FAQ: I've been considering adding some on farm storage for grain, what are some basics for FSA's loan program?
Answer: Provided by Beth Grabau, public information and outreach specialist at the USDA Farm Service Agency's state office in Des Moines. FSA program specialist Brad Murray assisted her in answering these questions.
FSA has a separate loan program for farm storage, it is the Farm Storage Facility Loan (FSFL) program. It allows producers of eligible commodities to obtain low-interest financing to build or upgrade farm storage and handling facilities.
FSA loans money for facilities for these commodities:
- Corn, grain sorghum, soybeans, oats, wheat, barley or minor oilseeds harvested as whole grain
- Corn, grain sorghum, wheat, oats or barley harvested as other-than-whole grain
- Pulse crops - lentils, small chickpeas and dry peas Hay
- Renewable biomass
- Fruits (including nuts) and vegetables for cold storage facilities
The maximum principal amount of a loan through FSFL is $500,000. Participants are required to provide a minimum down payment of 15%, with CCC providing a loan for the remaining 85% of the net cost of the eligible storage facility and permanent drying and handling equipment.
Loan terms of 7, 10 or 12 years are available depending on the amount of the loan. Interest rates for each term may be different and are based on the rate which CCC borrows from the U.S. Treasury Department.
Question: What types of structures, facilities or equipment can be included in the loan? What type of security is needed?
Loans are based on the new cost to the borrower for the eligible facility, accessories and services associated with the construction. These net costs could include (but are not limited to) the purchase price, tax, shipping, delivery, site preparation, installment or construction costs, cement work, electrical work and paid labor. Paid labor can't include the borrower's own labor.
Loans can be on new structures, flat storage, new electrical equipment that is needed, safety equipment, affixed grain handling and drying equipment, structures for hay storage or even fruits and vegetables. All eligible structures and equipment must have a useful life expectancy of at least 15 years.
Contact your local FSA office to find out more information on what is eligible for a loan as this relates to the structure you would like to install.
In addition to the 15% down and a UCC-1 filing to give CCC first lien on the structure, CCC will also file a real estate mortgage on loans over $50,000. Another option in lieu of the real estate mortgage would be to use a letter or credit from your lender.
Question: I have not obtained a loan from FSA for some time. What do I need to do to apply?
First, there are some important things to remember as you get started. The FSFL must be approved before any site preparation, construction or delivery can begin. FSA is required to inspect the facility site prior to loan approval.
To begin the process, your application for FSFL must be submitted to the FSA county office that maintains the farm's records. At the time of application, a $100 nonrefundable application fee will be charged. At the time of application, you will need to provide estimates of the costs associated with the construction or cost of the items you would like to have under loan.
Applications are based on needed storage capacity for two years worth of production. This number is reduced by the storage capacity that is already owned by the producer. As the application process continues, your local FSA office will also need proof of crop insurance, as well as insurance on the structure. Balance sheets and income statements or a Letter of Credit from your bank will also need to be provided.
If you have specific questions or need details on USDA farm programs, contact your local USDA Farm Service Agency or other appropriate USDA agency office. And be sure to read the regular column of "Frequently Asked Questions about the Farm Program" appearing in each issue of Wallaces Farmer magazine and at www.WallacesFarmer.com.