USDA’s Farm Service Agency (FSA) announced last Friday that they are transferring additional funding into their direct farm operating loan program. This program loans money to farmers to help them pay for farm operating expenses and equipment when they cannot find a farm loan with another lender. This program includes the incredibly popular microloan program that NYFC helped create.

Congress funds FSA’s farm loan programs for each fiscal year, which begins October 1. Farm loans are then available until this funding runs out or the next fiscal year begins. This year, direct operating funds ran out over the summer, which means FSA has been unable to fund roughly 2,000 approved loan applications. The funding transfer announced last week will wipe out this backlog and hopefully sustain the program through the end of the fiscal year.

NYFC is a strong advocate for FSA loan programs. For many of our members, FSA is the only entity that will give them a farm loan, and those loans are key to supporting and growing any farm business. We have been monitoring the farm loan funding situation carefully, and we strongly urged USDA to make this funding transfer. We have also urged Congress to increase funding for farm loans next year, in order to keep this situation from happening again. Thus far, the House and the Senate have both proposed increasing funding to meet demand.

While Friday’s action addresses the shortfall in the direct farm operating loan program, it does not fix the shortfall in the guaranteed farm operating loan program. Guaranteed loans are made by private banks but backed by USDA. If a farmer defaults on a guaranteed loan, USDA will step in and pay the bank a portion of the amount owed. FSA is facing a backlog in these loans as well.