If you are looking to start or expand a farm, you probably need financing. If you are unable to secure financing from a traditional lender, you may be eligible for FSA guaranteed financing. You still get this financing from a traditional lender, but the FSA guarantees it. This gives you the opportunity to secure better terms and possibly even higher loan amounts.
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Just what is the maximum FSA guarantee, though? Keep reading to find out more.
The Maximum FSA Guarantee
Today, farmers can borrow up to $1.75 million to start or expand a farm. This is an increase of $350,000 in recent years. The FSA guarantees up to 95% of your loan amount. In other words, they pay the lender back up to 95% of the maximum $1.75 million if you were to default on your loan.
How the FSA Loan Works
Even though the FSA loan is through the
Farm Service Agency, you don’t apply for it directly through them. Instead, you find a traditional commercial lender that has FSA approval. You apply for the loan as you would any other type of loan.
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The lender evaluates the documents you provide and determines if you are a good fit for the loan. If they decide you are a good fit, they work with the Farm Service Agency to create the guarantee. If you meet the requirements of the lender and the FSA, the FSA/lender approve your application, process, close, and fund the loan.
You make payments directly to the lender or servicer, not the FSA. The only way that the FSA gets involved is if you default on your loan. The FSA
guarantees or promises the lender that they will pay them back 95% of the loss.
Qualifying for the FSA Guaranteed Loan
Qualifying for the FSA guaranteed loan is fairly simple. You must meet the following requirements:
- You must be a US citizen
- You must be a family farmer
- You must have a proven credit history that shows you can handle your debt obligations
- Prove that you can afford the loan
- Prove that you are unable to obtain credit from any other source
- Not have any delinquent federal debts
Basically, you have to prove that you deserve the loan and that you aren’t a high risk of default. If you can prove this and you can’t get financing without the FSA guarantee, you should be well on your way to getting the farm financing that you need.
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