The Farm Service Agency (FSA) offers farm operating loans to farmers who are temporarily unable to obtain private, commercial credit at reasonable rates and terms. Operating loans are used to purchase items such as livestock and feed, machinery and equipment, fuel, farm chemicals, and insurance; pay family living expenses and general farm operating expenses; and make minor improvements or repairs to buildings and fencing.
Both guaranteed loans and direct loans are available through this program. FSA guaranteed loans provide lenders (e.g., banks, Farm Credit System institutions, credit unions) with a guarantee of up to 95 percent of the loss of principal and interest on a loan. The maximum FSA guaranteed operating loan is $1,302 ,000 (adjusted annually based on inflation).
Applicants unable to qualify for a guaranteed loan may be eligible for a direct loan from FSA. Direct loans are made and serviced by FSA officials, who also provide borrowers with supervision and credit counseling. The maximum amount for a direct farm operating loan is $300,000.
FSA also provides Microloans, which are direct operating loans designed to meet the unique financial operating needs of many socially disadvantaged and beginning farmers, niche farm operations, the smallest of family farm operations, and those serving local and regional food markets, including urban farmers. The maximum loan amount for a Microloan is $35,000.
The repayment terms vary according to the type of loan made, collateral securing the loan, and the applicant's ability to repay. Term operating loans are normally repaid within 7 years and annual operating loans are generally repaid within 12 months or when the commodities produced are sold.
General Program Requirements
To qualify for assistance, applicants must meet all loan eligibility requirements including:
- Be a family farmer;
- Have a satisfactory history of meeting credit obligations;
- For direct OL loans, be able to show sufficient farm managerial experience through education, on-the-job training, and/or general farm experience
- Be a citizen, non-citizen national or legal resident alien of the United States, including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, and certain former Pacific Trust Territories
- Be unable to obtain credit elsewhere at reasonable rates and terms to meet actual needs;
- Possess legal capacity to incur loan obligations;
- Not be delinquent on a federal debt; and
- Not have caused FSA a loss by receiving debt forgiveness (certain exceptions apply) and
- Be the tenant-operator or owner-operator of a family farm after loan closing.
Additional information on FSA operating loans may be found on the FSA website (http://www.fsa.usda.gov/dafl
), on the FSA Farm Loans Fact Sheet (http://www.fsa.usda.gov/Internet/FSA_File/loanprograms2013.pdf
) or by contacting FSA directly.
Loan repayment periods for both direct and guaranteed farm operating loans cannot exceed seven years. Loans for annual operating expenses are normally repaid within one year. Loans for equipment and livestock purchases are scheduled for repayment over longer periods, but cannot exceed seven years. Interest rates for direct operating loans are based on the Government's cost of funds. FSA offers lower resource interest rates to direct loan applicants who cannot afford the agency's regular interest rate. Interest rates for guaranteed operating loans are negotiated by the lender and farmer. However, the lender must not charge the guaranteed loan customer a higher interest rate than they charge their average farm loan customer. In some cases, FSA can pay 4 percent of the interest rate for farmers who cannot afford the lender's normal interest rate. For most guaranteed loans, FSA charges an origination fee equal to one percent of the guarantee.