USDA published a press release on Feb. 14, 2013 sharing Agriculture Secretary Vilsack’s Address Regarding Access to Credit for Veterans, Young and Beginning Farmers. He highlighted the new Microloan Program and credit for socially-disadvantaged producers in San Antonio, Texas.
Here are excerpts from the release:
Agriculture Secretary Tom Vilsack talked with veterans, young, beginning and socially-disadvantaged producers today at a community center in San Antonio, Texas, about USDA’s work to expand credit for their farming operations. USDA is hearing from excited producers all across the country about USDA’s new microloan program, designed to help small and family operations secure loans under $35,000. Since 2009, said Vilsack, USDA has continued to expand the overall number of loans to beginning farmers and ranchers as well as its lending to socially-disadvantaged producers by significant margins.
USDA announced the new microloan program in January to help small and family operations, beginning and socially disadvantaged farmers secure loans under $35,000. The new microloan program is aimed at bolstering the progress of producers through their start-up years by providing needed resources and helping to increase equity so that farmers may eventually graduate to commercial credit and expand their operations. The microloan program will also provide a less burdensome, more simplified application process in comparison to traditional farm loans. The interest rate for microloans changes monthly and is currently 1.25 percent.
Producers can apply for a maximum of $35,000 to pay for initial start-up expenses such as hoop houses to extend the growing season, essential tools, irrigation, delivery vehicles, and annual expenses such as seed, fertilizer, utilities, land rents, marketing, and distribution expenses. As their financing needs increase, applicants can apply for an operating loan up to the maximum amount of $300,000 or obtain financing from a commercial lender under FSA’s Guaranteed Loan Program.
While USDA continues to introduce new products that are more responsive to the credit needs of its diverse customer base, the Department continues to expand its traditional farms loans. In fact, since 2009 USDA has made a record amount of farm loans—more than 134,000 loans totaling nearly $18 billion. USDA has increased the number of loans to beginning farmers and ranchers from 11,000 loans in 2008 to 15,000 loans in 2011. More than 40 percent of USDA’s farm loans now go to beginning farmers. In addition, USDA has increased its lending to socially-disadvantaged producers by nearly 50 percent since 2008.
In assessing its programs, FSA evaluated the needs of smaller farm operations and any unintended barriers to obtaining financing. For beginning farmers and ranchers, for instance, the new microloan program offers a simplified loan application process. In addition, for those who want to grow niche crops to sell directly to ethnic markets and farmers markets, the microloan program offers a path to obtain financing. For past FSA Rural Youth Loan recipients, the microloan program provides a bridge to successfully transition to larger-scale operations.
USDA farm loans can be used to purchase land, livestock, equipment, feed, seed, and supplies, or be to construct buildings or make farm improvements. Small farmers often rely on credit cards or personal loans, which carry high interest rates and have less flexible payment schedules, to finance their operations. Expanding access to credit, USDA’s microloan will provide a simple and flexible loan process for small operations.
Producers interested in applying for a microloan may contact their local Farm Service Agency office.