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USDA Farm Service Agency – Farm
Loan Programs
1
Women Managing the Farm
2015Conference
FSA’s Vision: A market-oriented, economically and
environmentally sound American agriculture delivering
an abundant, safe and affordable food and fiber supply
while sustaining quality agricultural communities.
USDA FARM SERVICE AGENCY
• Kansas FSA:
– 96 County Offices in 105 Counties
– Management Team• County Executive Director
• Farm Loan Manager/Officer
• Program Technicians
• County Committee (Farmer Elected) 2
• USDA Service Centers:
• Farm Service Agency (FSA)
• Natural Resources Conservation Service (NRCS)
• Rural Development (RD)
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FARM LOAN PROGRAMS
Farm Loan Programs provide loans, loan guarantees, and business planning to eligible farmers, ranchers, and others to promote, build, and sustain family farms in support of a thriving agricultural economy.
Who are our potential customers?
• Beginning farmers and ranchers
• Farmers whose needs may not be met by commercial credit
• Multigenerational family farms
• Socially disadvantaged/underserved farmers and ranchers *
• Value added farming operations
• Organic and specialty farmers
• Farmers who have hit hard times and now require a safety net
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Definition of Socially Disadvantaged for Farm Loan Purposes:A group whose members have been subject to racial, ethnic, or gender prejudice because of their identity as members of the group without regard to their individual qualities.
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These groups consist of:
Women
American Indians
Alaskan Natives
Asians
Hispanics
Native Hawaiians or other Pacific Islanders
Blacks or African Americans
A certain percentage of farm loan program funding is targeted for SDA Applicants.
FARM LOAN PROGRAMS
FARM LOAN PROGRAMS
• Direct Loans– FSA makes and services direct loans and provides
supervised credit
– Funds come from the U.S. Treasury
• Guaranteed Loans– The lender makes and services the loan
– FSA guarantees loans made by conventional lenders up to 95 percent of any loss
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Farm Loan Program Delivery
Direct loan requests are processed and serviced in local offices
Guaranteed requests are completed by the lender and producer and submitted to FSA for processing
Upon request, FSA staff will assist applicants in completing paperwork
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FSA Farm Loan Programs
• Operating Loans (OL) - includes Microloans
• Farm Ownership (FO) Loans
• Guaranteed Operating and Farm Ownership Loans
• Land Contract Guarantee
• Emergency Loans
• Youth Loans8
Loan Limitations
Direct FO - $300,000
Direct OL - $300,000 Microloan - $50,000
Youth - $5,000
Emergency - $500,000
(or amount of loss,
whichever is lower)
Guaranteed:
Combined G-FO and
G-OL cannot exceed
$1,392,000 for FY 2015
Guaranteed loan limit changes annually based on rate of inflation applicable to fiscal year
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Farm Loan Programs –General Eligibility Requirements
Direct and guaranteed applicants must:
Be unable to obtain sufficient credit elsewhere
Be a citizen or a legal resident alien
Possess legal capacity to incur the loan obligation
Have an acceptable credit history
Be the owner-operator or tenant-operator of a family farm
Not be delinquent on federal debt
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Direct and guaranteed applicants must:
Not have outstanding unpaid judgments
Not have caused the Agency a loss by receiving debt forgiveness (there are some exceptions)
Not have been convicted of planting, cultivating, growing, producing, harvesting, or storing a controlled substance within the last five years
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General Eligibility Requirements (continued)
FSA Direct Loans
A direct loan applicant must:
Meet general eligibility criteria
Have applicable education, training, or farm experience that provides a reasonable prospect of success (For an FO loan, the applicant must have participated in the operations of a farm or ranch for at least 3 years)
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FSA Direct Loans (continued)
A direct loan applicant must:
Develop a realistic Farm Business Plan that projects repayment ability for the loan
Provide adequate collateral for the loan
Agree to take borrower training courses and “graduate” to private sector credit when able
Not exceed restriction on years of eligibility13
FSA Direct Loans (continued)
• Corporations, cooperatives, joint operations, trusts and partnerships may be eligible:
– Their members/stockholders must meet the program eligibility requirements
– The entity must also be authorized to operate a farm in the State where the farm is located
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Direct Loan Making –Operating Loans
• Purposes:
– Purchase Machinery and/or Equipment
– Purchase Livestock
– Production Expenses
– Refinance operating expenses (other than FSA)
• OL loans are repaid in 1 to 7 years depending on purpose
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Direct Loan Making –Microloans
Microloans are operating loans, either annual of term, that do not exceed $50,000.
Microloans have a simplified application process with paperwork and verification requirements that are more proportional to smaller loans and operations.
Alternative managerial requirements for Microloans may be acceptable.
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Marketing and distribution expenses
Purchase of livestock
Minor farm improvements such as wells and coolers
Annual operating expenses such as seed, fertilizer, utilities and land rents
Loan amount limited to $50,000
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~ FSA Microloans can include ~ Initial start-up expenses; such as: hoop houses to extend the
growing season
Essential tools or equipment needed for the operation
Irrigation equipment
Direct Loan Making –Youth Loans
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Establish and operate income producing projects.
Be at least 10 years old but less than 21 years of age.
Project must be participating in an established
organization that supports agricultural projects, such
as 4-H or FFA.
Must have recommendation and consent from
parent/guardian and from an advisor (4-H, Vo-Ag
teacher, scout leader, etc.)
The maximum loan available is $5,000.
Direct Loan Making –Farm Ownership Loans
• Purposes:
– Purchase Land
– Make Capital Improvements
– Promote Soil and Water Conservation
– Loan closing and related expenses
• FO loan repayments can be scheduled for up to 40 years
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Direct Loan Making –Farm Ownership Downpayment Loans
• Downpayment loan applicants must:
– Be beginning farmers or meet definition of SDA
– Provide a minimum down payment of 5%
• Downpayment loans will not exceed 45% of the lesser of:
1. The purchase price,
2. The appraised value of the farm to be purchased, or
3. $667,000 (maximum loan of $300,000)
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Direct Loan Making –Farm Ownership Downpayment Loans (continued)
• Maximum term for FSA loan is 20 years
• Interest rate is 4% below regular direct FO rate but no less than 1.5%
• The remaining balance may be obtained from a commercial lender or private party. That party must have an amortization period of at least 30 years and cannot balloon their payment in the first 20 years of the loan.– If lender seeks FSA guarantee, the guarantee fee will be waived
• There is no limit on purchase price of the property
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Direct Loan Making –Farm Ownership Joint Financing Loans
• FSA encourages using joint financing arrangements where an applicant obtains financing from another lender, which can be a commercial lender, a State program, or the seller of a farm. The applicant will use this financing along with FSA financing for any authorized FO purposes.
• If FO is part of a joint financing arrangement and the amount of FSA’s loan does not exceed 50% of the total amount financed, the interest rate charged by FSA will be the greater of the following:
– Current direct FO interest rate minus 2%
– 2.5% floor for interest rate
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Direct Loan Making –Emergency Loans
Emergency loans are available for real estate and operating purposes when a disaster or quarantine has been declared.
• Purposes:
– Refinance debts
– Repair/replace farm property• Buildings
• Machinery/Livestock
• Feed
• Other Items23
Land Contract Guarantee Program
• This program was announced in January 2012 – it’s a program available to landowners who wish to transfer farm real estate to the next generation of farmers and ranchers.
• The Land Contract Guarantee Program offers an alternative to a traditional loan.
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• Instead of obtaining a loan from a
commercial lender – the buyer and seller
will enter into a Purchase Contract and
FSA can guarantee said Contract.
• There is no fee charged by the Agency;
however, there may be fees charged by
the loan servicing / escrow agent.
Guaranteed Loans
Guaranteed loans are:
Made and serviced by local agricultural lenders
Funded by the lender
Used by lenders to assist producers who do not meet normal underwriting standards
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Guaranteed Loan Making –Eligibility
• To qualify for an FSA Guarantee, a loan applicant must:
– Meet the general eligibility requirements
– Be unable to obtain a loan without a guarantee
– Have a feasible plan and adequate collateral as determined by the lender
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Guaranteed Loan Making –Participating Lenders
• For guaranteed loans, applicants must apply to a commercial lender who participates in the Guaranteed Loan Program
• Local FSA offices have lists of participating lenders
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Farm Loan Programs –Program Funding
Loan programs are funded by annual Congressional Appropriations
Appropriation levels may fall short of demand, especially direct farm ownership loans
Loan funds are allocated to states
There are separate allocations of SDA and beginning farmer targeted funds
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Farm Loan Programs –Socially Disadvantaged Applicant (SDA)
As defined by law, an SDA applicant is one who is a member of a socially disadvantaged group whose members have been subjected to racial, ethnic, or gender prejudice because of their identity as a member of a group, without regard to their individual qualities.
SDA groups are African Americans, American Indians, Alaskan Natives, Hispanics, Asians, Pacific Islanders, and Women.
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Farm Loan Programs –Socially Disadvantaged Applicant (SDA)
FSA does not have a specific SDA loan program, but rather targets funds in existing programs to applicants that meet the definition
The targets are set by law
SDA loan applicants must meet loan program requirements
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Farm Loan Programs –Beginning Farmer Loans
• FSA provides direct and guaranteed loans to beginning farmers and ranchers
• FSA targets a portion of its direct and guaranteed FO and OL funds to beginning farmers
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Farm Loan Programs –Beginning Farmer Loans
• A beginning farmer or rancher is an individual or entity who:
1. Has not operated a farm or ranch for more than 10 years,
2. Meets the loan eligibility requirements of the program to which he/she is applying,
3. For an FO loan, does not own a farm greater than 30 percent of the average size farm in the county
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Farm Loan Programs –Application Tips
A good farm business plan is critical
Applicants should:
Set short and long term goals
Plan conservatively
Have records to support production projections
Have good financial records
Get help from experts (FSA staff, Extension, etc.)
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Farm Loan Programs –Application Tips
Application forms are available from FSA Offices
All forms are available via internet as well
No one can be denied an application or other forms
Applicants may ask FSA employees for help to complete the paperwork
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Farm Loan Programs–Applications
Applications for direct loan assistance may be submitted to the FSA local office serving the area where the operation is located
Local FSA offices are listed in the telephone directory under U.S. Government, Department of Agriculture, Farm Service Agency
Applications, additional forms, office locations and more are available online at: www.fsa.usda.gov
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FARM LOAN TEAM OFFICES
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Farm Storage Facility Loans (FSFL)
• FSA provides FSFL’s to producers to build or upgrade farm storage and handling facilities:– Corn, grain sorghum, soybeans, wheat, etc.
– Hay
– Pulse Crops, including lentils, chickpeas and dry peas
– Renewable biomass
– Fruits, nuts, vegetables and cold storage facilities
• Maximum loan amount - $500,000
• A 15% down payment is required
• Loan Terms: 7, 10 or 12 years depending on amount of the loan with a fixed interest rate
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