Apr 14, 2022
Are you planning to buy a farm or ranch? Do you want to buy farming tools and equipment like a tractor, irrigation pipes, or a greenhouse farming equipment? Do you want to expand your farming business? Did a natural disaster ruin your crops or damaged your farm buildings or equipment?
If the answer to these questions is “Yes”, you should apply for FSA farm loans. Undoubtedly, nearly all your problems will be resolved with government-backed farm loans from USDA. It’s been years that FSA farm loans have been helping farmers and other rural business owners. But, unfortunately, many of them are unable to use this benefit for their business because they aren’t aware of it. In this post, we will discuss FSA farm loans and some important points associated with them.
As an agency of the US Department of Agriculture (USDA), Farm Service Agency (FSA) lends money to the farmers and other rural business owners to help them start-up and stay in business. The best thing about FSA loan programs is that it helps the farmers who are unable to obtain credit elsewhere.
FSA provides direct loans as well as backs up or “guarantees” loans made by banks to farmers. The details of these loan programs are discussed below.
Guaranteed Loan Program - This loan is originated and serviced by commercial lenders, which include banks, the Farm Credit System or Credit Unions. Here, the FSA agency plays the role of a guarantor. The agency guarantees the lender’s loan against a loss of up to 95%. The role of the FSA is to approve all eligible guarantees and keep a check on the lender’s USDA origination and servicing activities.
Direct Loan Program- In this, no commercial lenders are involved. The FSA agency originates and services the Direct Loan program using taxpayers’ money. Here the FSA agency provides credit counseling and supervises its direct borrowers. The agency helps them in evaluating the adequacy of their real estate and facilities, machinery and equipment, and financial and production management.
The application for the loan program seems easy to many borrowers. But, there are many stages of FSA loan application which should be completed accurately. So, you should seek help from experts who are familiar with FSA lending processes and guidelines. You might also need help from a business advisor or other professionals for developing your business plan, which is an important part of your application. Getting approval for FSA farm loans without a business plan is a bit challenging.
At Royale Capital, we will help you complete the FSA farm loans application process and increase the approval chances manifold.
FSA farm loans have different types. The decision to choose one among these loan types is a bit confusing. To avoid this confusion, we have explained the different types of FSA farm loans in brief.
Farm Ownership loans- This loan type will help you buy or expand a farm or ranch, construct a new or make improvements in an existing farm or ranch building. Not only this, but the farm ownership loans will also help you pay closing costs and soil and water conservation and protection costs.
Operating loans- This FSA loan type will help you purchase livestock and equipment as well as pay for minor real estate repairs and annual operating expenses. In simple terms, anything that you require to operate your farm business will be fulfilled with operating loans.
Emergency loans-The natural disasters damage the farms and farming equipment, affecting the farming or ranching operation. To overcome the damages and restart the operations, emergency loans are used. With the help of the emergency loan, you can restore or replace the essential property, pay the production costs (fully or partly) that are associated with the disaster year, pay the essential expenses of family living and manage the farming operation and refinance certain debts.
· The maximum amount is 100% actual or physical losses or $500,000(whichever is the lowest)
· The loan term is for 1 to 7 years (possibly up to 20years) for non-real estate purposes. For physical losses on real estate, the loan term is up to 40 years. The interest rate is fixed.
This is something that borrowers often miss out on. If you are a beginner or socially disadvantaged farmer or rancher, the FSA has something different for you. And because of this, the FSA is referred to as the “Lender of First Opportunity”.
Every year, the FSA targets some of the direct and guaranteed loan funds for beginning and socially disadvantaged farmers or ranchers. For this, the agency keeps a certain amount of money for farmers or ranchers who are starting up or belong to a group that has been subjected to racial, ethnic, or gender prejudice because of their identity. You are a socially disadvantaged farmer or rancher if you are a woman, American Indian or Alaskan Native, Asian, Black or African American, Native Hawaiian or another Pacific Islander or Hispanic.
Undoubtedly, FSA farm loans are safe and one of the best ways to move ahead in your rural business. The only thing is the accurate submission of the loan application, which requires an expert on your side. Contact Royale Capital to help you with the process and get your loan funded.