Good News for Beginning Farmers and Ranchers Seeking FSA Farm Operating and Ownership Loans
Recently, the U.S. Department of Agriculture (USDA) Farm Service Agency (FSA) announced a new rule that expands loan opportunities for beginning and socially disadvantaged farmers and ranchers, while also establishing a new Land Contract Guarantee Program. The rule provides additional flexibility allowing FSA loan officers to consider all prior farming experience, including on-the-job training and formal education, when determining eligibility for FSA farm operating and ownership loans. It also expands a previous pilot program, the Land Contract Guarantee Program, from six states to all 50 states. This program enables landowners to sell their farmland to the next generation on a contract for deed with a 90-percent guarantee against losses to the seller. Alternatively, the agency can provide a guarantee of three years’ amortized loan installments, plus payment of real estate taxes and hazard insurance premiums for the same three-year period. This program is designed to encourage farmers and ranchers to sell their property to beginning and socially disadvantaged (SDA) farmers and ranchers through the use of seller financing.
Overall, the new rule introduces flexibility designed to enlarge the pool of potential farmland buyers, which is important to young, beginning and socially disadvantaged farmers who start out or operate without established credit.” The changes were made in the eligibility considerations for farm operating and ownership loans to increase access for farmers and ranchers to FSA loans and credit assistance.
A recent survey released by the National Young Farmers Coalition (NYFC), Beginning Farmers: Challenges Faced by Young, American Farmers and a National Strategy to Help Them Succeed, surveyed 1,000 farmers from across the United States and found that access to capital, access to land and, access to health insurance present the largest obstacles for beginners. Managerial ability is a determining factor in operating loan applications. The new rule provides flexibility to loan officers when deciding if a farmer has sufficient managerial ability to repay a loan. According to the new rule, the managerial requirement for all loans can be met through any combination of Education, On-the-job Training or Experience; or by meeting just one of the three criteria. As a result, the FSA loan program will accommodate the range of new training opportunities for today’s young farmers and may help young farmers who were previously denied financing, according to NYFC.
An example for fulfillment of the education requirement includes The Small Farm Program, University of Arkansas-Pine Bluff. This program falls under the broader language “successful completion of farm management curriculum offered by the Cooperative Extension Service, a community college, adult vocational agriculture program, or land grant university.” In addition, successful completion of a community-based, nationally based, non-profit, or similar farm workshop program qualifies as farm education.
The handbook now indicates that apprenticeships qualify as farm experience and it outlines example programs. The new language states “On-the-job training. For example, the applicant is currently working on a farm as part of an apprenticeship program.”
Farm ownership loans require that the applicant has managed a farm for 3 years. In the past, only farmers who had filed a Schedule-F could qualify. Although the rules were made more flexible before the recent change, the new handbook language is very clear that farm workers can meet the experience requirement for a farm ownership loan.
The FSA also puts less emphasis on tax records (Schedule F) as proof of farm experience and states that “The applicant may document this experience through FSA farm records or similar
With this announcement, the USDA stated that U.S. agriculture is currently experiencing its most productive period in decades thanks to the productivity, resiliency, and resourcefulness of America’s producers. The improvements will help producers and businesses maintain this competitive edge.
More information on the new Land Contract Guarantee Program and the other changes are available at local FSA offices nationwide. Information about Farm Loan Programs and FSA loan qualifications can be found at www.fsa.usda.gov.