The Farm Service Agency has a guaranteed loan program available to assist farmers and agricultural lenders. The guaranteed loans are made by a commercial lender such as a bank or Farm Credit. The Farm Service Agency provides the guarantee to the lender, not the borrower. The lender makes and services the loan.
The purpose of the guaranteed loan program is to assist lenders in extending credit to family farmers who do not qualify for standard commercial loans with the lender. The goal is to assist beginning farmers and farmers experiencing financial distress due to disasters or economic problems.
The loan limitation for fiscal year 2011 has been increased to $1,119,000. There are four types of FSA guaranteed loans: farm ownership loans; operating loans; operating line of credit loans; and conservation loans. A borrower can have one type of loan or a combination of all three types of loans.
Farm ownership loans can be used to purchase farm land, construct buildings and facilities, and to refinance debts to restructure the farm business. The term of the loan can be up to 40 years. Generally most lenders make 15- or 20-year loans. In the case of farm ownership loans the borrower must be the owner and operator of the farm real estate after the loan is closed.
Operating loans can be used to purchase farm equipment, livestock, fixtures, operating expenses and to refinance operating type debts. The term of the loan can be up to 7 years and will vary with what the loan funds are used for.
Operating line of credit loans can only be used for annual operating expenses. The loan has a term of five years but must be paid down to $1 each year. The lender and FSA then review the projection for the next year and determine if funds can be advanced for the next year. This way the borrower is only charged one closing fee and one guaranteed fee.
Conservation loans can be used to implement qualifying conservation projects. The conservation loan is not subject to the test for credit elsewhere or the family sized farm limitation. Examples of conservation practices are structures to address soil and water issues; install water conservation measures; install waste management structures; permanent pasture improvements including fencing and water sources; and other practices included in the farm’s conservation plan.
The Farm Service Agency also has direct farm loan available where the loan is made and serviced by FSA. These loans include farm ownership loans to purchase or improve farm real estate; operating loans to purchase farm equipment, livestock, and for annual operating expenses; and conservation loans to implement conservation practices.
The direct loans have more eligibility limitations than the guaranteed loans. The direct conservation loan is not subject to the credit elsewhere requirement and the family sized farm limitation. A portion of the direct loan funding is targeted towards beginning farmers and socially disadvantaged farmers.
The dollar limitation for these direct loan programs is $300,000 for farm ownership/ conservation loans and $300,000 for operating loans.
FSA also has a youth loan program available to assist young people involved with 4-H or FFA with agricultural related projects. The youth must be between 10 and 20 years of age. This loan has a limitation of $5,000.
Additional information on Farm Service Agency direct and guaranteed loan programs may be obtained by contacting the local FSA office or at www.fsa.usda.gov.
That’s all for now!