The agricultural department offers loans to underserved groups, beginning farmers
According to a press release from the Bangor-based agency, the US Department of Agriculture Maine Farm Service Agency is offering specially targeted farm property and farm business loans to underserved applicants as well as beginning farmers and ranchers.
“Farming and ranching are capital-intensive businesses and the FSA is committed to helping producers start and sustain their farming operations,” said Sherry Hamel, the agency’s executive director for the State.
In fiscal year 2021 (October 1, 2020 through September 30, 2021), the Maine FSA committed more than $9.8 million in loans to underserved borrowers and beginning farmers and ranchers.
The USDA defines underserved candidates as a group whose members have experienced racial, ethnic, or gender bias based on their identity as members of the group, without regard to their individual qualities. For the purposes of the agricultural loan program, underserved groups are women, African Americans, American Indians and Alaska Natives, Hispanics, Asians, and Pacific Islanders.
In order to qualify as a beginning farmer, the person or entity must meet the eligibility criteria set out for direct or guaranteed loans. In addition, individuals and all members of the entity must have operated a farm for less than 10 years.
Candidates must participate materially or substantially in the operation. For farm ownership purposes, the applicant must not own a farm greater than 30% of the average county farm size at the time of application. All applicants for direct farm ownership must have been involved in the business operations of a farm for at least three years in the last 10 years prior to the date of application submission. If the applicant is an entity, all members must be related by blood or marriage and all entity members must be eligible beginning farmers.
Underserved or beginning farmers and ranchers who cannot obtain business credit from a bank can apply for either direct loans from the FSA or guaranteed loans. Direct loans are granted to applicants by the FSA. Secured loans are granted by credit institutions which arrange for FSA to guarantee the loan.
FSA can guarantee up to 95% of the loss of principal and interest on a loan. The FSA guarantee allows lenders to offer agricultural credit to producers who do not meet the lender’s normal underwriting criteria.
The direct and guaranteed loan program offers two types of loans: farm property loans and farm business loans.
Farm property loan funds can be used to purchase or expand a farm or ranch, purchase easements or rights of way needed to operate the farm, construct or improve buildings such as a dwelling or barn , promote soil and water conservation and development, and pay closing fees.
Farm operation loan funds can be used to purchase livestock, poultry, farm equipment, fertilizer and other materials needed to run a successful farm. Funds from operating loans can also be used for family expenses, refinancing debts under certain conditions, paying wages for hired farm workers, installing or improving water systems for the home. , livestock or irrigation and other similar improvements.
Repayment terms for direct operating loans depend on the collateral backing the loan and generally range from one to seven years. The financing of direct loans to agricultural property cannot exceed 40 years. Interest rates for direct loans are set periodically based on the government’s cost of borrowing. Secured loan terms and interest rates are set by the lender.
For more information about the agency’s agricultural loan programs and guidelines for beginning and underserved farmers, contact a local FSA office. To find a local FSA office, visit offices.usda.gov.