Collateral Requirements for FSA Loans

• collateral
• fsa loans
• liens

What is collateral in a farm loan?

Collateral is property you pledge to secure a loan. If you cannot repay, the lender may have a legal claim on the pledged property. FSA's farm ownership and operating loan pages explain that its loans are generally secured.

The specific requirements depend on the loan type and the size of the request, so ask your county office what applies to you.

A secured loan is different from an unsecured one, where there is no pledged property. Farm loans of any size are usually secured because the risk is higher than for ordinary consumer credit.

What assets are commonly pledged?

Real estate loans are usually secured by the land and buildings purchased or improved. Operating loans are commonly secured by crops, livestock, equipment and sometimes the proceeds of sales.

Some assets might be excluded, and some might already be pledged elsewhere. A loan officer reviews all of that in your file.

Do not assume your family home is part of the picture. Whether a home or other personal property is pledged is something to ask about directly and get explained in writing.

• Land and buildings
• Growing crops and stored grain
• Livestock and their products
• Machinery and equipment
• Proceeds from sale of pledged property

How does a lender value collateral?

Lenders use a conservative value, often below what you hope to get on the open market, because forced sales usually bring less than normal sales. Real estate may require an appraisal, and machinery may be valued by listed prices or an inspection.

Ask how the office will value each asset and whether you must pay for an appraisal.

Appraisals take time and cost money, so ask early. A slow appraisal is a common source of delay for real estate requests.

What is a lien and why does the order matter?

A lien is a recorded claim against property. When several lenders have claims on the same asset, the order of filing can decide who is paid first. A second lien is weaker than a first lien.

Check public records for liens on your property, and tell your loan officer about every debt, including equipment financing. Hidden liens cause delays.

If you rent land, remember that you cannot pledge what you do not own. Crops you grow on rented ground may still be pledged, but the landlord's rights can matter, so mention the lease.

What if my collateral is thin?

Beginning farmers often have more ideas than assets. That does not rule out a loan, but it may lead to different structures, such as a smaller request, a down payment program or a guaranteed loan through a local lender.

The beginning farmer pages on the FSA site describe programs designed for newer operators. Ask which could apply.

Another option some newer farmers explore is bringing in a co-signer or partner. That has legal consequences, and an attorney should explain them before anyone signs.

What can I do to protect myself?

Read the security agreement before you sign, and ask for a plain explanation of any term you do not understand. Know whether you may sell pledged crops or animals without permission, and what happens to sale proceeds.

If you farm with partners or family, discuss who is signing and who is pledging what. An attorney can explain the legal effect of pledging jointly owned property.

Insurance matters here too. Lenders often require coverage on pledged buildings and equipment, and they may want to be named on the policy. Ask what is required.

• Ask what happens if you sell pledged property
• Ask whether cross-collateralization applies
• Keep insurance on pledged assets
• Record changes in writing

How should I prepare?

Make an inventory of what you own, with serial numbers for equipment, legal descriptions for land and counts for livestock. Gather titles and any loan payoff statements.

Bring it all to the first meeting, organized, and ask for the office's written list of what they need.

After the loan closes, keep a copy of every signed document in a safe place and note any promises about releasing collateral when the loan is paid off.

• Signed security agreement and note
• Insurance policy copies
• Titles and serial number lists
• Payoff and release letters

Last reviewed: November 12, 2026. Written by the Farm Money & Grants Editorial Team. Educational only, not tax, legal or financial advice. See our editorial policy.