Frank Urbanick, Agricultural Lending Manager for the USDA Farm Service Agency serving Allegheny, Armstrong, Beaver, Butler, Clarion, Elk, Indiana, Jefferson, Lawrence, Mercer and Washington counties, recently reminded growers that the FSA has funding earmarked specifically for use by targeted underserved groups and loans to beginning farmers.
These loan programs are designed to help farmers purchase and operate family farms.
“With these loan programs, the FSA hopes to help reverse the declining number of farmers and ranchers across the United States and especially here in our region,” Urbanick said. “These loans encourage and help them own and operate their own farms and ranches, participate in agricultural programs, and become an integral part of the farming community.”
According to Urbanick, the FSA sets aside a portion of its loan funds each year for targeted underserved groups. The USDA defines a targeted underserved farmer as part of a group whose members have been subjected to racial, ethnic, or gender bias based on their identity as members of the group, regardless of their individual qualities. For the purposes of this program, the targeted underserved groups are women, African Americans, Native Americans and Alaska Natives, Hispanics, Asians, and Pacific Islanders.
Direct loans are made to applicants by the FSA and include both operating and farm property loans. Repayment terms for direct operating loans depend on the collateral backing the loan and generally range from one to seven years.
Frank Urbanick says the repayment terms for home direct loans can be up to 40 years. Interest rates for direct loans are set periodically based on the government’s cost of borrowing. The Down Payment Loan Program requires the applicant to provide a minimum 5% down payment in cash, then the loan cannot exceed 45% of the lesser of the purchase price, the appraised value of the farm to be acquired, or 667,000 $.00 and for a term not to exceed 20 years. Subject to $600,000.00 Direct Farm Property Loan Limit. Down payment loans provided in the form of micro-loans for PO purchases cannot exceed $50,000.00.
Farm property loan funds can be used to purchase or expand a farm, purchase easements or rights of way necessary to operate the farm, erect or improve buildings such as a dwelling or barn, promote soil and water conservation and development and pay closing costs.
Funds from farm business loans can be used to purchase livestock, poultry, farm and household equipment, feed, seeds, fuel, fertilizers, chemicals, refinance debts, hail and other crop insurance, food, clothing, medical care and hired labor. Funds may also be used to install or improve water supply systems for domestic use, livestock or irrigation, and other improvements.
Individuals, partnerships, joint ventures, societies and cooperatives whose main and direct activity is agriculture and animal husbandry on family-sized farms can apply. A family-sized farm is considered a farm that a family can operate and manage on their own.
Secured loans can also be made for ownership or operating purposes and can be made by a lending institution subject to federal or state supervision (banks, savings and loan companies, insurance companies and units of the agricultural credit system). Typically, the FSA guarantees 90 or 95% of a loan against any loss that might be incurred if the loan fails. The terms of the secured loan are set by the lender. Interest rates for secured loans are set by the lender.
Applicants must meet the eligibility criteria for a given program before the FSA can extend program benefits. For additional information or inquiries for all FSA direct loan programs, contact your local FSA office at 24 Avalon Court, Suite 200, Mercer, PA 16137 or by phone (724) 662-2890.