Loan programs for beginning farmers and socially disadvantaged farmers are available from the U.S. Department of Agriculture’s Farm Service Agency.
The loans are designed to help farmers purchase and operate family farms, according to Krystal R. Sellers, of the FSA in Indiana and Westmoreland counties.
“With these loan programs, FSA hopes to help reverse the declining number of farmers and ranchers across the United States and especially here in Pennsylvania,” Sellers said. “These loans help to encourage and assist them in owning and operating their own farms and ranches, participate in agricultural programs and become integral parts of the agricultural community.”
According to Sellers, FSA reserves a portion of its loan funds each year for SDA loans. USDA defines a socially disadvantaged farmer as one of 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, Alaskan natives, Hispanics, Asians and Pacific Islanders.
Direct loans are made to applicants by FSA and include both farm operating and farm ownership loans. Repayment terms for direct operating loans depend on the collateral securing the loan and usually run from one to seven years, but can be as long as 40 years.
Interest rates for direct loans are set periodically according to the government’s cost of borrowing. The down payment loan program requires the applicant to provide a minimum down payment of 5 percent in cash and then the loan cannot exceed 45 percent of the lesser of the purchase price, the appraised value of the farm to be acquired or $500,000.
Farm ownership loan funds may be used to purchase or enlarge a farm, purchase easements or rights of way needed in the farm’s operation, erect 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 and home equipment, feed, seed, fuel fertilizer, chemicals, hail and other crop insurance, food, clothing, medical care and hired labor. Funds also may be used to install or improve water systems for home use, livestock or irrigation, and other improvements.
Individuals, partnerships, joint operations, corporations and cooperatives primarily and directly engaged in farming and ranching on family-size operations may apply. A family-size farm is considered to be one that a family can operate and manage itself.
Guaranteed loans also may be made for ownership or operating purposes, and may be made by any lending institution subject to federal or state supervision (banks, savings and loans, insurance companies and units of the Farm Credit system.) Typically, FSA guarantees 90 or 95 percent of a loan against any loss that might be incurred if the loan fails. Guaranteed loan terms are set by the lender. Interest rates for guaranteed loans are established by the lenders.
Applicants must meet the eligibility requirements for a given program before FSA can extend program benefits. For additional information or applications for all FSA direct loan programs, contact your local FSA Office at 1432 Route 286 Hwy East, Indiana, PA 15701 or by phone at (724) 463-8547, extension 2.