How Do You Qualify for a Farm Operating Loan
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- On January 29, 2016
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The Farm Service Agency (FSA) supports the U.S. agricultural economy by offering farm operating loans to family farmers and ranchers. These loans are available to enable farmers and ranchers to build and sustain family farms. There are two types of loans offered by FSA-direct loans and guaranteed loans. For the guaranteed loans, a commercial lender makes and services the loan, while the FSA guarantees it against loss, up to a maximum 90 percent. For the farmers and ranchers who are unable to meet the criteria for guaranteed loans, direct loans are available.
Direct borrowers undergo a rigorous evaluation process, after which they are offered credit counselling and supervision.
There are certain eligibility criteria that are used to determine who gets Farm Operating Loans.
- One must be a family farmer.
- One must have a satisfactory history of meeting all their credit obligations.
- For the direct loans, one must have sufficient farm managerial experience which has been obtained through education, on-the-job training and/or general farm experience.
- One must be a citizen, non-citizen national or legal resident alien of the U.S.
- One should be unable to obtain funds elsewhere at reasonable rates.
- One must possess the legal capacity to incur loan obligations.
- One must not have federal debt obligations that they have refused to honor.
- One must not have caused any losses to FSA by benefiting from debt forgiveness, though certain exceptions are made for this particular criterion.
- After loan closing, one must be the tenant-operator or owner-operator of a family farm. The funds gotten from these loans can be used for various purposes, including normal operating expenses, purchase of machinery and equipment, real estate repairs and refinancing of outstanding debts.
For the direct loan, the maximum indebtedness currently stands at $300,000. The guaranteed loans have a higher maximum indebtedness of $1,119,000, although this amount is adjusted annually for inflation. The repayment period does differ from loan to loan. However, for intermediate-term loans, it is usually seven years. Usually, annual operating loans are repaid within 12 months or after the commodities produced are sold.
If you are applying for a direct operating loan, you must submit an FSA-2001, “Request for Direct Loan Assistance” application form, together with supporting documentation. Submissions are done to your local USDA Service Center or FSA County Office. For guaranteed loans, you will be required to visit your lender who will make the necessary arrangements for a guaranteed loan.
Working capital is a struggle for many family farms. Commodity prices, weather and currency fluctuations all challenge the economic sustainability of a modern farmer. If Farm Operating Loans are not available or you do not qualify, there are other financing options available.
At National Business Helpers, we offer several different financing options, including:
Alternative Financing – Immediate additional funding for your business, no applying for a loan.
Business Cash Advance Loan – If you need quick working capital a business cash advance is the ideal situation for you.
Bad Credit Business Loans – While it may be hard to apply for a bad credit business loan, you can still receive funding and not worry about your personal credit being less than perfect.
Cash Advance Program – Whatever your business needs may be – Get a cash advance up to $250,000.
Cash Flow Loan – Great option to obtain working capital funding quick and easy!