Indianapolis – The Agricultural Services Agency (FSA) of the United States Department of Agriculture (USDA) reminds growers that the FSA offers home and farm loans to underserved applicants as well as beginner farmers and breeders. Underserved or entry-level farmers and ranchers who cannot obtain trade credit from a bank can apply for direct or guaranteed FSA loans.
âAgriculture and ranching are capital intensive activities and the FSA is committed to helping producers start and maintain their farms,â said Susan Houston, Acting State Executive Director of the FSA in Indiana. “FSA loans are designed to ensure that everyone has access to credit, including underserved and entry-level farmers and ranchers.”
The USDA defines underserved applicants as a group whose members have been subjected to racial, ethnic, or gender bias because of their identity as group members without regard to their individual qualities. For the purposes of the Farm Loan Program, underserved groups are American Indian or Alaska Native, Asians, Black or African American, Native Hawaiian or other Pacific Islander, Hispanic and women.
In order to qualify as a beginning farmer, the person or entity must meet the eligibility requirements outlined for direct or guaranteed loans. In addition, individuals and all members of the entity must have operated a farm for less than 10 years. Candidates must participate materially or substantially in the operation. For farm ownership purposes, the applicant must not own a farm greater than 30 percent of the average size farm in the county at the time of application. All applicants for direct farm ownership must have been involved in the business operations of a farm for at least three years within the past 10 years prior to the date the application is submitted to the FSA. Replacements for the full three years of experience may be made based on education, military experience, participation with a SCORE mentor, and farm management experience as a hired employee. Your local FSA office will be able to provide more details on acceptable substitutions.
If the applicant is an entity, all members must be related by blood or marriage and all members of the entity must be eligible entry-level farmers. At least one of the members must have three or more years of experience in the business operations of a farm by the date of submission of the application.
Direct loans are granted to applicants by the FSA. Secured loans are granted by lending institutions which arrange for the FSA to guarantee the loan. FSA can guarantee up to 95% of the loss of principal and interest on a loan. The FSA guarantee allows lenders to make agricultural credit available to producers who do not meet the lender’s normal underwriting criteria.
The Direct Guaranteed Loan program offers two types of loans: farm property loans and farm loans.
Farm property loan funds can be used to buy or expand a farm or ranch; purchase any easements or rights of way necessary for the operation of the farm; construct or improve buildings such as a dwelling or a barn; promote the conservation and development of soil and water; and pay closing costs.
Farm business loan funds can be used to purchase livestock, poultry, farm equipment, fertilizers, and other materials needed to operate a farm. Funds from the operating loan can also be used for family living expenses; refinancing of debts under certain conditions; pay the salaries of hired farm workers; installing or improving water supply systems for the home, livestock or irrigation; and other similar improvements.
The repayment terms for direct operating loans are expected to range from one to seven years. The financing of direct loans to agricultural property cannot exceed 40 years. Interest rates for direct loans are set periodically based on the government’s cost of borrowing. The secured loan terms and the interest rates are set by the lender.
For more information on FSA’s agricultural loan programs and guidelines for underserved and beginning farmers, please contact your local FSA office or visit farmers.gov.