The US Department of Agriculture’s (USDA) Farm Service Agency (USDA) is reminding producers that the FSA provides loans to underserved applicants and would-be farmers and ranchers for farm owners and farms. Underserved or aspiring farmers and ranchers unable to obtain commercial credit from a bank can apply for direct or guaranteed FSA loans.
“Agriculture and ranching are capital-intensive businesses, and the FSA is committed to helping growers get their farms started and run,” said Pauletta Dusterberg, FSA Acting State Executive Director in Indiana. “FSA loans are designed to ensure that everyone has access to credit, including underserved and aspiring farmers and ranchers.”
The USDA defines underserved applicants as a group whose members have been exposed to racial, ethnic, or gender bias because of their identity as members of the group regardless of their individual characteristics. For farm loan programs, underserved groups include Native American or Alaskan Indians, Asians, Blacks or African Americans, Native Hawaiians or other Pacific Islanders, Hispanics, and women.
To qualify as a beginning farmer, the natural or legal person must meet the eligibility requirements set out for direct or guaranteed loans. In addition, individuals and all company members must have been on a farm for less than 10 years. Applicants must participate materially or substantially in the operation. For reasons of business ownership, the applicant may not own a business at the time of application that is more than 30 percent of the average business size in the district. All direct agricultural property applicants must have been involved in running a farm for at least three years in the 10 years prior to the date the application was submitted to the FSA. Depending on training, military experience, participation in a SCORE mentor and experience in operational management as an employee, up to three years of experience can be replaced. Your local FSA office can provide further details on permissible substitutions.
If the applicant is a legal person, all members must be related by blood or by marriage and all members of the organization must be qualified young farmers. At least one of the members must have three years or more experience in the operation of a farm before submitting an application.
Direct loans are granted to applicants by the FSA. Guaranteed loans are issued by credit institutions that ensure that the FSA guarantees the loan. The FSA can guarantee up to 95 percent of the capital and interest loss on a loan. The FSA Guarantee enables lenders to provide agricultural loans to producers who do not meet the lender’s usual underwriting criteria.
The direct and guaranteed loan program offers two types of loan: farm owner loan and farm owner loan.
Farm owner loan funds can be used to buy or expand a farm or ranch; Purchase of easements or rights of way that are required in the operation of the farm; Build or upgrade buildings such as a house or barn; Promoting the protection and development of soil and water; and pay closure costs.
Business loan funds can be used to purchase livestock, poultry, farm implements, fertilizers, and other materials necessary to run a farm. Business loan funds can also be used to support the family; Refinancing of debt under certain conditions; Payment of wages for hired farm laborers; Installation or improvement of water systems for domestic, livestock or irrigation use; and other similar improvements.
The repayment periods for direct company loans are between one and seven years. The financing of direct loans for farms cannot exceed 40 years. The interest rates for direct loans are set regularly according to the borrowing costs of the state. Guaranteed loan terms and interest rates are set by the lender.
For more information on the FSA’s farm loan programs and guidelines for underserved and aspiring farmers, please contact your local FSA office or visit farmers.gov.