treasury note rate plus 5.5%. 

Data Collected from FSA.USDA.gov

This concept is somewhat complicated, but all it means is that the FSA works in accordance with other economic institutions to provide entrepreneurs with interest rates that reflect the national average.

Additionally, these interest rates serve as the maximum amount you can be charged for financing with the FSA, and you can potentially secure a lower interest rate by negotiating with your specific lender

3. Resources to entrepreneurs within the poultry farm industry

At the end of the day, the FSA wants business owners and entrepreneurs to succeed in the agricultural industry. That’s why, apart from numerous poultry farm loans, farmers can also find numerous resources to help them grow and operate their business.

Their website contains various resources and information for anyone looking to get their start, expand their operation, or grow to outpace their competitors.

One of which is their Farm Loan Discovery tool, an online resource that helps farmers like yourself start the process of financing their business. They also have a Service Center Locator, Disaster Assistance Discovery tool, and other resources on their website.

4. Poultry farm loans: Top Options in 2022

If the FSA’s specific programs aren’t what you’re looking for, you can secure traditional financing options to get poultry farm loans and reach your goals. Here are some of the more common options:

4.1. Term Loans

Term loans are given in one-time lump sum payments that you must repay within the terms outlined by your lender. Most of the FSA’s loan programs are term loans, but you can seek out a term loan from a different lender if needed.

You can also secure a higher borrowing amount if you choose to finance with a lender outside of the FSA. However, this often depends on your lender, and you may have to give a detailed plan on how you intend to use the borrowed funds.

You may need to offer collateral, too, if your business’s financial information isn’t the strongest.

4.2. Business Lines of Credit

When it comes to poultry farm loans, the next option for traditional financing that you have is business lines of credit. 

If you’re seeking flexible financing for your business, you can’t go wrong with a business line of credit. This financing option is a revolving line of credit that you can draw on whenever you need capital. Once you repay the borrowed amount, you can draw the same funds again, allowing you to always be prepared for the next challenge.

Many entrepreneurs use business lines of credit to handle expenses, manage their working capital, and afford minor cost growth opportunities, making this a highly beneficial option for any poultry farm.

4.3. Equipment Financing

If you are looking for poultry farm loans, you can also look into the possibility for  equipment financing.

Many agricultural businesses rely on heavy machinery and equipment to conduct their business operations with increased productivity. Unfortunately, this equipment is often expensive, which serves as a significant hurdle for both new entrepreneurs and existing businesses looking to keep up with their competition.

Rather than find a way around using the equipment, you can secure equipment financing to break down the sizeable purchase into more manageable monthly payments.

The total cost of the equipment will end up more expensive than purchasing the equipment outright due to the interest rate, so make sure to factor that into your decision before you sign at the dotted line.

4.4. Business cash advance

Disease, inclement weather, and other unforeseen circumstances can quickly wipe out your livestock and inventory, leaving you with no method to recoup your losses or turn a profit – and turning to poultry farm loans for help. 

It’s a difficult spot that many poultry farmers find themselves in annually, but you can potentially fix the problem by securing a Business Advance to borrow against your future sales.

This financing option is different from an outright loan because you’re paying for the financing with your future accounts receivable. Although, the price of the new inventory or livestock you purchase with a Business Advance will likely be higher than if you had made the purchase yourself due to the interest rate.

5. Getting poultry farm loans in 2022: traditional lenders vs. alternative lenders

Banks and credit unions have some of the strictest eligibility requirements in the lending industry. They often require you to have a high credit score, a lengthy time in business, and generate at least $10,000 per month in revenue in order for you to reach approval.

If you’re investing your profits back into your business, as many growing businesses do, you might find it difficult to convince a bank or credit union that your operation qualifies for financing. 

This is why online lenders have become so popular over the last decade. These alternative lenders have looser requirements and, therefore, can offer to finance more business owners and entrepreneurs.

They also offer their services to different types of businesses, like poultry farms, giving the entrepreneurs in these industries another avenue to secure the capital they need.

6. Get poultry farm loans with National Business Capital

Managing any business is hard work, but poultry farming is a bit more difficult than most traditional businesses, and poultry farm loans can play an important role in growing your ogranization.

Your inventory is alive, the weather heavily impacts your production, and the industry is highly competitive, but you’ll also have to manage your cash flow on top of it all. If you’re running into cash flow issues, or if you’re faced with a potential growth opportunity that’s outside of your financial capabilities, you should consider securing a loan or financing to help support your operation.

However, the process of finding a lender and applying for financing takes time, which is something that you might not have an abundance of as you manage the day-to-day of your poultry farm. Rather than take your focus away from your business, you can team up with National Business Capital and have our team do the heavy lifting for you.

At National, we leverage a 75+ lender marketplace to connect entrepreneurs with competitive financing that helps them grow and scale fast. Our experienced Business Finance Advisors take the time to learn about you, your business, and your challenges to find best-fit solutions for your specific circumstances, allowing you to spend time on what matters most—your business.

Ready to get started? Fill out our streamlined, digital application and kickstart your financing journey today.

FAQs

How Do I Start a Local Poultry Farm?

Before you start your own poultry farm, you’ll need to familiarize yourself with poultry farming techniques, choose the sector you’ll operate within, and decide on a type of bird(s) to support your business.

These are the most important steps, as anything after this point becomes irrelevant if you don’t fully understand the type of work you’ll perform. 

Next, you’ll start to build up the business side of your operation. You’ll select a logo, secure your licenses, set a location for your operation, and start to establish a business plan.

There are other minor yet important steps in between this and opening your doors, but at this point, you’ll have a solid foundation to move forward.

How Much Does It Cost to Start a Poultry Farm in the USA?

The specific amount you’ll need will depend on your location and individual circumstances, but it typically costs anywhere from $5,000 to $25,000 to start a poultry farm. That amount includes the first three months of pay for your employees, too, but it doesn’t account for any roadblocks or challenges you’ll encounter along the way.

You could have a bad weather day that wipes out $10,000 worth of supplies in an instant, or you might encounter a situation where someone you hire doesn’t work out as you intended.

In either case, you’ll need capital to cover your expenses in the interim, which is why it’s so important to establish a financing relationship from day one of your business.

Which Are the Best Poultry Farm Loans in 2022?

There’s no “best” poultry farm loan; The financing product that will benefit your specific situation the most will depend on your needs, circumstances, and business model. However, each financing product has characteristics that make one more advantageous than another.

For example, term loans are a great option for any entrepreneur that knows exactly how much a challenge or opportunity will cost them.

If you’re looking for a more flexible option to help you stay one step ahead of the curve, you can’t go wrong with a business line of credit. For equipment, you’ll likely choose equipment financing to get you across the finish line.

The bottom line? Each financing solution has a specific purpose that will make one more beneficial than the other, depending on your specific circumstances.

How Hard Is It to Get a Poultry Farm Loan?

The difficulty associated with securing a poultry farm loan will depend on the specific loan product you’re seeking to leverage in your business. For example, if you’re financing equipment, your credit score plays less of a role than it would if you were securing a term loan.

Generally, you’ll need at least one year in business, a 580+ FICO score, and at least $120,000 in annual revenue to give yourself a good chance of reaching an approval on any poultry farm loan product.

How Can I Get a Farm Loan With No Down Payment?

There are a few ways to secure a farm loan without a down payment: choose a financing solution that doesn’t traditionally require down payments or choose an FSA-sponsored loan product.

Some financing options, like equipment financing, won’t usually require a down payment unless your business’s financial information is less than favorable.

On the other hand, the FSA offers multiple farm loan products that don’t require down payments at all, which you can leverage if you meet their minimum qualifications.