If you are looking to start, expand, or purchase an existing farm, you probably need financing. You can find that financing with the FSA – the Farm Service Agency. Before you start, you should know how long it takes to get this type of loan, as it’s not the same process you would go through to purchase a residential home.
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Do you Need a Guaranteed or Direct Loan?
First, you need to determine if you need a
guaranteed FSA loan or a direct FSA loan. The guaranteed FSA loan comes from a lender with FSA approval, much like you would get an FHA or VA loan. You don’t deal with the FSA directly – instead, the lender operates on their behalf.
If you need a direct loan, it’s because you can’t qualify for a guaranteed loan. The direct loan, as the name suggests, comes directly from the FSA. It has limited power, though. For example, you can only borrow up to $300,000, while the guaranteed loan doesn’t have such a maximum. If you can’t qualify for the guaranteed loan, the direct loan can help you get started.
Obtaining the Guaranteed Loan
The guaranteed loan, as we said above, comes directly from the lender. But the lender must communicate with the FSA to get approval. The lender first gathers the necessary documents from you. This includes a business plan. This gives the lender an idea of how you will achieve your plans for your farm. The lender needs to see that you have the resources, ideas, and support to grow your farm as you intend.
Once you turn in your
income and asset documents along with your business plan, the underwriter will let you know what additional documents you need. Once the underwriter feels you have turned everything in and that the documents meet the FSA approval, he/she will send the package to the FSA for final underwriting. The FSA will review the package and let the lender know within 5 business days if anything is missing. Once the FSA has everything they need, they typically turn the answer around within a week.
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The FSA will provide the lender with a letter stating the approval of the loan. The lender can then schedule the closing for your farm loan.
On the chance that the FSA doesn’t approve your guaranteed loan application, you have a few options:
Ask for reconsideration or a meeting with the FSA loan officer
Hire a mediator to resolve the issues
File an appeal with the National Appeals Division of the USDA
Obtaining the Direct FSA Loan
If you apply for the direct FSA loan, you’ll have different requirements. First, you won’t work with a lender – you’ll work directly with the FSA. You can do this by visiting your local office or you can download the forms from the FSA website and complete them at home. There are FSA loan officers available to assist you with the process.
You will need to complete a variety of forms that let the FSA know:
- How much money you need
- Your plan for the money
- Your history of farm ownership or operation
- Credit information
- Income and expenses
- Proof of any training you’ve had
- Any leases you have that could affect your ownership
Once you have your documents, you can mail them to your FSA office, fax them, or deliver them to your local FSA office in person.
The FSA will respond regarding the receipt of your funds within 2 business days of receiving them. The FSA will let you know within 10 business days if there are any missing documents or issues with your submitted documents. The FSA then has 60 days to make a final decision on your loan.
If the FSA approves your request, you will receive the approval in writing and the FSA loan officer will then schedule your closing.
As you can see, there are many factors that affect the turnaround time of your FSA loan. It’s important to stay in close communication with your loan officer to ensure that your loan gets processed as quickly as possible.
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