FARM LOANS & GRANTS
I worked with some young farmers who bought a farm property using the USDA Farm Service Agency loan program. Mr. Farmer worked for his father, who was a farmer. Mrs. Farmer planned to set up a cattle farming operation on the land. She had to provide a projected income and expense sheet for her planned operation.
The Farm Service Agency (FSA) also has funds earkmarked for women and minority farmers. You can buy fixer-uppers, but the cost of repairs will be figured in to your expenses. It can take longer to close with a loan like this, but they have very good interest rates. More information below about farm loans.
For grants, you generally need to already have some farming operations in process and have a balance sheet. The Rural Energy America Program provides grants and loans to rural businesses for renewable energy, such as solar, geothermal, and wind power. Often grants want you to have some project in mind, as in the Sustainable Agriculture Research and Education program. For example, I have a Radionics device, and could pitch using the device to limit weeds. If you are a non-profit or cooperative this will open up other grant opportunities, such as Rural Business Development Grant or the Socially Disadvantaged Groups Grant.
- https://www.rd.usda.gov/programs-services/rural-energy-america-program-renewable-energy-systems-energy-efficiency
- https://www.rd.usda.gov/programs-services/rural-business-development-grants
- https://www.rd.usda.gov/programs-services/socially-disadvantaged-groups-grant.
OUTLINE
- PRIVATE & AGENCY LOANS
- USDA FARM SERVICE AGENCY LOANS
- USDA FARMING GRANTS
- ORGANIC FARMING GRANTS
PRIVATE & AGENCY LOANS
Loans are increasingly more available as the economy improves and agencies reach out to support farmers and ranchers. Some farm loans are subsidized or guaranteed by government agencies. There are also non-government, farm-specific agencies with access to funds raised via special bond sales just for the purpose of supporting farms and ranches.
http://www.farmgrants.us/farm-loans/
USDA FARM SERVICE LOANS
Direct Farm Ownership Loans are used to purchase or enlarge a farm or ranch, construct a new or improve existing farm or ranch buildings, and for soil and water conservation and protection purposes:
- Start, improve, expand, transition, market, and strengthen family farming and ranching operations
- Beginning farmers, racial and ethnic minority farmers and women producers
- Value-added, direct sale, organic, and specialty crop operations
- Young People actively involved in agricultural youth organizations needing financial assistance for income-producing, educational, agricultural projects
- Urban farmers and roof-top producers
- Operations using alternative farming methods such as hydroponics, aeroponics, vertical farming, and freight container farming
I called my local FSA office and spoke to the Farm Loan Manager, Karl Sabrosky. He was very helpful in answering my questions, and said he's available to meet with groups of people and discuss the programs they have available. He recommends people come in and meet with them if they are considering a farm loan. Here is what Karl told me about FSA loans.
Credit History
The FSA will lend to farmers when a standard lender is not willing to. The FSA does not look at your credit score to determine whether they lend to you, they look at your credit history. Karl said they have made loans to people that have credit scores around 400-500 if the credit issues are in the past and no longer an issue. But if someone has a low credit score and 7-8 delinquent accounts they have been neglecting, that is not someone they would lend to.
Income Requirements
A traditional lender will use a debt-to-income ratio, however that is not applicable to FSA loans. FSA loans are 100% based on your cash flow and expenses to determine if you can make appropriate payments for the loan. They gather a three year history and base your cash flow on the history of the operation. They look at your personal income, your family income, your expenses.
Active Farming Requirement
FSA loans require that you be actively farming, and have 3 years of farm management experience. To accomplish this, you can provide 3 years of Schedule F: Profit or Loss from Farming that you have filed with your income taxes, or some sort of documentation that you have been managing a farm operation. A recent farm bill loosened the regulations for 3 years of management experience. Some of the years of experience can be substituted with some certain type of agricultural degrees or agricultural military experience. If you have taken out youth loans, you can use that as experience.
Karl said that he knows of farm loans that have been used to by just a few acres in the Twin Cities area.
If you are a city dweller, it is possible to get a farm loan. I have known urban dwellers who have had backyard chickens or bees. You could have a plot in a community garden and sell your produce. You could generate a Schedule F from these activities, and justify getting a loan to buy land to increase your operation.
Karl said that he knows of farm loans that have been used to by just a few acres in the Twin Cities area.
If you are a city dweller, it is possible to get a farm loan. I have known urban dwellers who have had backyard chickens or bees. You could have a plot in a community garden and sell your produce. You could generate a Schedule F from these activities, and justify getting a loan to buy land to increase your operation.
Beginning Farmer Program
One FSA program is called the Beginning Farmer Program. If you are a beginning farmer and don't have a farming history for the FSA to determine cash flow, they can use area averages determine a projected income. If you have contracts, they can use that for income.
The Beginning Farmer loan is divided up as follows:
You can Buy Fixer Uppers
You can buy a farm property that needs repairs. Unlike FHA loans, farm service loans will finance these properties. The only catch is that the amount of needed repairs will be factored in as an expense in your cashflow formula.
How to Buy a Farm Property
Karl said that anyone interested in this loan should come meet with an FSA officer to learn how the program works. Then when you find a farm you would like to buy, and you have a purchase agreement, you complete the FSA application. The application is not complete until they have received a purchase agreement.
Farm Service loans require the following inspections:
One FSA program is called the Beginning Farmer Program. If you are a beginning farmer and don't have a farming history for the FSA to determine cash flow, they can use area averages determine a projected income. If you have contracts, they can use that for income.
The Beginning Farmer loan is divided up as follows:
- The bank that the FSA works with loans you 50% - at market rate
- FSA loans you 45% - at 1.5% interest
- You provide 5% down payment.
You can buy a farm property that needs repairs. Unlike FHA loans, farm service loans will finance these properties. The only catch is that the amount of needed repairs will be factored in as an expense in your cashflow formula.
How to Buy a Farm Property
Karl said that anyone interested in this loan should come meet with an FSA officer to learn how the program works. Then when you find a farm you would like to buy, and you have a purchase agreement, you complete the FSA application. The application is not complete until they have received a purchase agreement.
Farm Service loans require the following inspections:
- Environmental Inspection: This inspection is done by the FSA officer, and is to make sure there are no things like buried fuel tanks or oil spills or chemical containers in the sloughs.
- Septic Test: They require evidence the septic is compliant.
- Water Test: Testing for nitrates and coliform bacteria. Wells can be treated for bacteria. For nitrates, sometimes you can retest, but if they can't get an acceptable nitrate test, sometimes you have to drill a new well.
Why It Can Take a While to Close
How long it takes to close can depend on how quickly the borrower provides the FSA information. The FSA recommends about 12 weeks for a closing date. Once they receive a completed purchase agreement, they send out a letter within 10 days letting you know your application is complete or if you are missing something. If you are missing something, you have 20 days to send the information in. If you still are missing something, they send out another letter within 10 days, and you have 20 days again. If you fail to respond they close the application. So how quickly you respond with needed information can determine how long it will take to close.
Once the application is complete, if you have adequate cash flow, they order the appraisal. Appraisers usually want a 30-day window.
By statute, the FSA has 60 days to process a completed application. So they recommend a closing date 3 months out. Karl said he has seen it take 4-6 months to close an application, generally due to how quickly the buyer responded with needed information.
Find Your Local FSA Office
https://offices.sc.egov.usda.gov/locator/app?state=mn&agency=fsa
In Morrison County, where I live, Karl said his office served several counties: Morrison, Todd, Wadena, Hubbard, Cass, and Crow Wing.
| County Executive Director Jay.Backowski@mn.usda.gov Farm Loan Manager |
USDA FARMING GRANTS
Here is some initial research into government farming grants. You can search all government grants at this link:
https://www.grants.gov
This page catalogs current grants and loans available, many target organic farming and underserved communities.
https://www.nal.usda.gov/afsic/grants-and-loans-farmers
Government Farm Grants: Learn how federal and state governments are supporting farming financially through grants and other government support. The Obama administration reported that it awarded more than 12,000 grants and loans to assist 50,000 rural small businesses including farms.
http://www.farmgrants.us/government-farm-grants/
USDA Farm Grants: The USDA provides extensive support services to farmers and ranches, including access to money and property, assistance with new or existing mortgages and foreclosure avoidance, special programs and grants for youth, and more.
USDA Farm Grants: The USDA provides extensive support services to farmers and ranches, including access to money and property, assistance with new or existing mortgages and foreclosure avoidance, special programs and grants for youth, and more.
Grants To Start A Farm: The U. S. Farming population is aging and there is strong motivation to attract younger people to this area. Many opportunities exist to get young and beginning farmers started.
http://www.farmgrants.us/grants-to-start-a-farm/
Federal Grants For Agriculture: Federal and state grants related to agriculture go beyond farm and ranch operational grants. Check out this handy overview of what type of help is available where.
Grants For Ranches: Though much available support is focused on farms and farming, ranches and ranching are often included. Discover more about what scholarships, grants, loans and youth programs are out there for ranchers and would-be ranchers.
http://www.farmgrants.us/grants-for-ranches/
ORGANIC FARMING GRANTS
Here is some initial research into organic farming grants.
Organic Farming USDAGrants: The organic farming specialty area is booming due to its increasing popularity in the marketplace. Check out how you can be a part of this healthy, ecologically responsible movement!
http://www.farmgrants.us/organic-farming-grants/
The USDA Small Business Innovation Research Program is for producers of agriculturally important animals, helping them to provide a safe and inexpensive supply of animal protein to the American consumer. Funds can be used to conserve resources and to reduce their production expenses.
The Organic Farming Research Foundation funds ranchers who want to bring more natural, ecologically-friendly processes to their production. Their grants typically average $10,000. Projects can include finding solutions to the financial issues that plague small organic ranchers as well as exploring new types of feed or grazing conditions.
This 2015 brochure lists numerous grant programs for organic farming:
https://www.ams.usda.gov/sites/default/files/media/USDA%20Organic%20Resource%20Guide_0.pdf
The Sustainable Agriculture Research and Education (SARE) organization provides grants to farmers, non-profit organizations, communities and others. They fund projects and research about how the sustainable farming effort can be profitable as well as well as good for us. Over 5,000 grants have been provided since the organization’s founding in 1988, with projects including such subjects as pest and weed management, renewable energy development, soil conservation and nutrient management, as well as more business-oriented projects such as marketing campaigns and research into the creation of sustainable communities.
https://www.northcentralsare.org/Grants/Apply-for-a-Grant
https://www.ams.usda.gov/sites/default/files/media/USDA%20Organic%20Resource%20Guide_0.pdf
The Sustainable Agriculture Research and Education (SARE) organization provides grants to farmers, non-profit organizations, communities and others. They fund projects and research about how the sustainable farming effort can be profitable as well as well as good for us. Over 5,000 grants have been provided since the organization’s founding in 1988, with projects including such subjects as pest and weed management, renewable energy development, soil conservation and nutrient management, as well as more business-oriented projects such as marketing campaigns and research into the creation of sustainable communities.
https://www.northcentralsare.org/Grants/Apply-for-a-Grant
No comments:
Post a Comment