Ask FSA Andy about loans for beginning farmers

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Hello Again!

The Farm Service Agency has loan programs to assist beginning farmers to finance farm operations. FSA can provide financing to eligible applicants through either direct and/or guaranteed loans. FSA has targeted funding each fiscal year to assist beginning farmers.

A beginning farmer is defined as someone who has not operated a farm for more than 10 years, substantially participates in a farm operation and meets the eligibility requirements of the loan program they are applying for. For Farm Ownership loans, a beginning farmer cannot own a farm greater that 30% of the average sized farm in the county (this is before applying for the loan). The average farm size is based on the 2012 Census of Agriculture for each county. For example, the average farm size for Tuscarawas County is 136 acres and 30% of the average is 40.8 acres.

FSA has a down payment farm ownership loan to assist beginning farmers in purchasing a farm. The down payment farm ownership loan requires that the applicant have a cash down payment of at least 5%. The FSA loan cannot exceed 45% of the purchase with a maximum FSA loan of $300,000. The balance is financed by a commercial lender or a private party such as the seller. To qualify for the down payment farm ownership loan assistance, the loan applicant must meet all of the regular loan eligibility requirements. The FSA down payment loan has a term of 20 years and the present interest rate is 1.5% fixed.

Another option for real estate financing for beginning farmers is the “joint financing” farm ownership loan. With this arrangement FSA can lend up to 50% of the amount financed and another lender provides the balance of the financing. The FSA joint financing loan has a maximum loan limit of $300,000; the term can be up to 40 years; and the present interest rate is 2.5% fixed.

All eligible applicants for direct farm ownership loans must have participated in the business operation of a farm for at least three years. In addition to farm related experience, other types of skills can be considered to meet the direct farming experience required for farm loan eligibility. Some examples of other experience are operation or management of a non-farm business, leadership positions while serving in the military, and/or advanced education in an agricultural field. This substitution can only be used to meet one year of the three years farm operating history.

Additionally, FSA targets loan funds to assist beginning farmers in other loan programs, such as:

• Direct operating microloans for operating expenses and capital purchases with a maximum loan limitation of $50,000. This loan program has reduced the application paperwork process.

• Direct operating loans for operating expenses, livestock purchases, and farm equipment purchases with the maximum loan limitation of $300,000.

Additional information on Farm Service Agency farm loan programs can be obtained by contacting your local FSA office, or the Farm Loan team serving your county, or the FSA web site at www.fsa.usda.gov and clicking on farm loans.

That’s all for now,

FSA Andy

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