Agriculture Secretary Tom Vilsack talked with veterans, young, beginning and socially-disadvantaged producers Thursday at a community center in San Antonio, Texas, about USDA's work to expand credit for their farming operations.
USDA is hearing from excited producers all across the country about USDA's new microloan program, designed to help small and family operations secure loans under $35,000. Since 2009, said Vilsack, USDA has continued to expand the overall number of loans to beginning farmers and ranchers as well as its lending to socially-disadvantaged producers by significant margins.
"Agriculture must continue to attract the smartest, hardest-working people in the nation so we can continue to feed our nation and the world," Vilsack said. "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 ."
According to a USDA beginning farmers and rancher report, access to capital is one of the biggest hurdles new operators face.
Between 1982 and 2007, the report found, the number of beginning farmers and ranchers – those who have managed or operated a farm for 10 years or fewer – declined along with the number of young principal operators. Additionally, 16% of all principal operators were under the age of 35 in 1982, but by 2007 that number dropped to 5%.
Part of the effort to replenish operators in that age bracket is the new microloan program that was first released in January. The new microloan program is aimed at bolstering 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 will also provide a less burdensome, more simplified application process in comparison to traditional farm loans, USDA says. The interest rate for microloans changes monthly and is currently 1.25%.
Administered through USDA's Farm Service Agency Operating Loan Program, the new microloan program offers credit options and solutions to a variety of producers.
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 be to construct buildings or make farm improvements. Small farmers often rely on credit cards or personal loans, which carry high interest rates and have less flexible payment schedules, to finance their operations. Expanding access to credit, USDA's microloan will provide a simple and flexible loan process for small operations.
Producers interested in applying for a microloan may contact their local Farm Service Agency office.