By ANN HINCH
Assistant Editor INDIANAPOLIS, Ind. — With harvest almost (finally) finished, and in between holiday festivities, growers may wish to turn their attention to learning more about loan and other funding programs through the USDA, particularly its Farm Service Agency (FSA).
Though the following information is largely Indiana-centric, FSA’s Farm Loan Programs are available in every state, to varying degrees. Most notable of these are the direct and guaranteed loans; in fact, 80-83 percent of the loans FSA makes through Farm Loan Programs are guaranteed, according to Indiana Farm Loan Chief Greg Foulke.
“Twenty years ago, there was some negative connotation with getting an FSA loan … used to be when you couldn’t get a loan from anyone else,” he recalled. Now, the FSA is actually the first stop for many eligible clients, especially beginning farmers – “We do tons and tons of those.”
In a guaranteed loan, the FSA directly loans a farmer half the amount and a local bank loans the other half, with 90 percent of the bank’s share being “guaranteed” by the FSA in case of default. Foulke said there are banks otherwise afraid to take a chance on such a large, uncertain purchase as a farm without the guarantee; the Indiana FSA made more than 100 such loans in 2008.
The FSA also offers “bridge loan” assurance to local banks in the event a loan goes through during a time of year before Congress has released annual funding to the agency. This allows the bank to extend the full loan to the farmer, with reimbursement of the federal share when the FSA receives its cash.
A direct loan is for farmers unable to secure loans from other lending institutions. In Indiana alone, Foulke said the FSA has loaned out $117 million in principal on direct loans, with a combined delinquency and loss rate of just over 3 percent. In guaranteed loans, the late and loss rates total just over 1 percent. Term of repayment for either is between 1-7 years.
Under the Downpayment Program – through which funds may only be used to purchase a farm, no supplies or improvements – beginning farmers, especially socially disadvantaged minorities and women, are encouraged to apply. It’s a 20-year term requiring a 5 percent down payment, with an extremely low interest rate.
“That’s dang near giving the money away,” Foulke said.
It does have maximum amount conditions: 45 percent of either the purchase price or the appraised value, or $225,000 – whichever of these is the least.
A “beginning farmer” is defined as being new to the occupation or not having yet farmed for more than 10 years at the time the loan is approved. Also, they may not already own more acreage than that equal to 30 percent of the median size farm for their county.
Foulke pointed out this last requirement allows some flexibility in the Corn Belt, with its large farms, but there are states outside this region where the median size is only two acres.
Indiana has to compete with other states for a national FSA pool of funds for most loan programs, he explained. There was a time each state had allocated funds, but that has changed to a “first come, first served” basis.
One program Foulke said is often overlooked is the Rural Youth Loan Program, up to $5,000 targeted to children between ages 10 and 21. It is designed to help kids on a project – such as in 4-H or FFA – ag-related and intended to raise some modest income, such as through livestock, crops, vegetables or the like, under an advisor’s guidance.
There are other loans Foulke didn’t describe; to learn more about them or the ones listed above, call your local or state FSA office or log onto www.fsa.usda.gov |
