Rural Development Ag Loan Participation

The Loan Participation Program is intended to supplement, not replace, existing credit. Loans are administered and serviced through local lenders. The program participates with banks and borrowers to assist financing capital expenses associated with value-added production or processing projects, and can lend up to 80% of the total loan up to $500,000. Eligible participation loan costs include land needed for the project, buildings and improvements, and machinery and equipment. Terms: 3.5% fixed (2.5% fixed for small/beginning farmers); up to 10 year term based on collateral.

• Borrowers financing capital expenses for value-added agricultural production or processing projects, with a participating bank or local lender.

• Projects must be located in South Dakota.

• Projects must show potential to produce or add value to agricultural commodities and goods produced in South Dakota, or to develop agricultural alternatives, aquaculture, horticulture, or forestry products.

• Individual applicants must be South Dakota residents at the time of loan closing.

• Individual applicants must have their principal residence and the majority of their farm operation located in South Dakota.

• Individual applicants must be age 18 or older.

• Individual applicants must be farmers or ranchers who derived 60 percent of gross income in the last tax year from farming, unless a waiver is granted for extraordinary circumstances.

• Applicants must be creditworthy according to the standards of the participating lender.

• Applicants must be unable to finance the project from their own resources or from conventional sources at reasonable rates and terms.

• Cooperatives, corporations, partnerships, or other legal entities qualify if the majority of memberships and stock are owned by eligible farmers, or if the entity indirectly assists farmers, ranchers, or their family members.

• Applicants must provide a minimum equity contribution of 20 percent of total project costs.

• The participating lender must be subject to state or federal credit examination and supervision and in good standing with its licensing authority.

Participation size. "The program can lend up to 80% of the total loan up to $500,000." Read carefully: SDGOED buys a participation alongside a local lender rather than making the whole loan, so $500,000 is the state's maximum share — not a cap on the total project loan.

Rate and term. "3.5% fixed (2.5% fixed for small/beginning farmers); Up to 10 year term based on collateral." The reduced 2.5% rate for small and beginning farmers is the main concession here.

Structure. "The Loan Participation Program is intended to supplement, not replace, existing credit" and "Loans are administered and serviced through local lenders" — the farmer applies through their own bank, which keeps servicing.

Eligible costs. "Facility, equipment in facility and land needed for the project," tied to "capital expenses associated with value-added production, or processing projects."

No application fee, origination fee, match requirement, or minimum loan size is published.

Verified 2026-09-04.

Apply through a local lender using the Rural Development Ag Loan Participation Application (available from SDGOED). Contact the South Dakota Governor's Office of Economic Development.