The USDA Farm Service Agency (FSA) makes microloans for farmers practicing traditional and niche farming such as organic farming, aquaponics, and hydroponics. Just last year, the microloan program was expanded to serve veterans, small and mid-sized farmers, and
underserved farmers help acquire farm lands, build/repair farm structures, and finance a myriad of operating costs.
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Breaking Down Microloans
Microloans, as expanded, are primarily classified as (1) direct farm ownership and (2) direct farm operating microloans. While there is no minimum amount to borrow, both loans carry a maximum loan limit of $50,000 including existing FSA loans.
Suppose you take a direct
farm ownership microloan. You can use the loan proceeds as down payment on a farm land; or build, improve or repair farm structures. This type of microloans can also finance soil and water conservation projects.
Direct farm operating microloans, on the other hand, are multi-purpose. From financing essential farming tools and equipment, irrigation systems, fencing and trellising, marketing and distribution, to paying costs in compliance with relevant standards such as OSHA, Good Agricultural Practices, Good Handling Practices, and Organic Certification.
The interest rate on an FSA microloan would depend on whether it’s a direct farm ownership microloan or direct operating microloan as the relevant loan type rate will apply. What you’ll get is the lower rate charged at the time of the loan’s approval or closing date.
Repayment on a direct farm ownership microloan is up to 25 years. For direct operating microloans, the term would depend on how the loan is used.
If it’s for general operating and family expenses, it has to be repaid in 12 months or when the agricultural products are sold. Loans involving major purchases like livestock or equipment, the loan term is up to seven years.
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The FSA offers microloans directly for qualified farmers meeting its eligibility requirements, including but not limited to:
- Farm experience. While the program welcomes beginner farmers, they at least should have some experience managing a farm, an apprenticeship for instance. The specific years of farming experience vary with each type of micro loan.
- No controlled substance-related convictions. One must be clear of any convictions arising from violations of federal and state law regarding the production and possession of
controlled substances.
- Acceptable credit history. The FSA does not require credit scores but it does ask an acceptable payment history.
- Inability to find credit. One must show his/her inability to find traditional financing sufficient to fund the needs of the farm.
- No federal debt forgiveness, delinquency. One must not have any previous debt forgiven by the FSA. Moreover, one does not have any delinquent federal debt, except for IRS tax-related debt, at the time of loan closing.
- Citizenship status. One can be a citizen, a non-citizen national, or legal resident alien of the United States to qualify.
- No crop insurance violation. One must not be ineligible for federal programs because of violations under the Federal Crop Insurance Act.
For more information, visit the
FSA site. Do you have what it takes to qualify for a microloan?
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