Grain Bin Loan Questions

Grain Bin Loan Questions

USDA's Farm Service Agency has a loan program to help farmers obtain low-interest financing to build or upgrade on-farm grain storage and handling facilities.

FAQ: I want to apply for an FSA Farm Storage Facility Loan to build two new grain bins. Bin companies already have a long list of customers. Any adverse weather such as rain or even an early snowfall could cause delays in getting the bins built. What happens when I can't complete the building of the bins by the date I thought I would?

Answer: Provided by Beth Grabau, public information and outreach specialist with USDA's Farm Service Agency state office in Des Moines. FSA program specialist Brad Murray assisted her. If you need more information, contact your local FSA office. Or visit FSA online at www.fsa.usda.gov.

Producers have four months from the date the loan is approved to complete construction. In some cases, extensions of time to complete construction can be granted. These extensions of time will be granted only when there is a bona fide delay in construction that's beyond the producer's control. These reasons could include bad weather, delays in delivery of materials, etc. Requests for an extension of time need to be in writing, include evidence and be timely filed with the local FSA county office before the original four months runs out.

Question: I have an existing FSA storage facility loan and with all of the disasters that have affected our state lately, what affect does storm related damage to the bins have on these loans?

Because these are loans, producers are still obligated to make their installment payments regardless of the condition of the bin when that payment is due. Producers have three options when bins have been damaged. They can:

  • Repair the damaged structure or items to the condition that it was in before the adverse weather condition.
  • Replace the damaged structure or items which have the loan on them.
  • Repay the loan in its entirety.

 

In the case of repairing or replacing the bin, CCC will not sign off of an insurance check until repairs or replacement is completed. But an insurance check will be applied to the balance of the loan if the producer chooses to repay the loan in full.

Question: I'm considering adding some on farm grain storage bins. What are the basics of FSA's loan program?

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 makes these loans on facilities for the following 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 such as 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 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 the (but are not limited to); purchase price, tax, shipping, delivery, site preparation, installment or construction costs, cement work, electrical work, and paid labor. Paid labor cannot include the borrowers 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 loan as it 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 applications 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.

TAGS: Soybean
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