Ag News

USDA updates farm loan programs

On Aug. 7, the USDA announced changes to the Farm Service Agency’s (FSA) Farm Loan Programs. According to a USDA press release, the changes are intended to increase opportunities for farmers and ranchers to be financially viable. These improvements are part of the Enhancing Program Access and Delivery for Farm Loans rule, which is finalized and becomes effective Sept. 25.

Farm loan policy changes outlined in the rule are designed to better assist borrowers to make strategic investments in the enhancement or expansion of their agricultural operations.

The three most notable policy changes are:

• Establishing a new low-interest installment set-aside program for financially distressed borrowers. Eligible financially distressed borrowers can defer up to one annual loan installment per qualified loan at a reduced interest rate, providing a simpler and expedited option to resolve financial distress in addition to FSA’s existing loan servicing programs;

• Providing all eligible loan applicants access to flexible repayment terms that can increase profitability and help build working capital reserves and savings. By creating upfront positive cash flow, borrowers can find opportunities in their farm operating plan budgets to include a reasonable margin for increased working capital reserves and savings, including for retirement and education;

• Reducing additional loan security requirements to enable borrowers to leverage equity. This reduces the amount of additional security required for direct farm loans, including reducing the frequency borrowers must use their personal residence as additional collateral for a farm loan.

Additional Farm Loan Program Improvements

FSA has an initiative underway to streamline and automate the Farm Loan Program customer-facing business process. Among the FLP improvements are:

• The Loan Assistance Tool that provides customers with an interactive online, step-by-step guide to identifying the direct loan products that may be a fit for their business needs and to understanding the application process;

• The Online Loan Application, an interactive, guided application that is paperless and provides helpful features including an electronic signature option, the ability to attach supporting documents such as tax returns, complete a balance sheet, and build a farm operating plan;

• An online direct loan repayment feature that relieves borrowers from the necessity of calling, mailing, or visiting a local USDA Service Center to pay a loan installment;

• A simplified direct loan paper application, reduced from 29 pages to 13 pages.

USDA encourages producers to reach out to their local FSA farm loan staff to ensure they fully understand the wide range of loan and servicing options available to assist with starting, expanding, or maintaining their agricultural operation. To conduct business with FSA, please contact your local USDA Service Center.

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