Last week the U.S. Department of Agriculture announced a proposed rule for a new microloan program within the existing Farm Service Agency’s (FSA) operating loan program. FSA proposes to offer annual or term microloans of up to $35,000 that feature a streamlined application process and less stringent requirements in order to better serve small and beginning farmers’ credit needs.
National Farmers Union (NFU) policy supports the establishment of a more flexible microloan category within the operating loan program, as well as efforts to streamline loan programs to make the application process more accessible and less time-consuming for farmer and ranchers. Access to capital is one of the greatest obstacles beginning farmers and ranchers face, and this proposal should provide an opportunity to alleviate that burden for many of these farmers while helping ease the challenge of navigating FSA loan program applications and requirements.
This program and its flexible requirements should be particularly helpful to farmers and ranchers pursuing opportunities like direct-to-consumer sales, niche markets, urban agriculture, and other means of adding value to their production. These farmers often have very diverse farms and production systems that are not typically served by agricultural lenders. The following proposed modified provisions and requirements should help to meet these, and other small farmers’ needs:
- Rather than a set repayment schedule such as those required by credit cards or other forms of credit, flexibility to make payments after products are sold;
- Significantly lower interest rates than those of credit cards;
- Modified farm managerial experience requirements to include involvement with an agriculture-related organization such as FFA, 4-H, etc., or farm apprenticeship as eligible activities;
- Changes to the yield reporting requirements to reflect the difficulty demonstrating yields some farms have that, for example, have a wide variety of produce but small amounts of each type, frequently change the types of crops grown, sell in units that are difficult to measure such as bunches, etc.; and
- A collateral requirement of 100 percent of the loan amount (vs. 150 percent for operating loans), with flexibility to use equipment, foundation livestock, real estate, or, in the absence of these, sales of future crops to meet the requirement.
NFU plans to submit formal comments on the proposal by the July 24, 2012, deadline and encourages all interested persons to do so as well by visiting www.regulations.gov or by mailing comments to:
Director, Loan Making Division (LMD)
Farm Service Agency
U.S. Department of Agriculture
1400 Independence Avenue SW, Stop 0522
Washington, DC 20250-0522