Starting November 7, 2014, the US Department of Agriculture is making changes to its farm loan program so that they can provide more assistance to beginning and family farmers. Changes to this program, operated by the USDA’s Farm Service Agency, include:
Raising the borrowing limit for its microloan program from $35,000 to $50,000.
This gives small and mid-sized farmers access to an additional $15,000 in loans.
Simplifying the lending processes
Updating required “farming experience” to include other valuable experiences.
If you’ve operated or managed a non-farm business, held leadership or management positions in the military, or have advanced education in an agricultural field you can now apply for a micro loan. These changes reflect the fact that today’s beginning farmers are different than they were in the past.
Expanding eligible business entities to reflect changes in the way family farms are owned and operated.
A family farm now refers to the farm business operation, not the real estate. In the past, you were required to own the farm real estate in the same legal manner as you operated farm. Since this practice has become less common, with families owning the real estate under a separate entity, it made farm operators ineligible for this loan program. With the new changes, you simply have to be or become an owner and operator of the business with at least a 50% share of the family farm.
Previously, FSA required all entity applicants to be owned by individuals and not other entities. This requirement was established to help direct FLP loan funds to family farms as intended and avoid larger, more complex operations. However, over time this rule has become a barrier for many family farm operations. It has become an increasingly common business practice to separate certain segments of family farm operations for liability and financial planning reasons. Many operations are structured this way to facilitate the entry and exit of family members as operations grow and age. The new rule allows for this kind of structuring of legal entities.
Have Ideas to Make Things Better?
If you think that additional changes would be helpful, or you have ideas about how the process should work, you still have time to make a difference. Producers will have an opportunity to share suggestions on the microloan process, and the definitions of farming experience and business structures through Dec. 8, 2014, the public open comment period. You can read the entire proposed rule and find out how to send your comments in here.
Pilot Programs On The Way
FSA is also publishing a Federal Register notice to solicit ideas from the public for pilot projects to help increase the efficiency and effectiveness of farm loan programs. Comments and ideas regarding potential pilot projects will be accepted through Nov. 7, 2014. You can read the notice and find out how to send your comments in here.
Your USDA loan article caught my attention as I have experience through my work advising a farmer who participated in a similar loan program run by USDA FSA. I have several concerns about how they manage these “small loans”, which are:
1) The term is too long when the money is used to finance cattle – 7 years for an asset that may not last that long. While a shorter term increases the payments, it is more likely to be paid off while the asset still is present to generate income to help make the payments.
2) Here in Virginia, a cattle loan made by USDA FSA is also secured by a lien on the land. In my view, this is way too much security and it puts the land at risk. The cattle should be the security and are the security in most other Virginia farm lending situations involving cattle.
3) No support, education or training is provided to inexperienced farmers by the lender – in this case USDA FSA. They are handed a check and sent into the “lions den” of cattle markets to fend for themselves. Experienced cattle traders can and do take advantage of new money.
Well put.! There is a lot of us who are not novices but could use more help that cant seem to get the help they need.I’ve given up on the govt !
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