- Direct Farm Operating Loan Purposes: Identify essential needs such as reorganizing the farm, purchasing livestock and equipment, covering operating expenses, or making improvements and repairs.
- Eligibility Requirements: Ensure your farm enterprise qualifies, meet general criteria including legal responsibilities, credit history, and managerial ability.
- Loan Terms: Loans up to $400,000 are available with no down payment required. Repayment terms vary based on the loan’s purpose and your financial situation, with interest rates updated monthly.
- Application Process: Prepare by organizing financial records, setting clear farm operation goals, and arranging a meeting with a local Farm Loan Officer. Seek guidance from FSA officials and utilize resources like Cooperative Extension Services for assistance.
Apply for the Direct Farm Operating Loan
FSA’s Direct Farm Operating Loans are designed to provide critical financial support to new and established farmers. These loans help cover the essential costs of operating a farm or ranch and can be particularly beneficial for new agricultural producers. Here’s an overview of the loan’s purposes, eligibility requirements, terms, and application process.
Loan Purposes
Direct Farm Operating Loans must be essential to the success of the farming operation. They can be used for:
- Reorganizing the Farm:
- Purchase equipment for transitioning to no-till production.
- Shift from stocker to cow-calf production.
- Change from row crop to vegetable production.
- Buy grain drying and storage equipment for better marketing.
- Purchase shares in value-added processing and marketing cooperatives.
- Purchasing Livestock and Equipment:
- Buy livestock, including poultry.
- Acquire farm equipment.
- Operating Expenses:
- Cover costs such as feed, seed, fertilizer, pesticides, farm supplies, cash rent, and family living expenses.
- Initial processing of agricultural commodities under specific circumstances.
- Improvements and Repairs:
- Minor building improvements or repairs.
- Refinance certain farm-related debts (excluding real estate).
- Land and water development, use, or conservation.
- Loan closing and borrower training costs.
Eligibility Requirements
Eligible Farm Enterprise
- The farm operation must be an eligible farm enterprise. Loans cannot be used for non-farm enterprises like exotic birds, tropical fish, dogs, or horses used for non-farm purposes (e.g., racing, pleasure, show, or boarding).
General Eligibility Requirements
- No Federal or State Convictions: For offenses related to controlled substances.
- Legal Responsibility: Must be able to accept loan obligations.
- Credit History: Must have an acceptable credit history.
- Citizenship: Must be a U.S. citizen, non-citizen national, or legal resident alien.
- No Previous Debt Forgiveness: No prior debt forgiveness by the Agency.
- Insufficient Credit Elsewhere: Must be unable to obtain sufficient credit without the FSA loan guarantee.
- No Federal Debt Delinquency: No delinquency on federal debt at loan closing.
- No Federal Crop Insurance Violations: Must not be ineligible due to disqualification from federal crop insurance.
- Managerial Ability: Must have sufficient managerial ability to ensure loan repayment.
Managerial Ability
Managerial ability is assessed through education, on-the-job training, or farm experience.
- Education:
- College degree in an agricultural-related field.
- Completion of farm management courses from Cooperative Extension Services, community colleges, or Land Grant universities.
- Participation in farm workshop programs or agricultural clubs like 4-H or FFA.
- On-The-Job Training:
- Experience as hired farm labor with management responsibilities.
- Completion of farm mentorship, internship, or apprenticeship programs focused on management.
- Participation in urban or community-supported agriculture programs.
- Farm Experience:
- Ownership, management, or operation of a farm for at least one full production cycle within five years.
- Employment as a migrant farm worker with leadership responsibilities.
- Raised on a farm with significant management responsibilities.
- Successful repayment of at least one FSA Youth Loan.
Loan Terms
Maximum Loan Limitations
- The maximum loan amount is $400,000 with no down payment required.
Repayment Terms
- Terms vary based on the loan’s purpose, the applicant’s ability to repay, and projected income. General operating and family living expenses are typically due within 12 months or upon sale of agricultural commodities. For larger purchases, the term will not exceed seven years.
Interest Rate
- The interest rate is the lower rate in effect at the time of loan approval or closing. Rates are updated monthly.
Application Instructions
Preparation for Application
- First Meeting with FSA:
- Have clear goals for your farm operation and identify your needs.
- Organize financial records, including income, expenses, and recent tax returns.
- Bring records of any off-farm income, leases, and a recent credit report.
- During the Application Process:
- Make an appointment with a local Farm Loan Officer or Manager.
- The FSA officials will assist with completing forms and gathering necessary information.
- They will explain the application process and requirements and provide guidance on overcoming eligibility barriers.
- Resources and Assistance:
- Seek help from technical assistance providers like Cooperative Extension Services and non-profit organizations.
- Utilize the booklet “Your Guide to FSA Farm Loans” for more detailed information.
Suggestions for First Meeting with FSA
- Have a detailed plan for your farm operation and financial needs.
- Bring organized financial records and documentation.
- Understand the costs associated with your household and business.
- Review your credit report for accuracy before applying.
By following these steps and preparing adequately, you can increase your chances of securing a Direct Farm Operating Loan from the FSA, which can significantly aid in starting, maintaining, or expanding your agricultural operations.
