tractor in field
FSA LOANS: FSA’s direct and guaranteed loan program offers farm ownership loans and operating loans. Underserved or beginning farmers who can’t obtain commercial credit from a bank can apply for either FSA direct loans or guaranteed loans.

USDA offers targeted loans

The farm ownership and operating loan program is for underserved and beginning farmers.

Bob Wegand, USDA Farm Service Agency acting executive director in Iowa, reminds producers that FSA offers specially targeted farm ownership and farm operating loans to underserved applicants, as well as beginning farmers.

“Each year, a portion of FSA’s loan funds are set aside to lend to targeted underserved and beginning farmers and ranchers,” he says. “Farming and ranching is a capital-intensive business, and FSA is committed to helping producers start and maintain their operations.”

During fiscal year 2017, which ended Sept. 30, Iowa FSA obligated $169 million in loans to underserved borrowers and beginning farmers and ranchers.

USDA defines underserved applicants as a group whose members have been subjected to racial, ethnic or gender prejudice because of their identity as members of the group without regard to their individual qualities. For farm loan program purposes, underserved groups are women, African-Americans, American Indians and Alaskan natives, Hispanics, Asians and Pacific Islanders.

Must meet eligibility
To qualify as a beginning farmer, the individual or entity must meet the eligibility requirements outlined for direct or guaranteed loans. Individuals and all entity members must have operated a farm for less than 10 years. Applicants must materially or substantially participate in the operation.

For farm ownership purposes, the applicant must not own a farm greater than 30% of the average size farm in the county at time of application. All direct farm ownership applicants must have participated in the business operations of a farm for at least three years out of the last 10 years prior to the date the application is submitted. If the applicant is an entity, all members must be related by blood or marriage, and all entity members must be eligible beginning farmers.

Underserved or beginning farmers who can’t obtain commercial credit from a bank can apply for either FSA direct loans or guaranteed loans. Direct loans are made to applicants by FSA. Guaranteed loans are made by lending institutions who arrange for FSA to guarantee the loan. FSA can guarantee up to 95% of the loss of principal and interest on a loan. The FSA guarantee allows lenders to make ag credit available to producers who do not meet the lender’s normal underwriting criteria.

The direct and guaranteed loan program offers two types of loans: farm ownership loans and farm operating loans.

Farm ownership, operating loans
Farm ownership loan funds may be used to buy or enlarge a farm through purchase of easements or rights of way, build or improve buildings such as a dwelling or barn, promote soil and water conservation and development, and pay closing costs.

Farm operating loan funds may be used to buy livestock, poultry, farm equipment, fertilizer and other materials necessary to operate a successful farm. Operating loan funds can also be used for family living expenses, refinancing of debt under certain conditions, salaries for hired farm laborers, and installation or improvement of water systems for home, livestock or irrigation use.

Repayment terms for direct operating loans depend on the collateral securing the loan and usually run from one to seven years. Financing for direct farm ownership loans can’t exceed 40 years. Interest rates for direct loans are set periodically according to the government’s cost of borrowing. Guaranteed loan terms and interest rates are set by the lender.

For more information on FSA’s farm loan programs, and underserved and beginning farmer guidelines, contact your local FSA office. To find your local FSA office, visit

Source: FSA

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