The Farm Service Agency has a guaranteed loan program available to assist farmers and agricultural lenders.
The purpose of the FSA 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.
There are four types of guaranteed loans: farm ownership, operating loans, operating line of credit loans and conservation loans. A borrower can have one type of loan or a combination of all four types of loans.
Farm ownership loans can be used to purchase farmland, construct buildings and facilities, and to refinance debts to restructure the farm business with a term up to 40 years. Operating loans can be used to purchase farm equipment, livestock, fixtures and for operating expenses with terms up to seven years.
Operating Line of Credit loans can only be used for annual operating expenses. Conservation loans can be used to implement qualifying conservation projects. The total loan limitation is $1.392 million for fiscal year 2015.
The FSA guaranteed loan program also has benefits for lenders. The lender can resell the guaranteed portion of the loan while retaining the loan servicing responsibilities.
Selling the guaranteed portion allows the lender to free up loan funds, reduce the interest rate risk, earn an increased return on investment, and offer more flexible repayment terms.
Many banks find that selling the guaranteed portion of their farm ownership (real estate) loans allows the bank to offer longer terms at a fixed interest rates while freeing up funds for additional lending.
FSA has expanded the definition of an authorized entity for farm loan programs to include other legal business organizations such as limited liability partnerships.
FSA has made the eligibility rules for entities more flexible. Individuals or entities that own farmland and operate the farm under a different legal entity may now be eligible for FSA loans.
Additional information on Farm Service Agency loan programs may be obtained by contacting the local FSA office to arrange a meeting with a loan approval official or at www.fsa.usda.gov.
That’s all for now,
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