USDA Texas Farm Service Agency (FSA) Executive Director, Judith A. Canales, reminds producers that FSA offers specially-targeted farm ownership and farm operating loans to Socially Disadvantaged (SDA) applicants.
"Each year, a portion of FSA's loan funds are set aside to lend to socially disadvantaged farmers and ranchers," said Canales. "Farming and ranching is a capital intensive business and FSA is committed to helping producers start and maintain their agricultural operations."
During fiscal year 2014 (Oct. 1, 2013 through Sept. 30, 2014), Texas FSA obligated $52.2 million in SDA loans.
USDA defines socially disadvantaged applicants as a group whose members have been subjected to racial, ethnic, or gender prejudice because of their identity as members of the group without regard to their individual qualities. For farm loan program purposes, SDA groups are women, African Americans, American Indians and Alaskan Natives, Hispanics and Asians and Pacific Islanders.
SDA producers who cannot obtain commercial credit from a bank can apply for either FSA direct loans or guaranteed loans. Direct loans are made to applicants by FSA. Guaranteed loans are made by lending institutions who arrange for FSA to guarantee the loan. FSA can guarantee up to 95 percent of the loss of principal and interest on a loan. The FSA guarantee allows lenders to make agricultural credit available to producers who do not meet the lender's normal underwriting criteria.
The direct and guaranteed loan program offers two types of loans: farm ownership loans and farm operating loans.
Farm ownership loan funds may be used to purchase or enlarge a farm or ranch, purchase easements or rights of way needed in the farm's operation, build or improve buildings such as a dwelling or barn, promote soil and water conservation and development and pay closing costs.
Farm operating loan funds may be used to purchase livestock, poultry, farm equipment, fertilizer, and other materials necessary to operate a successful farm. Operating Loan funds can also be used for family living expenses, refinancing debts under certain conditions, paying salaries for hired farm laborers, installing or improving water systems for home, livestock, or irrigation use and other similar improvements.
Repayment terms for direct operating loans depend on the collateral securing the loan and usually run from one to seven years. Financing for direct farm ownership loans cannot exceed 40 years. Interest rates for direct loans are set periodically according to the Government's cost of borrowing. Guaranteed loan terms and interest rates are set by the lender.
For more information on FSA’s farm loan programs, please contact your local FSA Office. This is a release courtesy of The United States Department of Agriculture.