FAQ: What types of loans for agriculture are available from USDA's Farm Service Agency? How do I apply? What determine if I qualify?
Answer: USDA's Farm Service Agency makes and guaranteed loans to family farmers and ranchers to promote, build and sustain family farms in support of a thriving agricultural economy. Farmers may apply for direct loans at local FSA offices. Guaranteed loans may be available from local commercial lenders who apply for loan guarantees from FSA. Although general information may be obtained from headquarters and state offices, all programs are administered through local offices.
The goal of FSA's farm loan programs is to graduate its borrowers to commercial credit. Once a farmer is able to obtain credit from the commercial lending sector, the FSA's mission of providing temporary, supervised credit is complete.
Brian Gossling, chief program specialist for FSA farm loan programs at the Iowa FSA's state office in Des Moines, provided the answers to the following often-asked questions. Producers are encouraged to contact their local FSA office for further information regarding FSA loan programs. Likewise, if you have any farm program related question, always check with your local FSA office. Information can also be found online at www.fsa.usda.gov/ia.
Question: The business of agriculture is changing rapidly and then you add this year's drought conditions. My neighbors vary from traditional row crop to vegetable production and everything in between; we all have different challenges and needs. What does FSA have to help us meet these varying credit demands?
Answer: Agriculture and the farming industry has seen many challenges and changes recently, with higher input and feed costs, drought conditions, as well as new and diversified farming enterprises that are changing our communities. Through all of these changes and challenges, FSA's staff is committed to see our clients succeed by having loan programs that are designed to help family famers obtain loans and loan guarantees, conduct business planning and by offering solutions.
FSA programs can be tailored to fit a variety of circumstances and we have a strong interest in providing opportunities for non-traditional enterprises. FSA has provided financing for value added enterprises, organic farming, Community Support Agricultural enterprises, milking goats, and fruit and vegetable production, to name a few enterprises.
A real benefit of FSA's loan program is the farm planning and counseling provided by FSA's loan staff. We can assist our customers in identify opportunities and coordinate resources to improve profitability. This effort results in a tailored financial solution that works for unique lending situations.
Question: I've read information about direct and guaranteed loans? What are the differences? How do I know what to ask for when meeting with an FSA loan officer?
Answer: In brief, direct loans involve a direct lending relationship with the government. The interest rate and other loan terms are based on FSA guidelines. Guaranteed loans are obtained through a commercial lender such as a bank or other agricultural lender. The interest rate and terms are negotiated between the applicant and the lender. The ag lender would then apply to FSA for a guarantee to support the loan. FSA's guaranteed loans are designed to provide an additional incentive for a lender to make a loan at competitive rates and terms.
FSA loan officers can assist farmers in identifying which program best fits their operations. While the programs have many similarities, they are structured to meet different objectives. Direct loans have $300,000 limits for farm ownership and operating loans. These loan limits often fit better with smaller and less capital intensive operations, or with operations early in their business cycle. As the lender of first opportunity, FSA's direct loan program is a great fit for beginning farmers.
In contrast, an operation can borrower $1,302,000 through the guaranteed loan program. The guaranteed program also offers a line of credit whereby a lender can establish an annual operating draw note that can be used for up to five consecutive years. The structure of the guaranteed loan program makes it a good fit for operations with greater capital needs.
Question: What credit products does FSA have available? How can the loan funds be used?
Answer: FSA has a variety of loan products in both the direct and guaranteed loan programs. Loan funds can be used for most enterprises that raise and sell an ag commodity.
* Funds for Farm Ownership Loans may be used to purchase a farm, construct new facilities or improve existing structures, and pay closing costs. Farm Operating Loan funds may be used for normal operating expenses, machinery and equipment, to purchase livestock, and for refinancing debt.
* Emergency Loans assist farmers who have suffered a physical or production loss in areas declared a disaster by the President or U.S. Secretary of Agriculture. These loans can be used for a variety of purposes, with the intent of returning the farm to normal operations. Typical uses include refinancing debt, replacing lost livestock or damaged buildings and providing operating credit.
* FSA's Rural Youth Loans provide up to $5,000 in financing for young people to establish income producing agricultural enterprises.
* In each of these various loan categories, FSA provides targeted funding for Beginning Farmers and for primary operators who have typically been underrepresented in production agriculture, including minority and female farmers.