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.
While all qualified producers are eligible to apply for these loan programs, FSA has targeted funding for members of socially disadvantaged applicants and beginning farmers. Each fiscal year FSA targets a portion of its loan funds in each loan program to beginning farmers and socially disadvantaged applicants.
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 (prior to applying for a loan to purchase a farm).
The applicant must meet the loan eligibility requirements of the loan program for which they are applying.
As an example the median farm size in Tuscarawas County, according to the 2007 Census of Agriculture, is 75 acres and 30 percent of the median acres is 22.5 acres. Based on this, to be considered a beginning farmer for a farm ownership loan in Tuscarawas County, the applicant would have to own 22.5 acres or less.
For FSA Farm Loan programs 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, 2011 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. The business operation of a farm means that the applicant has materially and substantially provided day to day management for the farm.
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 and improving facilities.
Conservation loans for conservation practices and improvements.
Guaranteed operating and farm ownership loans with commercial banks or Farm Credit Associations.
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 website at www.fsa.usda.gov and clicking on “Farm Loans.”
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