The Federal Farm Loan Act of 1916 established 12 regional Farm Loan Banks to serve members of Farm Loan Associations. Farmers could borrow up to 50% of the value of their land and 20% of the value of their improvements.

The biggest benefit of the act was to allow small farmers to be more competitive with the larger businesses. Banks were to provide loans at a competitive rate to small businessmen.

The act was signed into law by President Woodrow Wilson.