Farm Operating Loan Program Benefits
The Farm Service Agency (FSA) offers farm operating loans to family farmers and ranchers to promote, build and sustain family farms in support of a thriving agricultural economy.
- The goal of FSA's farm loan programs is to graduate its borrowers to commercial credit.
- Once a farmer is able to obtain credit from the commercial lending sector, the agency's mission of providing temporary, supervised credit is complete
FSA provides guaranteed and direct loans. Under a guaranteed loan, a commercial lender makes and services the loan, and FSA guarantees it against loss up to a maximum of 95 percent of loan value. For those not yet meeting the qualifications for a loan guarantee from a commercial lender, FSA also makes available direct loans, which are serviced by FSA.
FSA has the responsibility of providing credit counseling and supervision to its direct borrowers by making a thorough assessment of the farming operation. Eligible applicants may obtain direct loans for up to a maximum indebtedness of $300,000 and a direct operating Microloan for up to a maximum indebtedness of $50,000. Maximum indebtedness for a guaranteed loan is $1,399,000 (amount adjusted annually for inflation).
The repayment term may vary, but typically it will not exceed seven years for intermediate-term purposes. Annual operating loans are generally repaid within 12 months or when the commodities produced are sold. In general, loan funds may be used for normal operating expenses, machinery and equipment, minor real estate repairs or improvements, and refinancing debt.
Who is eligible for Farm Operating Loan Program (Direct and Guaranteed)?
To be eligible for assistance, applicants must be family farmers, citizens, non-citizen nationals or legal resident aliens of the United States or U.S. territories, and be able to demonstrate one year of sufficient farm managerial experience. You must also meet all of the following:
- Have a satisfactory history of meeting credit obligations, and
- Have legal ability to sustain loan obligations, and
- Be unable to obtain credit elsewhere at reasonable rates and terms to meet actual needs, and
- Be the tenant-operator or owner-operator of a family farm after loan closing.
Applicants are automatically not eligible if either of the following apply:
- Are delinquent on a federal debt, or
- Have caused FSA a loss by receiving debt forgiveness (certain exceptions apply).
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What are the loan terms for Farm Operating Loan Program (Direct and Guaranteed)?
Eligible applicants may obtain direct loans for up to a maximum indebtedness of $300,000, and guaranteed loans for up to a maximum indebtedness of $1,392,000 (amount adjusted annually for inflation). The repayment term may vary, but typically it will not exceed 7 years for intermediate-term purposes.
Annual operating loans are generally repaid within 12 months or when the commodities produced are sold. In general, loan funds may be used for normal operating expenses, machinery and equipment, real estate repairs, and refinancing debt.
| Max Loan Length | 7 years |
| Interest Rate | Direct - Varies, Guaranteed - Market |
| Max Loan Amount | Direct - $300,000, Guaranteed - $949,000 |
| Payment Frequency | Varies |
| Prepayment Penalties | None |
| Max Loan Length | Direct - 0, Guaranteed - 1% |
Required Eligibility for Farm Operating Loan Program
The eligibility criteria for the Farm Operating Loan Program can vary depending on the specific program and country. However, I can provide you with some general information that is often applicable in many agricultural loan programs, particularly in the United States through the U.S. Department of Agriculture (USDA). Keep in mind that you should check with the relevant local or national agricultural authorities for the most accurate and up-to-date information.
- Farm Size: There may be restrictions on the size of the farm, typically measured in acres or production value. Different programs may have different size requirements.
- Legal Status: Applicants may need to be legal residents or citizens of the country where the program is offered. Some programs may also have specific requirements for entities, such as family farms or certain types of agricultural businesses.
- Creditworthiness: Lenders often assess the creditworthiness of the applicant. This involves reviewing the applicant's credit history, financial statements, and other relevant financial information.
- Collateral: Most agricultural loan programs require collateral to secure the loan. This can include the farm assets, such as land, equipment, and livestock.
- Business Plan: A solid business plan may be required, outlining the details of how the loan funds will be used and how the farm operation will be managed.
- Farm Experience: Some programs may require applicants to have a certain level of experience in farming or a related field.
- Ability to Repay: Lenders will assess the applicant's ability to repay the loan. This may involve evaluating the farm's income potential and the applicant's financial management skills.
- Compliance with Environmental Regulations: Farms may need to comply with environmental regulations and sustainable farming practices to be eligible for certain loan programs.
- Use of Funds: The funds from the loan may need to be used for specific purposes related to the farm operation, such as purchasing equipment, seeds, livestock, or covering operating expenses.
- Government Program Participation: Some loan programs may require participants to comply with certain government programs, such as conservation programs or crop insurance.
It's important to note that these are general guidelines, and specific eligibility requirements can vary. Therefore, it's crucial to contact the relevant agricultural agency or financial institution offering the loan program for the most accurate and up-to-date information.
Documents required for Farm Operating Loan Program
The specific documents required for a Farm Operating Loan Program can vary depending on the lending institution, the program itself, and the country in which the program is administered. However, here is a general list of documents that are commonly requested when applying for a farm operating loan:
- Loan Application: A completed loan application form, which typically includes detailed information about the farm operation, the purpose of the loan, and the requested loan amount.
- Business Plan: A comprehensive business plan that outlines the goals of the farm, details about the operation, financial projections, and how the loan funds will be used.
- Financial Statements: Recent financial statements for the farm operation, including balance sheets, income statements, and cash flow statements. These documents provide a snapshot of the farm's financial health.
- Tax Returns: Personal and/or business tax returns for the past few years. This helps the lender assess the applicant's financial history and ability to manage tax obligations.
- Credit History: Authorization for the lender to access the applicant's credit history and credit score. A good credit history is often a key factor in loan approval.
- Collateral Information: Documentation related to the proposed collateral for the loan, such as property deeds, vehicle titles, or information about equipment and livestock.
- Legal Documents: Depending on the structure of the farm (individual, partnership, corporation, etc.), legal documents such as articles of incorporation, partnership agreements, or other relevant documents may be required.
- Proof of Farm Experience: Documentation or resumes demonstrating the applicant's experience in farming or related agricultural activities.
- Budget and Cash Flow Projections: Detailed projections showing how the loan funds will be used and how the farm's income and expenses are expected to change over the loan period.
- Personal Identification: Valid identification documents, such as driver's license, passport, or other government-issued IDs.
- Loan Purpose Documentation: Specific documentation outlining the purpose of the loan, whether it's for purchasing equipment, seeds, livestock, or covering operating expenses.
It's essential to check with the specific lending institution or government agency offering the Farm Operating Loan Program to get the most accurate and up-to-date information on the required documents. Additionally, consulting with a financial advisor or agricultural extension service can provide valuable guidance in preparing a thorough loan application.
How do I apply for Farm Operating Loans (Direct and Guaranteed)?
To apply for a direct operating loan, applicants must submit an application form (FSA-2001, "Request for Direct Loan Assistance") and all other required documentation to their local USDA Service Center or FSA County Office. Please follow guidance on “How to Complete an FSA Loan Application” found on the FSA Fact Sheet. Forms can be located on FSA's Farm Loan Programs Direct Loan Application Forms and Instructions page. To apply for a guaranteed loan, visit your lender who will arrange for the guarantee.
How can I contact someone?
For more information about FSA loan programs, please visit FSA's Farm Loan Programs homepage. You may also obtain information through your local FSA office or USDA service center. To locate the office nearest you, visit the USDA Service Locator page. 1-202-720-2791