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FSA makes loans on storage bins

USDA’s Farm Service Agency has a loan program specifically for farm storage facilities such as grain bins and grain handling equipment. The low-interest loans aren’t only for grain storage; other commodities can qualify, too.

If you want to add some on-farm storage for grain, learn what FSA’s loan program offers. The following answers are provided by Beth Grabau, public information and outreach specialist at FSA’s state office in Des Moines. FSA program specialist Brad Murray assisted her. If you need more information, contact your local FSA office.

Question: What does FSA’s Farm Storage Facility Loan program have to offer?

Answer: The Farm Storage Facility Loan, or FSFL, program allows producers of eligible commodities to get low-interest financing to build or upgrade farm storage and handling facilities. FSA loans money for facilities for these commodities: corn, grain sorghum, soybeans, oats, wheat, barley or minor oilseeds harvested as whole grain; corn, grain sorghum, wheat, oats or barley harvested as other-than-whole grain; pulse crops such as lentils, small chickpeas and dry peas; hay; renewable biomass; and fruits (including nuts) and vegetables for cold-storage facilities.

The maximum principal amount of a loan through FSFL is $500,000. Participants must provide a minimum down payment of 15%, with the Commodity Credit Corporation providing a loan for the remaining 85% of the net cost of the eligible storage facility and permanent drying and handling equipment. Loans of seven, 10 or 12 years are available depending on amount of the loan. Interest rates for each term may be different and are based on the rate that CCC borrows from the U.S. Treasury.

Question: What types of structures, facilities or equipment can be included in the loan? What type of security is needed?

Answer: Loans are based on the new cost to the borrower for the eligible facility, accessories and services associated with the construction. These net costs could include (but aren’t limited to) purchase price, tax, shipping, delivery, site preparation, installment or construction costs, cement work, electrical work and paid labor. Paid labor can’t include the borrower’s own labor.

Loans can be on new structures, flat storage, new electrical equipment, safety equipment, affixed grain handling and drying equipment, and structures for hay storage or fruits and vegetables. All eligible structures and equipment must have a useful life expectancy of at least 15 years. Contact your local FSA office to find out more about what is eligible for a loan.

In addition to the 15% down and a UCC-1 filing to give CCC first lien on the structure, CCC will also file a real estate mortgage on loans more than $50,000. Another option in lieu of the real estate mortgage is to use a letter of credit from your lender.

Question: I haven’t obtained a loan from FSA for a while. What do I need to do to apply?

Answer: The FSFL must be approved before any site preparation, construction or delivery can begin. FSA is required to inspect the facility site prior to loan approval.

Your application for FSFL must be submitted to the FSA county office that maintains the farm’s records. A $100 nonrefundable application fee will be charged. You’ll need to provide estimates of the costs associated with construction or cost of the items you want to have under loan.

Applications are based on needed storage capacity for two years’ worth of production. This number is reduced by the storage capacity that’s already owned by the producer. As the application process continues, your local FSA office will also need proof of crop insurance, as well as insurance on the structure. Balance sheets and income statements or a letter of credit from your bank will also be needed.

This article published in the August, 2011 edition of WALLACES FARMER.

All rights reserved. Copyright Farm Progress Cos. 2011.