Financing beginning farmers

Farm Forum

PIERRE, S.D. – The South Dakota Value Added Finance Authority (VAFA) announces tax-exempt bonds are available for qualifying beginning farmers. Bond purchasers can potentially save thousands of dollars in federal taxes by investing in a beginning farmer.

The Beginning Farmer Bond program through the South Dakota Department of Agriculture (SDDA) is available for eligible beginning farmers to purchase agricultural land at lower interest rates.

“To be eligible for the program, an applicant must be at least 18 years old, a resident of South Dakota, have a net worth under $400,000 and own less acres than 30 percent of the county median,” says Terri LaBrie, SDDA finance administrator. “The limit on a beginning farmer bond is $517,700.”

Typically, the Beginning Farmer Bond program works through a local lender; however, if retiring farmers are interested in passing on their land to a beginner farmer, the interest off that contract sale is federally tax exempt providing substantial savings to the seller. Because federal regulations prohibit this type of transaction with closely related parties such as parents or grandparents, a third party lender is required in those cases.

“The bond program is a great way for a beginning farmer to buy land; however, it’s also advantageous for a retiring farmer that would be willing to enter into a contract for deed with that beginning farmer or an individual investor looking to help finance a beginning farmer,” says LaBrie.

The SDDA administers the Beginning Farmer Bond program through VAFA. The board meets monthly and reviews the applications for the program and issues the bonds for approved projects. Board members include: Bob Hull, Sisseton; Mark Gross, Sioux Falls; Bill Hansen, Centerville; Chuck Jepson, Ft. Pierre; Jim Doolittle, Belle Fourche; Marcia Hendrickson, Chancellor; and Nathan Jensen, Beresford.

For information on the financial programs offered through SDDA, please contact one of the board members or Terri LaBrie, SDDA finance administrator at 605.773.5436 or