The Farm Service Agency has loan programs to assist beginning farmers and/or members of socially disadvantaged groups to finance agricultural enterprises.
Under these designated farm loan programs, FSA can provide financing to eligible applicants through either direct or guaranteed loans. Each fiscal year FSA targets a portion of its loan funds to beginning farmers and Socially Disadvantaged farmers.
FSA defines a beginning farmer as a person who:
• Has operated a farm for not more than 10 years;
• Will materially and substantially participate in the operation of the farm;
• For farm ownership loan purposes, does not own a farm in excess of 30 percent of the median sized farm in the county;
• and the applicant must meet the loan eligibility requirements of the loan program for which they are applying.
Socially disadvantaged persons are defined as women, African American, American Indian, Alaskan Native, Hispanic, Asian American, and Pacific Islander farmers.
FSA has a special down payment farm ownership loan to assist beginning farmers and socially disadvantaged farmers in purchasing a farm. Retiring farmers may use this program to assist in transferring their land to future generations.
The down payment farm ownership loan requires that:
• The applicant must have a cash down payment of at least 5 percent of the purchase price;
• The FSA loan cannot exceed 45 percent of the least of the purchase price of the farm to be acquired, the appraised value of the farm to be acquired, or $500,000. This limits the maximum FSA down payment loan to $225,000.
• The balance of the purchase can be financed by a commercial lender (bank, Farm Credit) or a private party such as the seller. The amortization of the loan must be at least 30 years and cannot have a balloon payment due within the first 20 years of the loan. The FSA down payment loan has a term of 20 years. The interest rate is 4 percent below the direct Farm Ownership loan rate but cannot be lower than 1.5 percent. As of March, 2010 the interest rate is 1.5 percent.
To qualify for the down payment farm ownership loan assistance, the loan applicant must meet all of the regular loan eligibility requirements.
Note: All applicants for direct farm ownership loans must have participated in the business operation of a farm for at least three years. FSA also offers Joint Financing Farm Ownership loans to beginning and non beginning farmers. With joint financing farm ownership loans, FSA can loan up to 50 percent of the purchase price subject to the appraised value of the property. A commercial lender or private party must finance 50 percent or more of the purchase.
The term of the FSA portion of the loan can be up to 40 years. Currently the interest rate on the FSA loan is a fixed 5 percent. The terms of the commercial loan can vary.
Additionally FSA targets loan funds to beginning farmers and socially disadvantaged applicants in other loan programs, such as:
• Direct operating loans for operating expenses, livestock purchases, and farm equipment purchases;
• Direct farm ownership loans for purchasing real estate, improving facilities, and/or for water conservation improvements;
• Guaranteed operating and farm ownership loans with commercial banks or Farm Credit Associations.
That’s all for now,
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