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Farm Loan Programs: Direct Loans, Guaranteed Loans & Eligibility Requirements

The Farm Loan Programs offered by Direct Loans and Guaranteed Loans provide funding for farm ownership, farm operations, emergencies, and more. Learn about eligibility requirements and loan limitations.

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Farm Loan Programs: Direct Loans, Guaranteed Loans & Eligibility Requirements

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  1. 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 lendersfor up to 95 percent of any loss

  2. 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

  3. Types of Farm Loan Programs • Farm Ownership (FO) Loans • Farm Operating (OL) Loans • Emergency (EM) Loans (only Direct)

  4. Direct FO - $ 300,000 Direct OL - $ 300,000 Microloan - $ 50,000 Youth - $ 5,000 EM - $ 500,000 (or amount of loss, whichever is lower) Guaranteed: Combined G-FO and G-OL cannot exceed $1,399,000 for FY 2016 (changes annually based on rate of inflation applicable to FY) Loan Limitations

  5. Farm Loan ProgramsGeneral 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 acceptable credit history • Be the owner-operator or tenant-operator of a family farm

  6. General Eligibility RequirementsContinued Direct and guaranteed applicants must: • Not be delinquent on federal debt • Not have outstanding unpaid judgments • Not have caused the agency a loss by receiving debt forgiveness (some exceptions) • Not have been convicted of planting, cultivating, growing, producing, harvesting, or storing a controlled substance within the last five years

  7. FSA Direct Loans A direct loan applicant must: • Meet general eligibility criteria • Have applicable education, training, or farm experience that provides reasonable prospects of success (For an FO loan, must have participated in the operations of a farm or ranch for at least 3 years)

  8. FSA Direct LoansContinued • 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 to do so • Not exceed restriction on years of eligibility

  9. Direct Loan MakingOperating Loans • Purposes: • Purchase Equipment • Purchase Livestock • Production Expenses • Refinance operating expenses (other than FSA) • OL loans are repaid in 1 to 7 years

  10. Direct Loan MakingMicroloans • Microloans are operating loans, either annual or 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.

  11. Direct Loan MakingYouth Loans • Must comply with general eligibility requirements • Must be at least 10 yrs. old and under 21 • Must have recommendation and consent from parent or guardian • The outstanding principal balance cannot exceed $5,000. • Must have recommendation from advisor (4-H, Vo-Ag teacher, scout leader, etc.)

  12. Direct Loan Making Farm Ownership Loans • FO loan repayments can be scheduled for up to 40 years • Loan Purposes: • Purchase Land • Make Capital Improvements • Promote Soil and Water Conservation • Loan closing and related expenses

  13. Direct Loan Making Farm Ownership Downpayment Loans • Applicants must: - be beginning farmers or SDAs (minorities or women) - provide a minimum downpayment of 5% • Downpayment loans will not exceed 45% of the lesser of: • The purchase price • The appraised value of farm to be purchased, or • $667,000 (maximum loan of $300,000)

  14. Direct Loan MakingFarm Ownership Downpayment LoansContinued • Maximum FSA loan is 20 years • Interest rate is 4% below regular direct FO rate but no less than 1.5% • FSA can guarantee the balance with a term of no less than 30 years and no balloon payment due for the first 20 years • No guarantee fee charged • There is no limit on the purchase price of the property

  15. Direct Loan MakingFarm 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%

  16. Direct Loan MakingEmergency Loans Used for real estate and operating purposes where a disaster or quarantine has been declared • Purposes: • Refinance debts • Repair/replace farm property • Buildings • Machinery/Livestock • Feed • Other items

  17. Direct Loan MakingApplications • 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, other forms, Office locations are available online at: www.fsa.usda.gov

  18. Guaranteed Loans • Guaranteed loans are: • Made and serviced by local agricultural lenders • Funded by the lender • Used by lenders to assist producers who don’t meet normal underwriting standards.

  19. Guaranteed Loan MakingEligibility • 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

  20. Types of FSA Guaranteed Farm Loans • Farm Ownership (FO) Loans • Farm Operating (OL) Loans • Operating Lines of Credit

  21. Guaranteed Loan Making • The interest rate a lender charges: • must not exceed what that lender would normally charge its average farm customer • Maximum interest rate based on LIBOR and Treasury Rates • can be fixed or variable

  22. Guaranteed Loan Making • 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

  23. 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

  24. Targeted Underserved Applicant As defined by law, an underserved applicant is one who is a member of a 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. Underserved groups are African Americans, American Indians, Alaskan Natives, Hispanics, Asians, Pacific Islanders, and Women.

  25. Targeted Underserved Applicants • FSA does not have a specific loan program for underserved applicants, but rather targets funds in existing programs to applicants that meet the definition • The targets are set by law • Underserved loan applicants must meet loan program requirements

  26. 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

  27. 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

  28. 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 (Extension, State Programs, etc.)

  29. 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

  30. Application Tips • Applicants may ask FSA employees for help to complete the paperwork • Other sources of free assistance- • Extension Service • USDA Outreach Grant Recipient Organizations

  31. For More Information • Contact the Local FSA Office • Visit the FSA Website: www.fsa.usda.gov

  32. Farm Loan Programs QUESTIONS? Farm Service Agency

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