With all the questions that we get about the USDA’s Farm Service Agency (FSA), we thought that we should get those questions (and answers) put in writing. Chris Beyerhelm, Deputy Administrator for Farm Loan Programs at FSA, was kind enough to help us out. If you have additional questions that you’d like Chris to answer, let us know!
USDA’s Farm Service Agency (FSA) is the successor to a federal agency created in the 1930s to help repopulate rural America during the Great Depression. Over the years, the agency has gone through a number of name changes; however, its purpose has remained to provide assistance in meeting the credit needs of America’s farmers and ranchers. Today, FSA’s primary mission is to assist beginning and socially disadvantaged farmers and ranchers obtain credit to begin or maintain farming and/or ranching operations.
How are you different from other lenders?
FSA is the Lender of First Opportunity. FSA offers loans at lower interest rates and more favorable repayment terms to help applicants get started in agriculture. Commercial lenders are required by regulators to make loans to more financially established customers who have equity and a comfortable repayment capacity, whereas FSA offers loans to customers with less equity and less repayment capacity. At the same time, FSA is required to ask customers to pay off their loans and graduate to commercial credit when they are financially able to do so. This allows other beginning or socially disadvantaged farmers the same opportunity to get started and get on their feet financially.
What types of loans does FSA make?
FSA makes all types of loan related to the production of agricultural commodities. FSA offers 1 year operating type loans, up to 7 year intermediate capital item loans (i.e. machinery, livestock, etc.), and up to 40 year loans to purchase real estate. FSA makes direct loans (funded from government revenues), and guarantees loans funded by commercial lenders (guaranteed up to 95% by the government).
(Additional information on loans can be found here.)
What do I need to be eligible for an FSA loan?
There are two primary requirements to obtain an FSA loan. First, the applicant must meet the eligibility criteria, which include requirements such as United States citizenship, farming experience, and credit history. Secondly, applicants must be able to offer sufficient collateral (at least 1 to 1) to secure the proposed loan and develop a farm business plan that shows sufficient income to cover all expenses and planned payments. These requirements are not much different than any other lender is going to require.
The most important thing is to be prepared when meeting with an FSA loan officer for the first time. Applicants should have their financial information prepared and have a business plan which fully supports the loan request. They should also be prepared to be flexible if the loan officer has suggestions or recommends changes to the plans. Having a market for proposed commodities is also vital.
How much credit history do I need? Can someone co-sign my loan?
An applicant will not need a lot of credit history. FSA does not use credit scores to evaluate applications, but if an applicant has participated in credit transactions, we will expect that they have fulfilled obligations with previous creditors or have a good explanation for any adverse or delinquent account status. Co-signers are allowable if needed to show sufficient financial strength.
What size loan can I get from FSA? Is it easier to get a small loan?
FSA has a Direct Loan program with loan limits of $300,000 for operating type needs (1-7 year terms) and $300,000 for real estate needs (up to 40 years), for a total maximum of $600,000 per applicant. In addition FSA offers up to $1,214,000 in guaranteed loans, funded by commercial lenders, to be used for any combination of operating and/or real estate needs.
(Additional information on loan limits can be found here.)
Currently, FSA has a Lo-Doc operating loan (less than $50,000), which requires less paperwork than operating loans in excess of that amount.
Does FSA fund all types of farming operations? Could I get funding for a community supported agriculture farm? What about an organic operation?
FSA can finance most types of farming operations, including community supported and organic operations.
Do apprenticeships count as farm experience?
Yes, completing a farm mentorship or internship program with an emphasis on management requirements and day-to-day farm decisions is considered towards the experience requirements to obtain an FSA loan.
Do I need to have filed a Schedule F to get an FSA loan?
No, FSA requires applicants to demonstrate that they have some experience in farming. This can be demonstrated by education, on the job training, actual farming experience, or any combination of the three. Providing copies of schedule Fs is an easy way to demonstrate experience, but is not required.
Can I apply for an FSA loan online or do I need to go to an office?
Yes, forms can be found, and applications can be submitted, online.
However, at some point in the application process, an FSA loan officer will need to meet with the applicant in person to go over the business plan and discuss the terms and conditions of the proposed loan.
If I’m looking to buy or raise money for a new farm outside of the FSA district where I currently live, should I go to my local office or the office near the new farm? Is there coordination between FSA offices?
If someone has a specific area in mind outside where he or she currently resides, I would recommend making contact with the loan officer who serves that area. This is not required, but it is important for producers and loan officers to build a bond of trust and teamwork, and the earlier one begins to start to build that relationship, the better. In addition, a loan officer in the area where the operation will be located is going to be more knowledgeable on local conditions that might impact business decisions.
What’s new at FSA? Are there any new programs or services that young farmers should know about?
We just recently announced our Land Contract Guarantee program. Under this program a seller of land on contract can choose between getting a 90% guarantee or a prompt payment guarantee. By offering these risk protections to the seller, FSA hopes to encourage landowners to sell to beginning farmers.
(More information on this program can be found here.)