The U.S. Department of Agriculture Farm Service Agency offers specially-targeted farm loans known as Socially Disadvantaged Applicant Loans. These loan programs are designed to help farmers purchase and operate family farms, according to Bashir I. Duale, farm loan manager.
With these loan programs, FSA hopes to help reverse the declining number of farmers and ranchers across the United States and to encourage and assist them in owning and operating their own farms and ranches, participate in agricultural programs, and become integral part of the agricultural community.
FSA reserves a portion of its loan guarantee funds each year for SDA loans. Duale said 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 purposes of this program, socially disadvantaged groups are women, African-Americans, American Indians and Alaskan Natives, Hispanics and Asians and Pacific Islanders.
In fiscal year 2006, FSA obligated more than $330 million in SDA loans across the nation. Direct loans are made to applicants by FSA and include farm operating and farm ownership loans.
Guaranteed loans also may be made for farm ownership or operating purposes and may be made by any lending institution subject to federal or state supervision (banks, savings and loans, credit unions and units of the Farm Credit System including the Bank for Cooperatives) and guaranteed by FSA. Typically, FSA guarantees 90 or 95 percent of a loan against any loss that might be incurred if the loan fails.
According to Duale, “Repayment terms for direct operating loans depend on the collateral securing the loan and usually run from one to seven years and repayment terms for direct ownership loans can be as long as 40 years.”
Guaranteed loan terms are set by the lender. Interest rates for direct loans are set periodicially according to the government’s cost of borrowing. Interest rates for guaranteed loans are established by the lender.
Farm ownership loan funds may be used to purchase or enlarge a farm or ranch, purchase easements or rights of way 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 similiar improvements.
Applications for all FSA direct loan programs are made through FSA’s Ellis County FSA office. Call (972) 937-2600, ext. 2, for eligibility, application and related program details.