FSA Andy: Microloans

Hello Again!

The Farm Service Agency is now offering a new microloan program designed to assist small family farms, beginning farmers, and socially disadvantaged farmers with operating credit.

The microloan program was developed to better serve the unique financial operating needs of beginning, niche and the smallest of family farm operations. The microloan offers a more flexible access to credit for farm operations like specialty crop producers, produce farms selling at farmers markets and operators of community supported agriculture (CSAs).

For past FSA rural youth loan borrowers, this program will provide a bridge to successfully transition to a larger scale farm operation.

Simplified loan application

The microloan program offers a simplified loan application form and loan process. The application includes the basic information plus a simple balance sheet, a summary cash flow projection, and farm training/ farm experience section all on one form.

This is compared to the nine forms used for a regular FSA operating loan application. The applicant will need to pay the credit report fee, complete an AD 1026 “Highly Erodible Land Conservation and Wetland Conservation Certification,” production records for at least the past year or three years if available, and financial records for at least the past year or three years if available.

Microloan terms

FSA microloans are limited to a maximum of $35,000. The repayment terms for a Microloan will vary with the use of the loan funds and cannot exceed seven years. Microloan funds used for annual operating expenses are scheduled to be repaid within 12 months or when the agricultural commodities produced are sold.

Microloans for livestock and equipment can have a term up to seven years.

The interest rate for microloans is based on the FSA regular operating loan rate. Microloans must be secured by a first lien on farm property or agriculture products purchased with the loan funds and having a security value of at least 100% and up to 150% of the Microloan amount. This also applies to annual operating microloans.

Microloan uses

Microloan funds can be used for all approved FSA operating loan purposes such as:
– Initial startup expenses
– Annual operating expenses such as seed, fertilizer, rent, etc.
– Marketing expenses
– Purchase of livestock and equipment
– Minor farm improvements such as wells and coolers
– Essential tools
– Irrigation equipment

Microloan applicants must meet the basic eligibility requirements for FSA direct operating loans including a good credit history and be unable to obtain sufficient credit elsewhere. The sufficient credit elsewhere requirement does not include credit card debt available to finance the farm operation.

The requirements for farm managerial experience have been modified to accommodate smaller farm operations and beginning farmers.

Microloan applicants will need to have some farm experience, but this can be supplemented by an apprenticeship and gaining farm management experience while working with a mentor.
Additional information on the FSA Microloan program can be obtained at local FSA offices or through the FSA website at www.fsa.usda.gov.

That’s all for now,

FSA Andy