Access to credit continues to be an urgent need for farmers across the country, especially for small and beginning farmers. Starting a new farm is not unlike starting any other small business–it can require significant upfront capital to get off the ground.
USDA recently announced exciting changes to their Microloan Program, including launching a new Direct Farm Ownership Microloan, which will streamline and quicken the loan approval process for smaller real estate loans.
This announcement builds on USDA’s Farm Service Agency (FSA) efforts to bring more beginning, diversified, and local food producers in the door by offering resources that make sense for their scale of operation, production system, diversity of products grown or raised, and markets served.
About FSA Farm Ownership Microloans
The U.S. Department of Agriculture has been known as the “lender of last resort” since the federal agency first got into the loan-making business back in the 1930s, though in recent years the agency has changed its motto and operating principle to the “lender of first opportunity.” In the last few years, FSA has expanded funding and improved credit options, increasing the number of farmers served. This includes the microloan program that NSAC played a major role in getting authorized for the first time as part of the 2014 Farm Bill.
Since first launching FSA Microloans for farm operating loans, the agency has made 16,842 microloans to farmers, totaling $66.1 million dollars in FY 2013, $98.3 million in FY 2014, and $209.4 million in FY 2015 and the first quarter of FY 2016.
With the launch this month of Direct Farm Ownership Microloans, FSA aims to make farm ownership loans more available and attractive to small operators. The new ownership microloan program will offer reduced application requirements, more timely application processing, and added flexibility for Youth Loan borrowers in meeting the farm experience eligibility.
It is intended that these smaller loan amounts (up to $50,000) will provide substantial assistance to small operations, such as beginning farmers, truck farmers, and niche-type operations. The loan program is also ideal for those who have demonstrated financial and business experience through the successful repayment of a Youth Loan. These smaller farm operations tend to have difficulty obtaining real estate financing from other types lenders, who are unlikely to make loans in such small amounts or support less traditional farm operations.