USDA's recently announced microloan program aims to boost financial progress of small-scale, beginning and socially disadvantaged farmers during their start-up years. By underwriting operating loans of up to $35,000 via a streamlined process and at low operating loan interest rates, USDA's Farm Service Agency is targeting smaller family farms and beginning farmers. Currently, that interest rate is 1.24%
Steven Maurer, State Executive Director at Ohio's FSA office, describes the microloan application process as a more "customers-friendly" tool. "For those selling at farmers markets or through community-supported agriculture (CSA) operations, a microloan might serve their needs perfectly."
How the loan can be used
Up to a maximum of $35,000 may be used 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.
Eligible operating expenses include, but aren't limited to:
•Initial start-up expenses;
•Annual expenses such as seed, fertilizer, utilities, land rents;
•Marketing and distribution expenses;
•Family living expenses;
•Purchase of livestock, equipment, and other materials essential to farm operations;
•Minor farm improvements such as wells and coolers.
•Hoop houses to extend the growing season;
Microloan applicants will need to have some farm experience. FSA will consider an applicant's small business experience plus experience with a self-guided apprenticeship as a means to meet the farm management requirement. Limited experience may working with a mentor during the first production and marketing cycle.
Microloans must be secured by a first lien on a farm property or ag products having a security value of at least 100% of the microloan amount, and up to 150% when available.
Loan repayment terms may vary and not exceed seven years. Annual operating loans are repaid within 12 months or when the agricultural commodities produced are sold.
The program provides a bridge for past FSA Rural Youth Loan recipients to successfully transition to larger-scale operations. As their financing needs increase, producers can apply for USDA operating loans of up to $300,000 or get loans from commercial lenders under the agency's Guaranteed Loan Program
View the USDA's microloan website at microloans. For more info, contact your local FSA office.