- Posted by Michael Pennartz
- On January 15, 2016
- 0 Comments
If you are looking to buy or enlarge your farm or ranch, construct a new farm or ranch building, or improve an existing building, a bank loan can be very expensive. You may be required to pay closing costs or even pay for soil and water conservation and protection. The Farm Service Agency (FSA) provides direct and guaranteed loans – Farm Ownership Loans. The loans are guaranteed in that a commercial lender makes and services the loan while the FSA guarantees it against loss to a maximum of 90 percent, in most cases.
If you do not meet the qualifications for a loan guarantee from a commercial lender, it is helpful to know there are alternatives. The FSA also makes direct loans serviced by an official from the FSA. The direct borrowers are provided with credit counselling and supervision, which is preceded by a thorough assessment of the applicant’s farming operations.
To qualify for Farm Ownership Loans, there are several requirements that you need to meet.
- You need to be a family farmer.
- You must show that your history of meeting credit obligations is satisfactory.
- If you are applying for a direct farm ownership loans, you must have participated in the business operations of a farm for at least three years out of the 10 years prior to the date the application is submitted.
- You must be a citizen, non-citizen national or legal resident alien of the U.S.
- You must be unable to obtain credit elsewhere at reasonable rates.
- You must possess the legal capacity to incur loan obligations.
- You must not have exhibited delinquency in dealing with your federal debts, if any.
- You must not have caused FSA loss by receiving debt forgiveness.
- You must be the owner-operator of a family farm after loan closing.
If you are eligible for a Farm Ownership Loans, you may obtain direct loans up to a maximum indebtedness of $300,000, and $1,119,000 for guaranteed loans, although this amount is adjusted on an annual basis for inflation.
For both the direct and guaranteed loans, the maximum repayment period is 40 years.
If you are looking to apply for a direct operating loan, you will need to submit an application form and all other required documentation to your local USDA Service Center or the FSA County Office. For guaranteed loans, you will have to visit your local lender who will then arrange for the guarantee.
Operating a farm is not easy, especially if working capital is a challenge. Whether you are looking to improve your existing farm or ranch, financial assistance from the federal government may be an attractive option. If you do not qualify for a Farm Ownership Loan or are not able to wait until the often lengthy approval process is complete, you may want to consider a business cash advance or working capital loan for your business.