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"Direct" farm loans are made by FSA with Government
funds. We also service these loans and provide our Direct loan customers with supervision and credit counseling
so they have a better chance for success. Farm Ownership, Operating, Emergency
and Youth loans are the main types of
loans available under the Direct program. Direct loan funds
are also set aside each year for loans to minority applicants and
beginning farmers (see links below). To apply for a
Direct loan, contact your
local FSA office. For Direct loan interest rates,
click here.
Direct
Loan Programs and Information
Farm
Ownership Loans How can Farm
Ownership loan funds be used?
With a Direct
Farm Ownership Loan, you can purchase farmland, construct
or repair buildings and other fixtures, and promote soil and
water conservation.
What is the
maximum loan size?
The maximum amount
for Direct Farm Ownership Loans is $200,000.
What is the
Direct FO Joint Financing Plan?
Loan applicants
may choose to participate in a joint financing plan. In this
program, FSA lends up to 50 percent of the amount financed,
and another lender provides the balance. FSA may charge an
interest rate of not less than 4%.
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How can Operating
Loan funds be used?
Operating Loans
may be used to purchase items such as livestock, farm equipment, feed, seed,
fuel, farm chemicals, insurance, and other operating expenses.
Operating Loans can also be used to pay for minor improvements
to buildings, costs associated with land and water development,
family subsistence, and to refinance debts under certain conditions.
Loan funds
cannot be used to finance nonfarm enterprises, which include
raising earthworms, exotic birds, tropical fish, dogs, or
horses for non-farm purposes (racing, pleasure or show).
What is the
maximum loan size?
The limit on Direct
Farm Operating Loans is $200,000.
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FSA targets a
portion of Direct loan funds to beginning farmers and ranchers
who are unable to obtain financing from commercial credit
sources. Also, see our
fact sheet.
What are the
qualifications for beginning farmers?
Farm Ownership
Loans
In addition to
meeting all Farm Ownership Loan eligibility requirements,
a beginning farmer or rancher must be an individual or business
entity who:
-
has
participated in the business operations of a farm or ranch for at least 3 years, but not more than
10 years.
-
does not own
a farm greater than 30 percent of the average size farm
in the county.
-
If the applicant
is a business entity (e.g. a corporation, partnership,
etc.), all members
must be related by blood or marriage, and all stockholders
in a corporation must be eligible beginning farmers or
ranchers.
Operating Loans
In addition to
meeting all operating loan eligibility requirements, a beginning
farmer or rancher must be an individual or business entity
who:
-
has operated
a farm or ranch for 10 years or less.
-
If the applicant
is a business entity, all members must be related by blood
or marriage, and all stockholders in a corporation must
be eligible beginning farmers.
FSA has a special
Downpayment Farm Ownership Loan Program to help beginning
farmers and ranchers purchase a farm or ranch. This program
also provides a way for retiring farmers to transfer their
land to a future generation of farmers and ranchers.
Here's how the
program works:
-
An applicant
must make a cash downpayment of at least 10 percent of
the farm or ranch's purchase price.
-
FSA may finance
up to 40 percent of the purchase price or appraised value, whichever
is less. The loan term is 15 years at a fixed interest
rate of 4 percent.
-
The
remaining balance, may be obtained from a commercial lender or a private
party. FSA can provide up to a 95 percent guarantee if
financing is obtained from an eligible commercial lender.
-
The purchase
price or appraised value, whichever is lower, may not
exceed $250,000.
Sale of Inventory
Farmland to Beginning Farmers or Ranchers
FSA advertises
acquired farm property within 15 days of acquisition. Eligible
beginning farmers and ranchers are given first priority to
purchase these properties at the appraised market value for
the first 75 days after acquisition. If more than one eligible
beginning farmer or rancher offers to purchase the property,
the buyer is selected randomly.
Our
fact
sheet contains additional information about loans to beginning
farmers and ranchers.
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Loans
to Socially Disadvantaged Farmers/Ranchers
FSA reserves Direct loan funds
each year to help socially disadvantaged applicants buy and
operate family-size farms and ranches.
A socially disadvantaged (SDA)
applicant is one of 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. These groups include women, African Americans,
American Indians, Alaskan Natives, Hispanics, Asians, and
Pacific Islanders. Our
fact
sheet provides more information.
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FSA
Loan Program Eligibility
A direct loan
applicant must:
-
have sufficient
education, training, or experience in managing and operating
a farm or ranch that demonstrates the managerial ability
needed to succeed in farming.
-
be a citizen
of the United States (or legal resident alien), which
includes Puerto Rico, the Virgin Islands, Guam, American
Samoa, and certain former Pacific Trust Territories.
-
have the legal
capacity to incur the obligations of the loan.
-
be unable
to obtain credit elsewhere.
-
have an acceptable
credit history.
-
be the
operator
or tenant operator of a family farm after the loan is
closed. For a Farm Ownership
Loan, the producer must also own the farm. For an Operating or
Emergency Loan, the producer
need only be the operator.
-
not have had
a previous loan which resulted in a loss to the Agency
(with certain exceptions).
-
not be delinquent
on any Federal debt.
Corporations,
cooperatives, joint operations, and partnerships and their
members/stakeholders must meet
these same eligibility requirements, and the entity must also
be authorized to operate a farm or ranch in the State where
the land is located.
If a loan
applicant qualifies, what next?
The following
actions are usually taken as part of the application process:
-
Loan applicant
contacts the FSA office and receives an application package.
-
Loan applicant
completes the loan application, with FSA assistance if needed.
-
FSA and the
loan
applicant meet to review and discuss the application.
-
FSA determines
if the applicant is eligible and reviews the application
for repayment ability, security, and compliance with other
regulations.
-
FSA approves
and obligates the loan.
-
Loan is closed,
and the loan applicant receives the funds.
Other
Criteria
What are the
loan terms and interest rates?
Repayment terms
and interest rates vary according to the type of loan made,
the collateral securing the loan, and the applicant's ability
to repay. Operating Loans are normally repaid within 7 years,
and Farm Ownership Loan terms cannot exceed 40 years. The
interest rates for Direct Loans are adjusted periodically
based on the Federal Government's cost of borrowing.
A lower interest
rate is available for producers with limited resources. Loans
to limited resource producers are reviewed periodically to
adjust the interest rate based on repayment ability.
What security
is required?
Loans must
be adequately secured. Collateral for Operating Loans consists
of a first lien on crops to be produced and on livestock and
equipment purchased or refinanced with loan funds. A lien
may be taken on certain other chattel and real estate property,
and an assignment usually will be taken on income such as
that from a dairy enterprise. Collateral for Farm Ownership
Loans consists of real estate only or a combination of real
estate and chattels. FSA requires security of 150 percent of
the loan amount, if available. At a minimum, the
security must equal the loan amount.
Are there
any special loan conditions?
FSA provides temporary
credit to its direct loan borrowers; therefore, all borrowers
are required to refinance their loans with a private, commercial
lender when they are financially able to do so.
To improve their
production and financial management ability, FSA requires
all borrowers to complete farm and financial training courses.
Some borrowers may receive a waiver from the course if they
have demonstrated adequate knowledge and ability in the subject
areas covered by the course.
As part of its
supervised credit role, FSA will require borrowers to provide
updated financial information periodically and participate
in an annual review of their operation by FSA. The Agency
completes a comprehensive evaluation of the real estate and
chattel property used in the operation, the farm business
organization and key personnel, and any planned changes to
the operation. FSA will then identify and prioritize
training and supervisory needs, and help the borrower complete
a plan of supervision to assist the producer in achieving
financial viability.
Also, all borrowers
must operate their farms in an environmentally sound manner,
comply with highly erodible land and wetland policies, and
if necessary, operate according to a USDA land management
plan.
Where can
you apply for a loan?
For Direct Loans,
farmers apply at the local FSA county office servicing the
area in which they expect to carry out their operations.
Does it cost
anything to apply for a loan?
To process a Direct
loan application, FSA requires the loan applicant to pay a
credit report fee. In addition, if a loan is made, the producer
pays the fees charged for lien searches and for filing and
recording security instruments.
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Where
to Go for More Information
Further information
and applications for the loan programs described are available
at local FSA county offices. These are usually listed in telephone
directories in the section set aside for governmental/public
organizations under the U.S. Department of Agriculture, Farm
Service Agency. To
locate your local FSA Office, click here.
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