Seller Assisted Loan Participation Program

The Seller Assisted farm ownership program is a cooperative financing effort involving a buyer, a seller, a local lender, and the Minnesota Rural Finance Authority (RFA).

Under this program, each seller actively participates in financing the sale of their farm by providing a portion of the financing (the seller agrees to subordinate their financing to the lender/RFA). The lender and the RFA provide the balance of the funds with a first mortgage. The RFA portion of the total financing is provided at an affordable interest rate, which helps the buyer by reducing the total interest expense of the entire financing. In addition to the affordable rate financing, the program has built-in safeguards such as farm management training and financial planning.

To be eligible for assistance under the Seller Assisted Program, all applicants must:

• Be an individual who is a resident of Minnesota, a domestic family farm corporation, or a family farm partnership.

• Certify that they will be the principal operator of the farm, that they will make farming their principal future occupation, and that the farm will be used for agricultural purposes only.

• Not be a current or previous participant in the Minnesota Family Farm Security program.

• Have sufficient education, training, or experience to succeed in the type of farming to be undertaken.

• Have a financial need and the ability to repay their loans.

• Agree to enroll and continue in an approved farm business management program for the first three years of the loan, if an approved program is available within 45 miles of the borrower's residence.

• Agree to consult with a local Board of Water and Soil Resources office or the county Natural Resources Conservation Service.

• Agree to obtain credit life insurance for the amount of the debt incurred to purchase the property.

In addition to the above, beginning farmer applicants must have a total net worth of less than $1,069,000 in 2026 (indexed annually for inflation).

Eligible sellers. To qualify as an eligible seller, the seller must: be a person, a partnership, or a family farm corporation selling a farm located within the state of Minnesota; not be a current or previous seller or participant in the Minnesota Family Farm Security program; complete a seller assisted loan commitment form certifying that they will partially finance the purchase of the farm property by making a loan to the buyer; and make a loan to the buyer in an amount necessary to complete the transaction.

• RFA participation is limited to 45 percent of the lender's loan, up to a maximum of $500,000. There is no maximum on the size of the loan the lender may make under the program; each lender sets its own requirements based on the buyer's ability to repay.

• A down payment is negotiable — program rules do not require one.

• Loan amortization of the lender/RFA loan is scheduled on a flexible term of 15, 20, 25, or 30 years negotiated between the lender, applicant, and the RFA. However, loans balloon and require full payment at the end of 10 years, at which time the RFA participation ends; the borrower either repays with cash or refinances.

• Loans carry a prepayment penalty equal to 10% of the outstanding balance in the first 5 years, decreased by 2% annually.

• The RFA charges a reduced interest rate on its portion of each loan (call for a quote); the RFA's published current rate for Seller Assisted is 4.75% with no origination fee and a $50 application fee. The RFA rate is basically fixed for 10 years, but may be increased at any time for failure to remain in compliance with the rules or statutes governing the program.

• Participating lenders may charge either fixed or adjustable interest rates consistent with their normal farm real estate lending practices, so the actual rate paid by a beginning farmer is a blended rate of all three portions of the loan. The interest rate and certain conditions of the seller's loan are negotiated between the seller and the buyer.

• A borrower may use the program more than one time, to an aggregate RFA amount of $500,000 (e.g., two loans of $225,000 and $175,000, or eight RFA loans of $50,000). A new application is required for each loan, approved under the guidelines in effect at that time.

Apply through a local lender that participates with the RFA. The buyer and lender jointly complete the RFA Application for Loan Participation (Basic Farmer / Seller Assisted / Restructure II), and the seller completes the Seller Assisted Loan Participation Program Commitment Form; the lender submits the package to the RFA. While all lending institutions are eligible to be part of the program, participation is voluntary, and each lender enters into an agreement with the RFA; lender interest rates and other terms vary from lender to lender, so the RFA suggests that buyers contact more than one lender to determine the best available terms. Participating lenders can be searched by county on the MDA's List of Participating Lenders. Questions: RFA loan programs, 651-201-6004, RFA.Loans@state.mn.us.

• Rural Finance Authority (RFA) program hub

• List of RFA Loans

• List of Participating Lenders

• RFA Loan Brochure (PDF)

• Loan Comparison Chart

• Approved Farm Business Management Programs