Are you thinking about starting or expanding your farm but have questions about financing the new operation or expansion? The Farm Service Agency Loan Program may have the answers and assistance you need.
The Farm Service Agency Loan Program is designed to assist producers who are having trouble obtaining credit from a commercial lender in order to start, purchase, sustain or expand their farm.
Dan Gieseke, Missouri FSA Farm Loan Chief explained, “FSA loans are set up to act as a progression. We help producers get started and as their operation grows then they will be able to go through a traditional lender for their financing needs.”
The Loan Program is set up on two types of loans:
Guaranteed Loan Program
A guaranteed loan is made in cooperation with a traditional lender, such as a bank, Farm Credit system or credit unions. FSA will guarantee the lender’s loan up to 95 percent.
Direct Loan Program
A direct loan is made and serviced by the FSA using government money. The FSA will provide credit counseling and supervision for its borrowers.
According to the FSA website here is a brief description of the basic loans available:
Direct Farm Ownership Loans can be used to purchase farmland, construct or repair buildings and make farm improvements. There is no minimum amount with direct farm ownership loans with a maximum of $300,000.
Direct Operating Loans can be used to help you purchase livestock and equipment and pay for minor real estate repairs and annual operating expenses. Maximum loan amount is $300,000.
Emergency Loans can be used if you suffered a qualifying loss caused by natural disasters that damaged your farming or ranching operation. Emergency loan funds may be used to restore or replace essential property, pay all or part of production costs associated with the disaster year, pay essential family living expenses, reorganize the farming operation and refinance certain debts.
There are other types of loans available under these basic loans. Gieseke explained that there is special funding available for beginning farmers and minority and women farmers. “We have separate pools of money that others can’t use. Congress has set money aside so socially disadvantaged and beginning farmer applicants have better access to funding.”
One type of loan that may be useful for new farmers is the Beginning Farmer Down-Payment Loan. “If a beginning farmer or socially disadvantaged can come up with 5 percent down then FSA will loan up to 45 percent of $500,000. The maximum loan amount from the FSA for this type of loan is $225,000; a conventional lender then makes the rest of the loan. The advantage is the loan is a 20-year term with an interest rate that is 4 percent below the normal rate. Right now the interest rate for this type of loan is 1.5 percent,” said Gieseke.
“Beginning farmers is our emphasis,” continued Gieseke. “Last year FSA loaned $143 million to farmers, with nearly half going to beginning farmers.”
If producers are interested in receiving a loan from FSA they should first start by talking to their local FSA office. “Many times our local offices will meet with producers to counsel them and determine if they qualify. We will then explain what they need to do to continue with the process. Typically, the producer will be sent home with paperwork and instructions on what they will need to bring back.”
Gieseke concluded, “Missouri ranked 10th in the nation for overall loans and 10th in the nation for beginning farmer loans. We are proud of what we offer.”
