U.S. Agriculture Secretary Tom Vilsack announced on Tuesday, Jan. 15 the availability of a new microloan program to assist in providing small farmers, family operations, veterans and underserved farmers and ranchers with access to credit. The new USDA program aims to bolster the progress of producers through their start-up years by providing needed resources and helping to increase equity so that farmers may eventually graduate to commercial credit and expand their operations. The microloan program also will provide a less burdensome, more simplified application process in comparison to traditional farm loans.
“I have met several small and beginning farmers, returning veterans and disadvantaged producers interested in careers in farming who too often must rely on credit cards or personal loans with high interest rates to finance their start-up operations,” said Vilsack. “By further expanding access to credit to those just starting to put down roots in farming, USDA continues to help grow a new generation of farmers, while ensuring the strength of an American agriculture sector that drives our economy, creates jobs, and provides the most secure and affordable food supply in the world.”
He said the new program is one way USDA is making progress in expanding credit opportunities for minority, socially disadvantaged, and young and beginning farmers and ranchers. The interest rate for the loans changes monthly and is currently 1.25 percent. Administered through USDA’s Farm Service Agency (FSA) Operating Loan Program, the new microloan program offers credit options and solutions to a variety of producers. FSA has a long history of providing agricultural credit to the nation’s farmers and ranchers through its Operating Loan Program. In assessing its programs, FSA evaluated the needs of smaller farm operations and any unintended barriers to obtaining financing. For beginning farmers and ranchers, for instance, the new microloan program offers a simplified loan-application process. In addition, for those who want to grow niche crops to sell directly to ethnic markets and farmers markets, the microloan program offers a path to obtain financing.
Producers can apply for a maximum of $35,000 to pay for initial start-up expenses such as hoop houses to extend the growing season, essential tools, irrigation, delivery vehicles, and annual expenses such as seed, fertilizer, utilities, land rents, marketing, and distribution expenses. As their financing needs increase, applicants can apply for an operating loan up to the maximum amount of $300,000 or obtain financing from a commercial lender under FSA’s Guaranteed Loan Program. USDA farm loans can be used to purchase land, livestock, equipment, feed, seed, and supplies, or to construct buildings or make farm improvements.