FAQ: We need to add some storage bins to our current grain drying and storage set-up. Also, my brother-in-law wants to upgrade his old grain dryer--get a newer, more energy efficient one with higher capacity. Please explain the low-interest loan program USDA has for farmers who are adding bins and upgrading grain drying and handling facilities?
Answer: Provided by Jim Book, program specialist with USDA's Farm Service Agency state office in Des Moines.
USDA's Farm Service Agency has a Farm Storage Facility Loan program that provides low-interest financing for farmers, to help build or upgrade grain storage and handling facilities.
Related: Grain Handling & Storage Tips
All loans are secured by a promissory note and security agreement. Loan terms are available for 7 years, 10 years and 12 years depending on the amount of the loan. The maximum principal amount of any of these loans is 85% of the net cost, not to exceed $500,000. The interest rate varies each month. But it is fixed for the term of the loan based on the rate in effect during the month the loan is initially approved by the county Farm Service Agency committee.
If you are interested in obtaining a storage facility loan, contact your local FSA county office for details. Additional information can also be found online at www.fsa.usda.gov.
Q: What is the current loan rate and policy for loans to purchase new grain bins? What related grain handling equipment can you buy with an Farm Service Agency loan--such as drying equipment, fans, augers, stirring equipment, grain leg, truck scale, etc.?
A: The interest rates for facility loans approved in August are: 7 years, 2.5%; 10 years, 3.0%; and 12 years, 3.375%. FSA will loan for most permanently affixed handling and drying equipment. This includes fans, augers, stirrators and legs. Items not eligible for loan include anything portable, weigh scales and feed handling and processing equipment.
Q: What is the timing of the loan? How far ahead of when I want to build the bin should I apply for a loan? Is there a lot of paperwork involved?
A: Producers are required to have their loan approved by their county FSA committee prior to delivery of any bin equipment or site preparation for the new foundation. They should apply at least two weeks before the next FSA county committee meeting. The loan is disbursed after everything is completed and operational.
Grain Handling & Storage Tips
A key component of the grain management and marketing equation is storage. Should you store most of your new crop and wait for a better price? Or, should you aggressively market in the fall? While the answer isn't the same for every farmer, those considering short- or long-term storage will likely need to sit down and run the numbers before settling on the most profitable option.
There is some paperwork involved. Producers have to provide financial statements and cost estimates to start the application process.
Q: Does FSA lend money for flat storage? I would like to build a machine shed, with one-half of it being used for corn storage during winter.
A: We do make loans on flat structures but only for grain or hay storage. In your example, we would loan on one-half the building.
Q: What do I need to do before I come to FSA to apply for the loan? Do I need a site plan from an engineering firm? What requirements does FSA have in regard to having a bank co-sign?
A: Producers should have current financial statements available and complete cost estimates from all vendors involved in the project. A site plan isn't required. FSA doesn't allow co-signers on the note. If a loan exceeds $50,000 additional security is required. This can be real estate or an irrevocable letter of credit.
Q: Does FSA make loans for storage facilities for other crops or commodities besides grain? For example hay or vegetables?
A: FSA makes facility loans for hay and renewable biomass storage. We also make loans for fruit and vegetable cold storage facilities.
Q: I've got a couple of older bins that need to be renovated. They need new floors and replacement of some bin sheets. I'd also like to add a stirrator and unloading auger to each. Can I get a loan for this?
Related: Grain Handling & Storage Tips
A: Yes, FSA will make loans for renovation projects. Eligible loan items include replacing the concrete pad, new drying, aeration or hauling equipment and replacing rings or roof panels.
If you have specific questions or need details regarding USDA farm programs, contact your local USDA Farm Service Agency office. You can also get news and information about DCP, ACRE and other USDA programs at www.fsa.usda.gov.
Two Iowa State University Extension Web sites have farm program information and analysis. They are ISU's Ag Decision Maker site at www.extension.iastate.edu/agdm and ISU Extension Specialist Steve Johnson's site at www.extension.iastate.edu/polk/farmmanagement.htm.
And be sure to read the regular column "Frequently Asked Questions about the Farm Program" that appears in each issue of Wallaces Farmer magazine and at www.WallacesFarmer.com