USDA's new rule proposal that would allow more loans to smaller-scale farms was posted this week in the Federal Register for comment. Last week, U.S. Ag Secretary Tom Vilsack says the new microloan program would be part of the suite of credit options available through the Farm Service Agency.
In brief, change would allow FSA to make smaller loans, with a principal balance of up to $35,000. It also would streamline the application process to require less paperwork for farmers.
"As we expand options in agriculture, we're seeing a new vibrancy across the countryside," says Vilsack. "Younger people, many of whom are now involved in local and regional production, pursue livelihoods while raising food for local consumption."
USDA Proposes Streamlined Microloans For Small-scale Farmers
"This new program is a step in the right direction for the next generation of farmers who often are looking for smaller loans when they're first getting started in agriculture," notes National Sustainable Agriculture Coalition Policy Associate Juli Obudzinski.
Not all public comments, thus far, have been positive though. Several criticized USDA for wanting to open the gate wider to more bad loans that, in the past, have become taxpayer burdens.
Key provisions of the proposal
Rules for Operating Loan application, eligibility, and security requirements for microloans would be modified to better meet needs of very small family farm operations. Changes would include reduced application requirements, more timely application processing, and added flexibility in meeting the managerial ability eligibility requirement.
Current regulations require that an OL applicant show managerial ability via a 4-year college ag degree, have on-farm training or have farming experience. Microloan applicants could meet eligibility requirement via a past association with an agriculture-related organization, such as 4-H Club or Future Farmers of America, demonstrating experience in a related enterprise; or via an apprenticeship. Only a written description would be required to determine eligibility.
Expansion of this management ability condition offers the opportunity for ML borrowers to gain the minimum of 3 years farm and management experience required for FSA's Farm Ownership Program, a loan program for the purchase of farm real estate.
Read the proposal on the Federal Register website at Federal Register | Microloan Operating Loans. There, you can also click on and view posted public comments.