Microloans are primarily used to meet the financial needs of small, beginning farmers, niche, and non-traditional farm operations, including truck farms, farms that engage in direct marketing and sales through venues like farmers’ markets and CSAs, restaurants, and supermarkets, or farms that use hydroponic, aquaponic, organic, and vertical growing techniques.
How does microlending work?
The FSA Microloan Program’s goal is to provide young, beginning, socially disadvantaged, and seasoned farmers with the financing they need by streamlining the loan application procedure. The farmers who supply local and regional food markets, including urban areas and small-scale, diversified businesses, may also benefit from this scheme.
Microloans can be used to buy farmland as well as to pay for annual running costs (such as seeds, livestock, and small equipment). The repayment plans and loan terms for microloans are comparable to those of direct operating and ownership loans. Farmers may apply for operating and ownership microloans totaling up to $100,000, with loans of up to $50,000 each.
Am I Eligible for a Microloan?
Microloans are subject to the same eligibility requirements as FSA Direct Operating and Ownership Loans.
The total number of years that a farmer can get assistance through the FSA’s direct loan program does not, however, apply to microloans granted to new or experienced farmers, in contrast to other direct loan programs run by the agency. Microloans do count toward the seven-year term cap on the length of time a farmer can get FSA direct loan assistance for any other farmers.
Loan beneficiaries must be able to repay the loan in full, offer sufficient security to cover it dollar for dollar, and utilize it only for the intended purpose. Similar to other FSA loans, the security requirements may be satisfied by a co-signer or assurance of security from a third party.
Resources for the Program and How to Apply
In line with the smaller loan amount, the FSA Microloan Program has a streamlined application procedure that requires less paperwork than other federal lending programs. Although farmers must apply in person at an FSA county office or a USDA Service Center, application forms for microloans are available online.
The FSA oversees the administration of this program, and details about it are available under Farm Loan Programs on the FSA website.
Visit your state FSA office or your local FSA regional service center for information and applications. Using the FSA Service Center Locator, you can find all of the contact details.
Types of Microloans for Buying Land
Direct Farm Ownership
- Within ten years of the application dates, three years of agricultural management experience is required. However, one year of farm management experience may be substituted with one of the following:
- 16 credits of post-secondary education in an area linked to agriculture
- a minimum of one year’s direct managerial experience in business (not manager in title only)
- having successfully completed a recognized military leadership school in military leadership or management.
- Having successfully repaid an FSA Youth loan
Direct Farm Operating
- Microloan candidates still need to have some farm experience.
- Small company experience, agricultural internships, and apprenticeship programs, including self-guided ones, qualify toward completing the farm management criterion.
- Microloan applicants with little prior farming expertise can also choose to engage with a mentor for support during the initial cycle of production and selling.
- To satisfy the requirements for managerial experience, a Microloan applicant does not need to have generated agricultural income.
Operating Microloans must be secured by a first lien on farm property or agricultural products with a minimum value of at least 100% of the loan amount up to 1500% of the loan amount, if available, to be used for annual operating purposes. Microloans must be secured by a first lien on farmland or agricultural products worth at least 100% of the loan amount if they are used for any legal purpose other than operational costs.
Only the real estate that is being bought or improved may serve as a security for Direct Farm Ownership Microloans, if it satisfies the 100% security requirement.
Credit scores are not used by FSA. Loan applicants must have a solid repayment history with the Federal Government and other creditors. Instances of sporadic late payments, the absence of a credit history, or the ability to demonstrate that recent credit issues were unavoidable and temporary do not automatically disqualify loan applications. A loan applicant’s “no history” of credit transactions does not necessarily mean that they have a poor credit history.
The FSA does not manage a grant program for buying or running a farm or ranch. FSA loans may be combined with grants and matching awards, such as a value-added grant from Rural Development or cost-sharing plans offered by the Natural Resources Conservation Service. Additionally, FSA loans may be used with aid from the government.
To understand more about microloan programs, we strongly advise you to get in touch with your neighborhood office or USDA Service Center. Additionally, you ought to be able to find a listing in the phone book under the U.S. section designated for governmental/public organizations. Farm Service Agency under the Department of Agriculture The personnel at our local FSA office will be pleased to assist you and go over our loan programs in greater detail with you.
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