Not only do FSA direct and guaranteed loan programs have different delivery mechanisms, they also have different roles. All loan guarantees are loss sharing, which means FSA will reimburse the lender for losses incurred if the loan goes into default, including loss of loan principal, some accrued interest, and certain liquidation costs. Under a loan guarantee, FSA guarantees repayment of up to 95% of the principal balance. Applications for a loan guarantee are made by qualified lenders to a local FSA office. Guaranteed loans are originated and serviced by qualified commercial, cooperative, or nonprofit lenders. Although local offices may get direction from the State and National offices, decisions regarding a direct loan are made primarily by local staff. Direct loans are made and serviced by FSA's 2,106 county offices. Also, those responding as not having end of year farm debt were found to have an average FSA total debt outstanding of $80 thousand to $273 thousand depending on the loan program.ĭiffering Roles for Direct and Guaranteed LoansįSA direct and guaranteed loans are delivered through distinctly different mechanisms. McMinn found that more than 10 percent of FSA borrowers inaccurately classified their farm operations as having no end of year farm debt on the ARMS for 2001, 2004, 2006, and 2007. The resulting combined dataset accurately identifies FSA borrowers and corrects for any under-reporting among ARMS respondents and was used to estimate the share of beginning farmers receiving FSA loans (McMinn, 2015). The ARMS data were merged with USDA-FSA data on direct and guaranteed loans outstanding as of Decemusing a unique USDA customer identifier, common to both the ARMS and FSA loan files. Excluding beginning farms without debt, as well as non-family farming entities and farmers identifying themselves as retired from farming, provides a better indication of the number of beginning farmers that may be currently eligible and/or demand FSA loan programs. This subset of farms differs from earlier studies which examined all beginning farms (Ahearn, 2011 Ahearn and Newton, 2009). However, we used it to identify the subset of beginning farms more likely to be eligible for FSA credit programs. The Agricultural Resource Management Survey (ARMS) of farms does not provide sufficient information to fully determine FSA loan eligibility. Applying some of these criteria to ARMS survey data indicated approximately 176,000 farms, or less than half of all beginning farms, were likely eligible for FSA credit programs at calendar year-end 2014. Furthermore, eligible applicants must be unable to obtain credit through a commercial lender despite having a good credit history and a feasible business plan. Qualified applicants for direct and guaranteed loans must have the necessary skills and knowledge to effectively manage a farming operation and the majority of the labor used on the farm must be supplied by the applicant or a family member. FSA loan eligibility is determined by local county staff based on guidelines and criteria published in Federal regulation. Not all farms with a beginning farmer meet FSA loan eligibility criteria. Many of the farm operations with a beginning farmer and no debt were also small, averaging less than $50,000 in annual value of farm production, and representing less than 20% of the total dollar value of farm production by all farms with a beginning farmer. And over 60% of all farms with a beginning farmer reported no debt, with an average net worth of over $700,000. Nearly half of all beginning farmers in 2014 were over age 55. Many beginning farmers, however, were neither young nor appeared capital constrained. Data from the USDA’s Agricultural Resource Management Survey (ARMS) indicated 22% of all farms in 2014 had a beginning farmer as either a primary, secondary, or tertiary operator. They comprise a large and diverse population. What Is a Beginning Farmer?įor purposes of FSA loan eligibility, a beginning farmer is defined to be any individual involved in the operation of a farm who has 10 or fewer years of farming experience. The combination of farm consolidation, resulting in greater capital needs, and increased transition of agricultural land as landowners age, will likely result in a continuing need for FSA credit programs to overcome any barriers to entry for start-up and beginning farmers. FSA supplies credit through a combination of loans made directly to farmers (direct loans) and through Federal guarantees of loans made by commercial lenders (guaranteed loans) (USDA-FSA, 20). Department of Agriculture (USDA) Farm Service Agency (FSA) and its predecessor, the Farmers Home Administration (FmHA), has been an important source of credit for young and beginning farmers. "Beginning Farm Credit and the Farm Service Agency’s Role".
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