Presentation on theme: "Becoming an FSA Guaranteed Lender"— Presentation transcript:
1 Becoming an FSA Guaranteed Lender An Overview of the USDA Farm Service AgencyFarm Loan Programs
2 Welcome to Our Webinar Keep Background Noise to a Minimum All participants have been mutedChat FunctionAsk a Question in the ChatBoxRaise Your Hand to be UnmutedFeedback ButtonsYes or NoToo Fast or Too SlowLaughter and ApplauseChat Test QuestionWhat organization are you representing and where are you based?
3 Farm Service Agency Farm Loan Programs 1400 Independence Ave, SWWashington, DC
4 Farm Service Agency Farm Loan Programs Chris BeyerhelmDeputy Administratorfor Farm Loan Programs
7 California FarmLink Certified CDFI Reggie Knox Executive Director Santa Cruz, CACA FarmLink provides small loans to farmers for annual operating costs, equipment and infrastructure.
8 Farm Service AgencyFSA provides assistance to farmers through many programs:Farm Programs:Production, Emergencies & CompliancePrice SupportConservation & Environmental ProgramsDisaster ProgramsFarm Loan Programs:Direct LoansGuaranteed Loans
9 Types of Loans Direct Loans Applicant applies directly to one of the USDA-FSA Service Centers located across the countryLoan limits may be made up to $300,000Guaranteed LoansApplicant applies to an agricultural lender, who then applies to FSA for the guaranteeGuaranteed Loan limits may be made up to $1,355,000 (adjusted annually)
10 Benefits of a Guaranteed Loan Provides an “Insurance Policy” for production agricultural loansFSA reimburses the lender up to 95% of the principal and interest lost when a borrower can not pay back the loanMitigates risk when lending to borrowers who do not meet commercial lender underwriting standardsLess risk means lower interests for your borrowers
11 Benefits Turns a loan into a marketable security Guaranteed portion of loan can be sold on the secondary marketProvides capital that can build portfolioProvides source of capital through servicing fees
12 Benefits Using guaranteed & direct farm ownership programs together Downpayment Program (SDA/BF)5% down payment provided by borrowerUp to $300,000 financed by FSA directlyBalance financed by lenderParticipationIf FSA provides ≤ 50%, special interest rates apply
13 Benefits Gain experience underwriting agricultural loans FSA will help you through the underwriting processFSA provides annual lender training
14 Purposes Farm Ownership (FO) Direct & Guaranteed Use of Proceeds Purchase farmConstruct buildings or other capital improvementsSoil and water conservationPay closing costRefinance debt incurred for FO purposes (Guaranteed only)Interest Rates-FeesDirect: varies, based on Government’s borrowing cost (currently 4%)Guaranteed: determined by lender1.5% Guaranteed FeeTermsup to 40 year
15 Purposes Farm Operating (OL)(LOC) Direct & Guaranteed Use of Proceeds Purchase livestock, machinery and equipmentPay annual operating and/or family living expensesRefinance operating debtPay closing costPayment of non-delinquent payments on term debts (OL/FO)Interest Rates-FeesDirect: varies, based on Government’s borrowing cost (currently 2.25%)Guaranteed: determined by lender1.5% Guaranteed FeeTermsup to 7 year
16 Eligibility Requirements Standard Eligible Lender (SEL)SEL is basic level of participation in the FSA Guaranteed Loan ProgramLender must have experience in making and servicing agricultural loans (or work with an experienced packager)Lender must maintain an office near enough to the collateral’s location for proper servicing
17 Becoming a SEL CDFI’s requesting SEL approval will need to provide: Cover letter requesting SEL statusCopy of year-end financial statement and agriculture performance history for past 2 yearsSchedule of current sources of funding and funds available for agriculture lendingCurrent loan loss reserveRequests are submitted to the National Office through the State Executive Director for the State where the CDFI is located.
18 Application Process SELs submit the following to FSA: Application form Loan narrativeBalance sheetCash flow budgetDescription of farmed landCredit reportEnvironmental information (if needed)Verification of income/debtsFinancial/production historyFSA will:Make determination, approve and obligate loan request
20 Guaranteed Loan Servicing Guaranteed against loss as long as:Serviced according to standard Ag Lending practices and standards, andThe requirements of the lenders agreement and the guarantee are met.
21 General Servicing Lender Responsibilities: Apply standard agricultural loan servicing principals to guaranteed loans:Accounting for loan proceedsMonitoring collateral and tracking the sale of collateralMaintain regular contact with the borrowerServicing a guaranteed loan is no different than servicing a non-guaranteed loan.
22 ReportingGuaranteed Loan Status reports as of March 31 and September 30 of each year.
23 Servicing ToolsFSA works with lenders to help assure that every borrower has the opportunity to be a successful farmer or rancher. The guarantee provides servicing flexibility that results in favorable terms for:ReschedulingDeferralDebt Writedown
24 Other Servicing ToolsServicing tools that are also available to assist borrowers with options to improve cash flow or help to ensure the success of the farming or ranching operation include:SubordinationsPartial ReleasesInterest Rate AdjustmentsDebt Consolidation
25 Default ServicingLoans are in default when 30 days past due on a payment or in violation of provisions of the loan documents. Default status reports are required for delinquent loans every 60 days until the default is resolved or loss claim submitted.
26 Loss ClaimsMust be supported by documentation that lender has serviced the loan as required.Example:Accounting for use of proceedsAccounting for all security
27 FSA Website: http://fsa.usda.gov/FSA/ Sign-up for FSA electronic notificationsDownload Fact Sheets for FSA ProgramsLocate FSA State and County Service Center Office (FSA staff and phone number)CDFI’s can also contact:FSA State OfficeLocal USDA-FSA Service Center