2 Who is FSAThe Farm Service Agency (FSA), is an agency within the United States Department of Agriculture (USDA).FSA’s Farm Loan Programs (FLP) can provide credit to agricultural producers who are unable to obtain private, commercial credit. FSA places special emphasis on providing loans to beginning, minority and femalefarmers and ranchers.LOAN TYPE FY FY 2012Direct OL , $ 68,349, , $ 73,859,061Guaran OL $ 76,979, $ 55,498,938Emergency $ , $ 5,788,610Direct FO $ 22,328, $ 22,126,667Direct CL 10 $ , $Guaran FO $ 31,779, $ 39,156,620Totals , $200,337, , $196,429,896FY 2012:Guaranteed Loan Program: 70 loans to BF; 24 to SDADirect Loan Program: 358 youth loans; 643 loans to BF; 492 to SDA % of the loans made in Texas were made to BF and SDA
3 An Introduction to FSA Farm Loans USDA – Farm Service AgencyFarm Loan ProgramsAmerica’s Lender of First OpportunityIf you are a farmer or rancher who is unable to obtain credit from another lender to start, purchase, sustain, or expand your family farm you may be able to obtain a loan through FSA’s Farm Loan Programs.FSA has different types of loans depending on your current situation and credit needs. FSA loan officers are available to answer your questions and to help with the application process.
4 What Type of Loans are Available USDA – Farm Service AgencyFarm Loan ProgramsAmerica’s Lender of First OpportunityDirect Loan ProgramOperatingMicroloan*Farm OwnershipEmergencyYouth ProjectsGuaranteed Loan ProgramLine of CreditConservationLand Contract GuaranteeThese loan programs can be discussed in a little more detail when introducing slide 5 and 6Point out the different loan programs we administer, however we will focus our discussion today mainly on the ML program
5 Farm Loan Programs Information Chart Type of LoanMaximum Loan AmountRates and TermsDirect Farm Ownership$300,000Term: Up to 40 years3.375% as of June 1, 2013Direct Down PaymentThe lowest of the following:45% of the farm or ranch purchase price45% of the appraised value$225,000Term: Up to 20 years1.50% as of June 1, 2013Direct OperatingTerm: 1 to 7 years1.250% as of June 1, 2013Direct Emergency100% of actual or physical losses$500,000Term: 1 to 7 years (possibly up to 20 years) for non-real estate purposesUp to 40 years for physical losses on real estate2.250% as of June 1, 2013Youth Loan$5,000In general:Direct Farm Ownership: purchase a farm; enlarge an existing farm; construct new farm buildings and/or improve structures. Direct FO loan funds cannot be used to refinance real estate type loans.Direct Down Payment: Designed to assist SDA and Beginning farmers and ranchers. The applicant must make a 5% cash down payment. FSA can loan 45% for the down payment and the remaining balance may be obtained from a commercial lender or private party.Direct Operating: Annual operating loans are typically repaid within 12 months. Funds can be used to pay for farm operating expenses, machinery, equipment, livestock. Direct operating loans can also be used to refinance farm operating type debt.Emergency: Emergency loans are available to producers who operate in a county declared a disaster by the Secretary of Agriculture or the President. The use of EM funds are similar to the operating loan program designed to assist the producer recover from the natural disaster. For production loss loans, the producer must demonstrate a 30% loss in a single farming or ranching enterprise.Youth loans: loan funds can be used by eligible rural youth to finance modest ag related projects in association with membership in organizations such as 4-H or FFA or other similar type organizations.
6 Farm Loan Programs Information Chart Continued Type of LoanMaximum Loan AmountRates and TermsGuaranteed OperatingThe maximum loan amount is adjusted annually for inflation*Currently: $1,302,000Term: 1 to 7 years5 Year Line of CreditThe interest rate is negotiated by you and your lender.Guaranteed Farm OwnershipTerm: Up to 40 yearsGuaranteed ConservationTerm: Up to 30 yearsLand Contract GuaranteeA maximum purchase price of the farm cannot exceed the lessor of:$500,000Current market value of the propertyTerm: Contract payments must be amortized for a minimum of 20 years with equal payments during the term of the guarantee. The guarantee period is 10 years.Interest Rate: Direct Farm Ownership rate plus 3%The guaranteed loan program requires a participating commercial lender. It is the lender’s decision to pursue a guarantee from FSA.A lender can obtain up to a 90% guarantee from FSA. The lender is charged a fee of 1.5% of the principal amount of loan guaranteed.In general:Guaranteed Operating: Annual farm operating expenses, purchase of equipment or livestock or refinance farm operating type debtGuaranteed Farm Ownership: Purchase a farm, enlarge a farm, construct farm buildings and improvements, or REFINANCE farm real estate type debt. (yes, we can refinance real estate type debt with this program)Guaranteed Conservation: Maximum guarantee to lender is 75% for this program. Loan funds can be used to implement any conservation practice in an NRCS approved Conservation Plan. Loan funds can also be used to refinance debts related to implementing an NRCS approved conservation plan. Eligibility for this type loan is expanded to include large and financially strong operations.Land Contract Guarantee: Program designed to assist the transfer of farms to Beginning and SDA farmers and ranchers through a land contract. The guarantee is issued to the seller of the farm real estate. The applicant must have a 5% down payment.
7 FSA’s Microloan Program The Farm Service Agency (FSA) developed the Microloan(ML) program to better serve the unique financial operating needs of:Beginning farmers and ranchersNiche operationsSmallest of family farm operationsExamples might include;Direct marketing to restaurants and grocery stores,Organic production,Community supported agriculture (CSA’s) and farmers markets.
8 Fulfilling a NeedAssisting applicants who have limited experience by providing them with an opportunity to gain farm management experience while working with a mentor;Eliminate use of high cost personal loans and high interest credit cards;Providing a bridge for Youth Loan borrowers to transition to larger-scale operations;Assisting the agricultural community by creating opportunities to start new businesses.
9 What is a Microloan Microloans are direct farm operating loans, Annual Operating purposesCapital purchases – term loanMaximum Loan Amount is $35,000Simplified application process and paperwork and verification requirements that are more proportional to smaller loans and operations.
10 An OverviewMicroloans can be used for operating expenses including but not limited to:• Initial start-up expenses;• Annual expenses such as seed, fertilizer, utilities, land rents;• Marketing and distribution expenses;• Family living expenses;• Purchase of livestock, equipment, and other materials essential tofarm operations;• Minor farm improvements such as wells and coolers;• Hoop houses to extend the growing season;• Essential tools;• Irrigation;• Delivery vehicles
11 General Eligibility Requirements Some general eligibility requirements include:Operator of a family sized farm,Unable to obtain sufficient credit elsewhere but have an acceptable credit history,U.S. citizen, non-citizen national, or qualified alien,Not delinquent on a federal debt, andHave sufficient managerial ability**Different types of loans have different eligibility requirements. For more information on general and loan specific eligibility requirements, visit our website at or see your local FSA loan officer.Meet General Eligibility Requirements:U.S. CitizenMust be a family size farmLegal capacity to incur the loan obligationUnable to obtain sufficient credit elsewhereNot delinquent on a federal debtNo Prior FSA debt forgiveness*Satisfactory credit historyNo disqualification from Crop Insurance violationsNo conviction for controlled substanceDemonstrate Management AbilityTerm limits sometimes come up here:[7 CFR (e)] And anyone who will sign the promissory note, may close an OLloan in no more than seven calendar years, either as an individual or as a member of anentity, except as provided in paragraph (e)(1) through (4) of this section. The yearsmay be consecutive or non-consecutive, and there is no limit on the number of loansclosed in a year. Youth loans are not counted toward this limitation. The followingexceptions are applicable.[7 CFR (e)(1)] This limitation does not apply if the applicant and anyone whowill sign the promissory note is a beginning farmer.The maximum number of years a beginning farmer may receive OL assistance is 10 years.
12 Managerial Ability and Alternatives for Microloan Applicants for microloans may demonstrate management ability by or through:Education, orOn-the-job training, orFarming experienceOwner, manager or operator of a farm for at least 1 production cycle, (within last 5 years) orObtained and successfully repaid one FSA Youth LoanDemonstrate Management AbilityManagement ability may be demonstrated by:Education4 year college degree in an Ag related field2 year degree in Ag related field along with experience in working on a farmVo-ag classed in high school along with experience working on a farmOn-the-Job TrainingCurrently working or recently working on a farm with management responsibilitiesFarming ExperienceOwner, manager or operator of a farm business for at least one entire production cycle
13 Alternatives for Meeting Eligibility Requirements For Microloans Certification of past participation in any one of the following:4-HFFABeginning Farmers & Ranchers Dev. ProgramsCommunity Based OrganizationsThat demonstrates experience in a related enterpriseOR,
14 Alternatives for Meeting Eligibility Requirements For Microloans Participate in a self-directed apprenticeship combined with either prior sufficient experience working on a farm or significant small business management experience.ML applicant must seek, receive and apply guidance from a qualified person during 1st cycle of production
15 Securing MicroloansCollateral for an annual operating purpose, such as purchasing seed, fertilizer and other crop input costs:Generally, secured by the crop or products produced, however equipment or other security can be used.Collateral for loans for other purposes such as purchasing equipment or foundationlivestock:Usually secured by the equipment or livestock being purchased.All loans need adequate security.150% security required on ML made for annual operating expenses, if available. Otherwise 100% security is sufficient.100% security required on ML made for purchase of equipment or breeding livestock.A lien on non-essential assets does not apply to ML, down payment loans or youth loans.
16 Microloan application requirements FSA-2330, “Request for Microloan Assistance”Farm Operating PlanBalance SheetEnvironmental InformationAD-1026, and RDCredit Report FeeFinancial and Production records for most recent production cycle if availableCredit Report Fee is:Individual $13.50Joint $20.25Entity $75.00
26 Reminder: Only the most recent year is required for a MicroloanR This form is optional. If an applicant has this same information recorded in a similar format. Remember, FSA only needs the most recent year. Three years of records is not required for the microloan.
28 Reminder: Only the most recent year is required for a Microloan This form is optional. If an applicant has this same information recorded in a similar format. Remember, FSA only needs the most recent year. Three years of records is not required for the microloan.
30 Applying for a LoanYou may obtain the forms for a loan application by visiting your local FSA office or from the FSA website atand click on the “Forms” tabFSA loan officers can provide assistance in completing the FSA forms or can identify other sources of assistance in your area.Applications may be submitted by:• calling for an appointment with an FSA loan officer;• mailing, faxing, or delivering your application to your local FSA office; or• electronically submitting your application if you have registered through the e-gov system. For information click on the “Online Services” tab at
31 In Summary: Microloans Are a direct operating loan with a maximum loan amount of $35,000.Have a shortened application process and reduced paperwork.Allow some applicants that do not currently meet the experience and managerial requirements to qualify through a self-guided mentorship.
32 In Summary: Microloans Provide some flexibility in loan security;Assist the agricultural community by creating opportunities to start new businesses;Fulfill financial operating needs ofbeginning, niche and the smallest of family farm operations.
33 Enter contact information of the presenterCONTACT INFORMATION:Eddie Trevino, Farm Loan ChiefTelephone: