Summary
"Direct" farm loans are made by FSA with Government funds. The FSA also services these loans and provides their Direct loan customers with supervision and credit counseling so they have a better chance for success. Farm Ownership, Operating, Emergency and Youth loans are the main types of loans available under the Direct program. Direct loan funds are also set aside each year for loans to minority applicants and beginning farmers
Eligible Applicants
A direct loan applicant must:
- have sufficient education, training, or experience in managing and operating a farm or ranch that demonstrates the managerial ability needed to succeed in farming.
- be a citizen of the United States (or legal resident alien), which includes Puerto Rico, the Virgin Islands, Guam, American Samoa, and certain former Pacific trust Territories.
- have the legal capacity to incur the obligations of the loan.
- be unable to obtain credit elsewhere.
- have an acceptable credit history.
- be the operator or tenant operator of a family farm after the loan is closed. For a Farm Ownership Loan, the producer must also own the farm. For an Operating or Emergency Loan, the producer need only be the operator.
- not have had a previous loan which resulted in a loss to the Agency (with certain exceptions).
- not be delinquent on any Federal debt.
Corporations, cooperatives, joint operations, and partnerships and their members/stakeholders must meet these same eligibility requirements, and the entity must also be authorized to operate a farm or ranch in the State where the land is located.
Eligible Uses
- Farm Ownership Loans
Direct Farm Ownership (FO) Loans may be made to purchase farmland, construct or repair buildings and other fixtures and to develop farmland to promote soil and water conservation.
- Operating Loans
Direct Operating Loans (OL) may be used to livestock, farm equipment, feed, seed, fuel, farm chemicals, insurance, and other operating expenses. Operating Loans can also be used to pay for minor improvements to buildings, costs associated with land and water development and family living expenses.
Loan Amounts
The maximum amount for Direct Farm Ownership or Farm Operating Loan is $200,000.
Terms
Repayment terms vary according to the type of loan made, the collateral securing the loan, and the producer's ability to repay. OLs are normally repaid within 7 years and FO loans cannot exceed 40 years.
Interest Rate
The interest rates for Direct Loans are adjusted periodically based on the Federal Government's cost of borrowing. Current interest rates can be found at http://www.fsa.usda.gov/dafl/rates.htm A lower interest rate is available for producers with limited resources. Loans to limited resource producers are reviewed periodically to adjust the interest rate based on repayment ability.
Fees
To process a Direct loan application, FSA requires the loan applicant to pay a credit report fee. In addition, if a loan is made, the producer pays the fees charged for lien searches and for filing and recording security instruments.
Types of Direct Loans
- Beginning Farmer and Rancher Loans
FSA targets a portion of Direct loan funds to beginning farmers and ranchers who are unable to obtain financing from commercial credit sources.
- Downpayment Farm Ownership Loans for Beginning Farmers
FSA has a special Downpayment Farm Ownership Loan Program to help beginning farmers and ranchers purchase a farm or ranch. This program also provides a way for retiring farmers to transfer their land to a future generation of farmers and ranchers.
- Loans to Socially Disadvantaged Farmers/Ranchers
FSA reserves Direct loan funds each year to help socially disadvantaged applicants buy and operate family-size farms and ranches. Each of these loan types have additional requirements that can be found by visiting: http://www.fsa.usda.gov/pas/
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