The U.S. Department of Agriculture has changed the Farm Service Agency’s Farm Loan Programs, effective Sept. 25, 2024, intended to increase opportunities for farmers and ranchers to be financially viable.
These improvements, part of the Enhancing Program Access and Delivery for Farm Loans rule, are intended to demonstrate the USDA’s commitment to improving farm profitability through farm loans designed to provide important financing options producers use to cover operating expenses and purchase land and equipment.
“USDA recognizes that Farm Service Agency’s loan-making and servicing activities are critical for producers, especially in tough times. Providing borrowers the financial freedom to increase profits, save for long-term needs and make strategic investments is the best way to ensure the nation’s farmers and ranchers can build financial equity and resilience,” said Zach Ducheneaux, FSA Administrator. “Implementing these improvements to our Farm Loan Programs is the next step in our ongoing commitment to removing lending barriers that may prevent access to credit for borrowers, especially those who need it most.”
Farm loan policy changes outlined in the Enhancing Program Access and Delivery for Farm Loans rule are designed to better assist borrowers to make strategic investments in the enhancement or expansion of their agricultural operations.
The three most notable policy changes include:
- Establishing a new low-interest installment set-aside program for financially distressed borrowers. Eligible financially distressed borrowers can defer up to one annual loan installment per qualified loan at a reduced interest rate, providing a simpler and expedited option to resolve financial distress in addition to FSA’s existing loan servicing programs.
- Providing all eligible loan applicants access to flexible repayment terms that can increase profitability and help build working capital reserves and savings. By creating upfront positive cash flow, borrowers can find opportunities in their farm operating plan budgets to include a reasonable margin for increased working capital reserves and savings, including for retirement and education.
- Reducing additional loan security requirements to enable borrowers to leverage equity. This reduces the amount of additional security required for direct farm loans, including reducing the frequency borrowers must use their personal residence as additional collateral for a farm loan.
“Administrator Ducheneaux and his team have taken a good, hard look at their lending programs and are putting forth common-sense changes that provide much-needed flexibility, and — hopefully — can ease some of the significant stress farm families experience in a difficult economy, like what we are experiencing now,” wrote American Farm Bureau Federation President Zippy Duvall regarding the announcement.
Other Farm Loan Program improvements
The USDA’s Farm Service Agency has been working on improving access to credit for small and mid-sized family farms through its Farm Loan Programs. In its latest report to Congress, FSA shared data showing an increase in loans to young and beginning farmers, as well as improved participation rates among minority borrowers. The report also highlighted the microloan program’s new focus on urban agriculture and niche market lending, along with increased support for farmers looking to purchase land despite rising property values.
To make the loan process easier for the 26,000 producers who apply each year, FSA has introduced several tools, including:
- The Loan Assistance Tool, an online guide that helps farmers identify suitable loan products and navigate the application process.
- The Online Loan Application, a digital, paperless application that allows for electronic signatures, document uploads, and farm plan building.
- An online repayment option, which eliminates the need for borrowers to visit or call a USDA Service Center to make loan payments.
- A simplified paper application, which has been reduced from 29 pages to 13.
Farmers are encouraged to contact their local FSA office to explore the range of loan and servicing options available to support their agricultural operations.
