Purpose of this Guide

Who should read this guide?

This guide is for farmers or ranchers who have a USDA Farm Service Agency (FSA) Farm 

Loan Programs loan. FSA offers other types of loans, such as marketing assistance loans 

and farm storage facility loans, which are made under authorities of the Commodity Credit 

Corporation (CCC). These are not part of FSA’s Farm Loan Programs and, therefore, may 

be serviced differently. Any reference to an FSA loan in this guide is referring to a Farm 

Loan Programs loan. For more information on these and other programs offered by FSA, 

please visit ourwebsite athttps://www.fsa.usda.gov.

Getting an FSA loan is only the beginning of your relationship with FSA. When you 

borrow money, you have many responsibilities, but with an FSA loan, you also have 

a partner that wants to help you succeed. While you have your loan, there is a lot to 

know, like how to report sales and make payments. You may also need other help 

with your loan. You might want to trade a piece of equipment, lease certain property

rights (for example, allow drilling for oil or gas, building wind power generation, or cell 

antenna towers), or sell or give some property to someone else. You may need your 

loans restructured because of a disaster or financial problems.

This guide will help you answer these and other questions. It is important that you know 

what your responsibilities are in working with FSA. It is also important that you know 

what FSA’s responsibilities are and how the local FSA office can help you. It may be helpful

to use this guide with someone who can direct you to more sources of farming or 

ranching information, such as an experienced farmer or rancher, Extension Agent, a 

specialist with a community or farm organization, or other service provider. You may want 

to involve your family when reviewing this guide. It is important that everyone involved in 

the farm understands the process and risks involved in operating a farm business and 

borrowing money.

Your FSA Farm Loan Compass Page 3
What is in this guide?

This guide includes information to help you understand how to make the most of the services 

and options that FSA offers. It also explains the responsibilities that you have with an FSA loan. 

It is intended to be a reference for you. When you have situations that affect your farm 

business, your ability to repay an FSA loan, or the property you have given as collateral for a 

loan, you can refer to this guide. There are sections on interest and payments, loan 

documents, and farm business planning and records. It includes important information about 

requirements for loan collateral. It also explains FSA’s responsibilities to you.

Appendix A provides a list of other USDA agencies and some organizations you can contact 

for more information on agriculture, developing business plans, and obtaining help for your 

operation. Lending and finance have some specialized terms. Definitions for these terms 

are included in this guide in Appendix B. If you are not familiar with terms like promissory 

note, loan collateral, and accrued interest, you should review Appendix B before you read 

further.

There is also a Quick Reference Index to help you find information in the guide on certain 

situations.

Disclaimer: This booklet is provided as a guide to help you understand FSA loan features, 

benefits, and borrower and agency responsibilities. This document does not replace or 

change FSA requirements, regulations, loan documents, or program handbooks. It is 

intended only as a program aid and guide. You should always talk with an FSA loan official 

before making major decisions that affect your financial situation, FSA loans, or farming 

operation.

Page 4 Your FSA Farm Loan Compass
Your FSA Farm Loan Compass Page 5
Contents Introduction................................................................... 8

Your Relationship With FSA......................................... 11

Loan Basics.................................................................. 12 • How FSA Charges Interest

• Interest and LatePayments

• Your Loan Documents

Your Responsibilities....................................................17 • Personal Liability

• Making YourPayments

• Supervised Bank Accounts

• Changes in Your Financial or Operating Status

• Borrower Training

• Term Limits

• Graduation

Your Farm Business Plan ..............................................23 • Following and Changing the Plan

• Keeping Complete, Accurate, Up-to-DateRecords

• Year-End Analysis and Farm Assessment

• Loan Collateral

• Maintaining LoanCollateral

• Accounting for Loan Collateral

• What Happens If You Violate the Agreement?

Servicesfor Existing Loans ..........................................33 • Subordination

• Transfer and Assumption

• Partial Release

• Lease of Collateral

• Borrowers Who Are Active Duty Members of the Armed Services

• What To Do If You Cannot Make a Payment

• Disaster Set-Aside

• Primary Loan Servicing Options

• FSA’s Consideration of Primary Loan Servicing Requests

Page 6 Your FSA Farm Loan Compass
• Results of a Request for Primary Loan Servicing

• Offsets

• Conservation Contracts

• Alternatives When Primary Loan Servicing Is Not Possible

Other Servicing and Collection Activities................ 46 • Homestead Protection

• Treasury Servicing and Offset

• Debt Settlement

Guaranteed Loan Program ............................................... 47 • Overview

• Servicing of Guaranteed Loans

FSA Responsibilities......................................................49 • Customer Service

• Timeliness

• Technical Assistance

• Receipt for Service

• Written Notification of FSA Decisions

• Notification If Your Request Is Denied

• Availability of FSA Forms and Documents

• Availability of Regulations and Directives

• Availability of Your Loan File

Conclusion........................................................................ 54

Appendix A: Resources and Contact Information.......... 55

• USDA Agencies

• Other Organizations

• Additional Resourcesfor American Indians/Alaskan Natives

AppendixB: Definitionof Terms.................................... 62

Appendix C: ExampleScenarios.................................... 68 • MakingPayments

• Term Limits

• Changes in Financial or Operating Status

Appendix D: Quick Reference Index ............................ 72

Your FSA Farm Loan Compass Page 7
Introduction

FSA is an agency of the U.S. Department of Agriculture (USDA) that delivers programs 

to support American agriculture. When a commercial lender could not help you, FSA 

provided the loan you needed. If you received your loan from your local FSA office, then 

your loan was made under the Direct Loan Program. If you received your loan from a 

commercial lender, such as a bank, the Farm Credit System, or a credit union, who 

obtained a loan guarantee from FSA, your loan was made under the Guaranteed Loan 

Program. This guide focuses primarily on the Direct Loan Program.

FSA is not meant to be your lender for your entire farming career. Our goal is to help 

you progress and move to a commercial lender. Once you can obtain credit from a 

commercial lender, FSA’s mission of providing temporary credit for you is complete.

Page 8 Your FSA Farm Loan Compass
Your FSA Farm Loan Compass Page 9
Page 10 Your FSA Farm Loan Compass
Your Relationship

With FSA

FSA’s mission in making farm loans is to give you the best opportunity to achieve financial 

success on your farm, pay back your FSA loan, and move to a commercial lender.

Although this guide explains your and FSA’s responsibilities and how FSA can help you 

overcome challenges and make financial progress, it is not a substitute for communicating 

with your local FSA office. If you run into problems or difficulties, FSA staff may be able to 

help you, even if the information is not included in this guide. Be sure to check with them 

before making changes or decisions that were not part of your current farm business plan 

or that could affect your loan. It is especially important that you get FSA’s approval of any 

sales, trades, or changes to collateral.

FSA’s mission is not simply limited to providing credit. This is one of the ways that FSA is 

quite different from commercial lenders. You will make all production and financial 

management decisions for your operation, but improvement in both production and 

financial management can make a difference in the success of your operation. FSA can 

provide advice and guide you to resources to help identify opportunities for improvement 

in farm production and farm management. FSA will then work with you on alternatives 

and options to address these areas. If you need help with anything related to your loans, 

your farm business plan, your financial situation, even production problems, consult your 

local FSA loan official. If the loan official cannot assist you, they will help you find an 

expert who can.

Everyone’s case is different, so loan servicing may be different for you than for someone 

else going through the same process. Be sure to ALWAYS contact your local FSA office with 

any questions you have about your loan, collateral, or any changes you are thinking about 

making in your operation.

Your FSA Farm Loan Compass Page 11
Loan Basics

How FSA Charges Interest

Lenders calculate interest in different ways. FSA calculates interest using what is called a

simple interest method. That is, interest is charged only on the unpaid loan principal. 

Interest is charged on the principal each day. When you make a payment, the money is 

first used to pay interest that has been charged (called “accrued interest”) up to the day 

the payment is received. The rest of the payment goes to pay down the principal

amount of the loan.

FSA loan payments are usually calculated or “amortized”, so they repay the loan in equal, 

regularly scheduled amounts over a period. Some important payment facts:

• Payments are normally dueannually.

• You are expected to pay when you receive income, which is planned for use as a

loan payment, even if the payment is not yet due.

• You do not have to wait until a payment is due to make a payment.

• You can make partial payments at any time.

• There is no penalty for paying early.

• Paying ahead and paying early will reduce the interest you pay.

Page 12 Your FSA Farm Loan Compass
Whatever amount you pay will always be used to first pay any interest that has been 

charged (accrued) since the last payment. The rest of the payment then goes to pay down 

the loan principal.

Interest and Late Payments

If you are late making a payment on a loan, FSA is required by law to begin considering 

your loan for restructuring (which we will discuss later), and your last payment will have to 

be higher to make up for the extra interest that accrues.

Here are some examples so you can see the effect of late payments:

Example 1: Payments made as scheduled.

$75,000 loan, 3% interest rate, payment due March 31, loan closed March 31.

Your FSA Farm Loan Compass Page 13
Example 2: Payments are made late.

$75,000 loan, 3% interest rate, payment due March 31, loan closed March 31.

In this example, you can see that making late payments can be expensive. When a 

payment is paid late, more of the payment is used to pay the additional daily interest 

charges that added up for each late day. The amount of principal that was not paid will 

then accrue more interest than calculated in the original repayment schedule. The result is 

that every late payment will continue to cost you money for the remaining term of the loan. 

This borrower paid over $1,100 more interest than was originally scheduled for the loan 

because payments were late. Also, the last payment on the loan had to increase by that 

amount to pay the loan in full when it was due.

Page 14 Your FSA Farm Loan Compass
If you make payments early or you include 

extra money with your payments, just the 

opposite will happen. You will be paying 

less interest and your last payment could 

even be lower than projected.

If a loan is restructured, any unpaid interest 

will be capitalized and become part of the 

principal (this is explained in more detail

in the primary loan servicing section of this 

guide). The result is that the capitalized 

interest will also begin to accrue interest.

Your FSA Farm Loan Compass Page 15
Your Loan Documents

When you received your FSA loan, you signed several legal documents including a 

promissory note, a list of your responsibilities, and documents giving FSA a lien on the 

items used to secure the loan (collateral). When you signed these documents, you made 

serious financial and legal promises. Hopefully, you read these carefully before signing 

them. If you have not read them, do that right away. If there is anything you do not 

understand, contact your FSA loan officer to discuss your concerns.

The documents include agreements about how you may use your loan funds, what 

property you pledged to the Government to assure repayment if you fail to pay your loans 

(the collateral for the loan), and requirements for insurance and property taxes. You are 

responsible for keeping all the agreements and promises in the documents you signed.

Failure to make a payment or meet any of the other requirements in the loan agreements 

can lead to serious problems. If you have more than one FSA loan, breaking one loan 

agreement means you have broken the agreements for all your FSA loans. However, in 

many cases, a loan official can help you resolve these issues before they become major 

problems. That is why it is so critical for you to stay in close communication with FSA 

loan staff. The most important agreements and promises are outlined in the next section.

Page 16 Your FSA Farm Loan Compass
Your Responsibilities

Personal Liability

When you receive a loan, you sign a legal contract, a 

document called a promissory note (this document is 

explained further in Appendix B). Anyone (and everyone, 

if more than one person signs it) who signs a promissory 

note is legally responsible for the repayment of the entire 

loan, including any unpaid interest and any fees charged 

on the account.

When you sign a promissory note, you are responsible for the 

loan until one of these things happens:

• The loan is paid in full.

• FSA releases you from liability (covered later in this guide).

• The debt is canceled throughbankruptcy.

If you are part of a business organization like a partnership, limited liability 

company (LLC), or corporation that received a loan, you are still required to sign as 

an individual. Each member of the entity is responsible for the entire FSA loan.

• If you signed the promissory note for a loan and leave the business, you are still

liable for the loan until FSA releases you from liability.

• If you leave or plan to leave the business, you and the remaining members of the

business should contact FSA immediately to discuss future plans, including the

possibility of release from liability if you wish to be released.

Your FSA Farm Loan Compass Page 17
If you signed one or more FSA promissory notes with a spouse, and later you and your 

spouse divorce, you are still liable for the loan(s). A divorce decree does not release you 

from liability with FSA. You should tell your local FSA office about the divorce action and 

update contact information, such as new mailing addresses and telephone numbers. Your 

local FSA office will work with you and your ex-spouse to help figure out a plan for servicing 

the FSA loan, including requesting a release from liability for the former spouse leaving the 

farm business.

Making Your Payments

Your loan payments are due as scheduled and agreed upon in the promissory note. As 

discussed in the Interest and Late Payments section earlier in this guide, it is important 

that payments be made on time. Prepayment of scheduled payments, or any part of a 

payment, can be made at any time without a penalty.

If basic loan security, such as land, equipment or breeding livestock is sold and will not 

be replaced, the money from the sale must be used to make an extra payment. An 

extra payment cannot be used as a scheduled installment. This is because the sale of 

collateral decreasesthe value of the remaining collateral. Making an extra payment

from the sale of collateral does not take away your responsibility to also make scheduled 

loan installments; however, it does reduce the amount of your FSA debt.

Any money that FSA must advance or spend to collect a loan or to care for and protect loan 

collateral, such as payment of unpaid property taxes, becomes a part of the loan. Interest is 

charged at the same rate as the loan, and you are required to repay FSA for these expenses 

without prior notice.

Even if you get behind on your loan payments and are working with FSA on restructuring 

or loan servicing options, it is important to pay what you can. Not only is that what you 

promised to do, but interest continues to be charged on the loan.

Page 18 Your FSA Farm Loan Compass
It is also important to make every effort not to become delinquent on your payments to 

FSA because other payments you may be expecting to receive will be administratively 

offset (offsets are discussed in detail later in this guide) and not paid to you. Being 

delinquent on FSA loan payments will also keep you from getting other loans from the 

Federal Government, such as student loans and Veterans Affairs (VA) loans.

Supervised Bank Accounts

In certain situations, FSA may require money to be placed in a supervised bank account

(SBA). These situations could include loan funds, when the funds will be used to 

purchase livestock or equipment; money received from the sale of FSA loan collateral, 

when the funds will be used to replace what was sold; and money received from insurance 

claims, when the money will be used to repair or replace damaged or destroyed property.

Use of an SBA should not continue for an extended period. When the items have been 

purchased, repaired, or replaced, the account should be closed. Even though FSA must 

sign off on checks written from an SBA, the account is yours. Be sure to review the 

monthly account statement carefully. If you see any problems or differences with your 

records, contact FSA as soon as possible.

Changes in Your Financial or Operating Status

FSA made you a loan based on facts you gave in your application, for example, what 

property you have, what you are producing or going to produce, and how you plan to 

farm. If you plan to or have had an important change in your operation, family income, 

expenses, or collateral, any of these things could affect your ability to repay the loan or 

affect FSA loan collateral. You should let your local FSA office know immediately if any of 

these things happen or when you find out something is going to happen.

Your FSA Farm Loan Compass Page 19
The law that establishes FSA farm loans requires that anyone who receives a loan must 

operate a farm or ranch. This requirement is included in the promissory note that you 

signed when you received the loan. In certain cases, FSA may be able to grant limited 

exceptions to this requirement (covered in the Lease of Collateral section later in this 

guide). Be sure to talk with your local FSA office about your options before agreeing to 

rent or lease loan collateral to anyone. Never sign a lease or rental agreement on any part

of your property that is loan collateral without talking with FSA. If you rent or lease loan 

collateral without FSA’s approval, even if you rent or lease to a family member, it is a 

violation of your loan agreements and security instruments. Breaking these agreements can

jeopardize your loan and take away much of the flexibility FSA may have to help you cope

with or resolve problems.

Borrower Training

As part of a loan agreement, FSA often requires borrowers to complete training. This is to 

help borrowers develop and improve important skills to help them be successful farm and 

ranch operators (the law directs FSA to determine a borrower’s need for training and

require it when appropriate). The training helps FSA borrowers gain knowledge, address 

problems or operational weaknesses, and plan for financial success.

Depending on the needs and location, there are different kinds of training available. For 

example, some training may be done locally in a classroom setting while other training is 

available online, by video, or correspondence course workbooks. If you are required to 

complete training as part of your loan agreement, your local FSA office will work with you 

to find approved classes and training programs. You will have 2 years from loan closing to 

complete the training.

Page 20 Your FSA Farm Loan Compass
Term Limits

Because FSA is a temporary source of credit, there are limits on the number of years 

in which you can get some types of FSA loans. When you reach the term limit in a

loan program, loans you still owe are not affected, but you cannot get new loans in that 

program.

Operating Loans – In general, you may not receive FSA direct operating loans in more than 

7 different calendar years. For beginning farmers, the limitation is 10 years. It does not 

make any difference if the years are consecutive (1 year after the other) or spread out over 

many years. Even if you receive multiple operating loans in 1 year, you still have used only 

1 year of eligibility. The number of years a loan is outstanding does not count toward term 

limits for direct operating loans. For example, if your first operating loan is a 7-year loan, 

even if several years have passed, if you have not received additional operating loans you 

have still only used 1 year of eligibility.

Exemptions/Exceptions:

• If you are a beginning or a veteran farmer/rancher, any FSA microloans you receive

will NOT count against the term limits as long as you qualify as a beginning or

veteran farmer/rancher.

• Term limits do not apply if your land is subject to Indian Tribal jurisdiction.

• In limited circumstances, FSA can grant a waiver to term limits. The waiver is only

available one time and is good for 2 years. To receive a waiver, you must be able

to show that your operation is financially viable. You must also agree to complete

Your FSA Farm Loan Compass Page 21
financial management training under the borrower training program, even if you 

have previously completed training or received a waiver. If you do not complete 

the training during the first year, the term limit waiver is cancelled, and you cannot 

receive additional operating loans.

Farm Ownership (FO) Loans – You may not have a direct FO loan outstanding for more than 

a total of 10 years prior to the date a new FO is closed. When you receive your first farm 

ownership loan, the 10-year period begins and runs as long as you have an outstanding 

farm ownership loan. It does not make any difference if the years are consecutive (1 year 

after the other) or spread out over many years. For example, if you previously received

a farm ownership loan, but paid it off in 5 years, you still have 5 years of having a farm 

ownership loan left before you are no longer eligible due to term limits.

Emergency loans – There is no term limit on emergency loans.

Graduation

FSA loans are a temporary source of credit and not a replacement or substitute for 

commercial credit; therefore, FSA loans are only available to you until you are able to 

get a loan from a commercial lender. FSA is required to review your financial situation 

periodically to determine whether it might be possible for you to graduate by refinancing 

your FSA loans with a commercial lender. When it appears to FSA that you have made

financial progress and can get commercial credit at rates and terms similar to other farmers 

in your area, you will be required to apply for a loan with a commercial lender.

If you apply for commercial loans at FSA’s request and are denied, you will not have to 

graduate at that time.

Page 22 Your FSA Farm Loan Compass
Your Farm Business

Plan

Following and Changing the Plan

Your farm business plan has several purposes. If you do not 

know where you are going, how will you know when you get 

there? Can you tell if you have made a wrong turn? Is there 

a better road to take? That is what a farm business plan is 

for. It helps you operate your business.

Your farm loan or loan servicing application received 

approval because your farm business plan showed your 

farming operation would produce enough income to pay 

your bills, make your loan payments, and pay your family

living expenses. Of course, we all know that things can change, 

sometimes for better (we hope!) or worse (hopefully not).

Sometimes it is hard to discuss what you believe is a bad situation with 

your loan officer. You might be surprised to find things are not as they seem.

Please keep in mind that FSA’s goal is to help you make financial progress. When

changes happen, it is important for you to talk with FSA. It was mentioned earlier that 

any changes you make have the potential of affecting your income or overall financial 

situation, including your ability to make your loan payments. FSA has a variety of tools 

to help you, such as training, technical assistance, and loan servicing options (covered

later in this guide); however, FSA cannot use these tools to help you unless you talk to your 

loan officer.

Your FSA Farm Loan Compass Page 23
Below are a few examples of changes you should discuss with your FSA loan officer if they 

were not part of the farm business plan.

• Renting more or fewer acres.

• Trading, buying, or leasing equipment.

• Increasing breeding herd (keeping rather than selling heifers/gilts/ewes, etc.).

• Impact of adverse weather (delayed planting or harvest, hail or frost, or death or

injury to livestock).

• Significant, unplanned expenses or income.

• Lease or sale of mineral rights.

• Reduction in non-farmincome.

There could also be nonfinancial changes that affect your operation that you should discuss 

immediately with FSA. Examples of nonfinancial changes include, and are not limited to:

• Formation or dissolution of a business organization (partnership, corporation, LLC,

etc.).

• Divorce.

• Serious illness or death of a spouse or other key person in the farm operation.

• Property changes beyond your control (notice of eminent domain, change in zoning,

etc.).

If you talk with FSA as soon as you are aware of any of these changes, FSA can help you 

avoid or minimize problems with FSA. For example, the Agency wants to make sure you 

will form a business organization in a way that will allow you to continue to qualify for 

future loans or that you remain eligible for loan servicing options.

Page 24 Your FSA Farm Loan Compass
Keeping Complete, Accurate, Up-to-Date Records

Proper records of income and expenses for family living and farm operating expenses are 

an important part of your business “road map” that enable you to know where you are and 

make good business decisions as you move forward.

Records that are complete, accurate, and up-to-date are critical for successfully managing 

your operation. Good records can help you identify parts of your operation that are not 

profitable, expenses that may be too high, or opportunities for greater profit.

Because records are so important, keeping good records and providing financial 

information to FSA upon request are part of your loan contract. Without timely and 

accurate financial information, FSA cannot help you with decision-making or 

provide assistance such as loan restructuring.

Year-End Analysis and Farm Assessment

The year-end analysis (YEA) is a key component of FSA technical assistance and an 

important tool to help new or distressed operations to become successful. A YEA is an 

annual meeting with an FSA loan official to review your records. To be most effective, the

meeting should be as close as possible after the end of the season or production cycle.

The objective of a YEA is to determine what went right, what went wrong, and plan 

accordingly for the coming year. Your FSA loan officer will work with you to review your 

progress, identify challenges, evaluate current needs, and help you plan for the coming 

production cycle.

Your FSA Farm Loan Compass Page 25
When you first received a loan, the loan officer worked with you to complete a farm 

assessment. The assessment included strengths and weaknesses and plans to use the 

strengths and correct or cope with weaknesses. It also included setting goals for your 

operation. The assessment is intended to provide you with a long-term plan for moving 

toward success. The idea is to help you see where you are on the road to success, and 

when necessary, get help from the right places to overcome challenges and keep moving 

forward.

Loan Collateral

Please read this section carefully. Problems and misunderstandings when accounting for 

collateral can create very serious problems.

Collateral refers to specific property you have pledged to FSA to secure repayment of a 

loan. The items used as collateral provide a second source of repayment in case you are 

not able to make payments on the loan. Loan collateral can be many different things, for 

example, land and buildings, crops, livestock, machinery, equipment, trucks, trailers, and in 

unusual cases, even cars and boats. FSA groups loan collateral into two different 

categories:

• Normal Income Security – This includes things you will produce or grow on

your farm or ranch and then sell; for example, crops that you grow and harvest,

livestock products like milk, eggs, wool, and livestock raised for sale like calves

or feeder stock. These are the things you would raise and expect to sell to make

money each season or production cycle.

Page 26 Your FSA Farm Loan Compass
• Basic Loan Security – This includes the value of things you need to be able to

continue to operate your farm or ranch; for example, land (including the surface

and any oil, gas and minerals), farm equipment, breeding livestock, or livestock

used to produce things that you sell, like milk, eggs, or wool.

The loan documents you signed give FSA certain legal rights to basic and normal income 

security (this property is under lien or mortgage – refer to Appendix B for a definition of 

these terms); this makes you responsible for letting your local FSA office know about 

anything that affects this property. Be sure you know what property and products were 

used to secure your FSA loan.

Important Note: It is critical that you understand the following:

• Your agreements with FSA for using any money received from selling collateral

property. Be sure to always contact your local FSA office any time you are not

sure or have questions.

• If your loan is secured by crops, livestock, machinery or equipment, the loan

documents include an after-acquired clause (defined in Appendix B). This means

that you agree to give FSA a security interest in property you purchase after signing

the documents, even if FSA did not provide financing for it. For example, if you buy

additional cattle, those cattle become part of FSA’s loan collateral no matter where

the funds to purchase them came from. If you buy a tractor or other equipment with

dealer financing, FSA will automatically have a lien behind the dealer or finance

company. If you have questions about whether FSA has a lien on property you have

purchased, talk with an FSA loan official.

Your FSA Farm Loan Compass Page 27
Procedures for placing and releasing liens on property to secure a loan are determined by 

State laws, which FSA must follow. The policies and processes discussed here are general. 

An FSA loan official can discuss the very specific details for the State where you live. For 

example, in many States, liens on some types of security are recorded centrally at the State 

level, but in other States, the records are kept in each county.

Maintaining Loan Collateral

The loan contract requires you to take care of all the property used to secure your FSA 

loan. If you have a loan secured by real estate, this includes following all farm and ranch 

conservation, environmental, or management plans. Do not change the use of the property 

(for example, from farmland to a quarry) or sell or allow removal of things like timber, sand, 

gravel, oil, gas, coal, or other minerals without first getting the written consent of

FSA. If another lender has a lien on the property 

in addition to FSA, you will need to get the other 

lender’s approval as well.

As discussed previously in the Changes in your 

Financial or Operating Statussection ofthis guide, you 

must always get FSA approval any time you want

to lease property that is part of FSA loan collateral. 

This could be anything from the lease of a small 

plot for a mobile home to sections of cropland or 

buildings. It also includes leases for oil or mineral 

exploration, as well as leases for wind turbines or 

communication towers. Leasing of equipment and

livestock that are loan collateral will not be 

approved. Payments received for approved leases 

may be made directly to FSA.

Page 28 Your FSA Farm Loan Compass
You must obey all environmental laws and requirements and not do anything that 

could create environmental problems, such as use, handle, or store hazardous material 

improperly or dispose of hazardous material on property that is FSA loan collateral. 

Livestock waste must be properly stored and handled. The USDA Natural Resources 

Conservation Service (NRCS) can help you if you need assistance with livestock 

waste issues; your local FSA office can provide you with an NRCS contact. If your

operation requires environmental permits, you must stay in compliance with any permit 

requirements.

You must pay all taxes you owe on property securing your FSA loan. Unlike home 

mortgage loans, FSA does not include taxes as a part of a farmland loan payment and pay 

them for you. Be sure to plan for enough cash on hand to pay taxes when they are due.

If any other legal claim is filed against FSA collateral such as liens, assessments, or 

judgments because of debts you owe to other creditors or Government agencies, you are in

default on your FSA loan agreements. If you run into problems with other creditors, it is 

important that you contact FSA right away. FSA may be able to use its loan servicing 

tools and help you reach payment agreements with other creditors. Do not wait until a 

creditor starts legal action. If the situation reaches that point, it may be too late for a 

workable solution.

Insurance is required on all property that serves as FSA loan collateral. Collateral must be 

insured against damage or loss. The amount of coverage required is specified in loan 

documents. If the property includes buildings within a flood plain, flood insurance is 

required as well. You are not required to insure property when the cost is not reasonable, for

example, when the premium for insuring an older building is more than the building

is worth. In addition, you must provide FSA with a copy of the insurance policy when 

requested.

Your FSA Farm Loan Compass Page 29
You must pay for or reimburse FSA for the cost of filing or renewing paperwork needed to 

keep your legal loan documents current during the life of the loan or to protect FSA loan 

collateral. For example, each State charges a small fee every 5 years to renew or continue 

some types of lien documents, so FSA will ask you for the money to pay for this.

FSA will inspect your farm to make sure that you are taking care of loan collateral 

and operating it in keeping with the promises and agreements you made in your loan 

documents.

Accounting for Loan Collateral

Any sale or trade of things used to secure your FSA loan, even if FSA is not the first lien 

holder, must be approved in advance by FSA.

Selling Normal Income Security – Part of the farm business plan and loan documents 

you signed included an agreement about how, where, and to whom you would sell the 

crops, livestock products, and livestock you grow or produce. This agreement is known 

as Form FSA-2040, “Agreement for Use of Proceeds and Security,” and it lists the amount 

of income you expect to receive from the sale of the property and how that money will be 

used. Form FSA-2040 serves as your permission from FSA to sell or transfer the property 

listed and use the proceeds to pay for family living and farm operating expenses, loan 

installments, and other purchases. At the beginning of the planning cycle, you meet with 

FSA to develop or update your farm business plan for the year. When you and FSAagree

on a plan, that agreement includes FSA’s permission to use income from the sale of certain 

collateral according to the plan. If your actual expenses arehigher thanexpected, contact 

FSA to discuss changed circumstances and get approval by adjusting Form FSA-2040 before 

you use proceeds from the sale or transfer of collateral to pay for these additional expenses.

Page 30 Your FSA Farm Loan Compass
Any time you are thinking about making any changes to how, where, or to whom you sell

the things you grow or produce or how the money will be used, be sure to let your

local FSA office know. Here are some examples: instead of selling watermelons at a local 

produce auction, a grower might want to sell them directly to a grocery store; instead of 

using money from the sale of spring crops to buy more cows as planned, a borrower may 

need to pay for a tractor overhaul; or an integrated livestock producer may want to change 

integrators.

Selling or Trading Basic Loan Security – Before you sell or trade basic loan security, it is 

very important for you to let your local FSA office know what you are thinking about doing. 

They will work with you to figure out the current market value of the item(s), agree on how 

any money received will be used, and determine if any changes in your loan documents 

will be needed.

Example: You want totrade your tractor for a newer tractor, andyou can get financing 

fromthe dealer. You wouldfirst gotoyour local FSA office todiscussthepossibletrade. Some

discussion points couldbe:

• Doesthe newer tractorbetter fit your operation?

• Is the older tractor breaking down a lot, how much would repairs cost, and have

breakdowns kept you from using the tractor when it was needed?

• How much do you needto getfor the trade-in?

• How muchadditionaldebt can youafford?

The FSA loan staff can help you answer these questions so you can make an informed decision.

• Selling Real Estate – Real estate is also basic loan security. If you decide to

sell real estate, contact your FSA loan official as soon as possible. Real estate

sales are more complicated than sales of livestock or equipment. If you are

dividing property, you may need to hire a surveyor and an attorney. In some

Your FSA Farm Loan Compass Page 31
cases, FSA may need an appraisal of the property before agreeing to release its 

lien. If the sale will directly impact your farm operation, a new or revised farm 

business plan may be needed. Be sure to let your local FSA office know well in 

advance of any possible sale so a staff member can work with you to figure out 

what processes are needed and get them started.

What Happens If You Violate the Agreement?

If you accidentally violate the Form FSA-2040 agreement by disposing of collateral or 

using the proceeds from the sale of collateral in a way outside the plan, you will have the 

opportunity to correct the violation. You may get FSA approval for what you did, after 

you did it (post approval). However, this post approval is only available to you one time. 

You:

• have 30 days to correct the violation

• can correct the violation by either paying FSA the amount received when you sold the

collateral or by providing enough information to allow FSA to approve the sale and use

of proceeds.

If you are not able to correct the violation within 30 days, then you will be considered 

in default on the loan and FSA may pursue legal action. If you violate the agreement a

second time, then you will be considered in default on the loan and FSA may pursue legal 

action.

Knowingly selling or disposing of FSA loan collateral without FSA approval and then using 

any money from that sale for something other than paying FSA is not only a violation of 

loan agreements, but also a criminal offense. The Government may press criminal charges 

against you.

Page 32 Your FSA Farm Loan Compass
Services for Existing

Loans

Subordination

A subordination:

• is when a lender gives all or part of its legal right to loan collateral to another

lender, creditor, or other party

• can allow FSA loan collateral to be used by another lender to make a new loan.

The new loan could be used for things like operating credit to produce a crop, build

a house on the farm or ranch, or other useful improvements for the operation

• may be requested because of a lease for oil or mineral rights or for wind or cell

towers. In these cases, subordination would mean that the lease takes priority

over a mortgage. The lease holder would want this so that if a foreclosure

happened, it would not affect the lease.

There are several conditions that must be met for approval of a subordination. Be sure 

to check with your local FSA office if you have a situation where a subordination may be 

necessary.

Transfer and Assumption

A transfer and assumption is when someone wants to buy your loan collateral and take 

personal liability for the FSA loans. The sale of your loan collateral must meet certain 

conditions like being sold for current market value. It is also important to remember the 

person who wants to assume your loan must meet all FSA loan requirements the same as 

if the person was getting a new loan.

Your FSA Farm Loan Compass Page 33
Transfer and assumptions can be very complicated, so be sure you and the buyer discuss 

the sale of your loan collateral with your local FSA office before making any kind of 

commitment. The local FSA office will help you with the proper paperwork and assist the 

buyer who will need to submit a complete FSA loan application. You will both need to 

work closely with FSA throughout the whole process.

Important Note: If you intend to sell property and the deal includes the buyer “taking 

over payments,” it is critical that you discuss this with FSA and that the buyer apply for 

a transfer and assumption. If you make such a deal without FSA’s approval, you have 

created problems for yourself because:

• you are still responsible and liable for the FSA loans. If the person who bought the

farm from you does not pay, FSA is still looking to you for payments even though you

are not operating the farm.

• your loans will be in nonmonetary default (covered in the Changes in Your

Financial or Operating Status section of this guide) because you will no longer be

the operator (or owner-operator) of the farm. FSA may declare your loans all due

and payable and begin foreclosure action.

Partial Release

A partial release is when FSA releases its lien against some part of the property that is FSA 

loan collateral. Usually a partial release is requested when land is being sold, for example, 

dividing off and selling a building lot or selling one of several parcels of land FSA holds as 

collateral. It can also be the sale of a right of way and rights to things like timber, mineral 

rights, gas, coal, sand, or gravel. For a partial release to be approved, certain conditions 

must be met. Releases may be made for crops, livestock, machinery, and equipment, 

which is FSA loan collateral as well.

Page 34 Your FSA Farm Loan Compass
Your FSA Farm Loan Compass Page 35
At a minimum, the sale must be for current market value and should not interfere with 

your operation. In a few cases, FSA can agree to release property without payment.

However, the value of the remaining collateral must be significantly more than the 

remaining loan balances and other conditions must be met.

Any time you are thinking about a sale of real estate or other collateral, you will need 

to contact your local FSA office so that FSA can determine if a partial release can be

approved. The same is true if you want to give some land to a family member. FSA can 

also help you with the application and legal processes. The process can be complicated 

and could require things like an appraisal, sales contract, and legal services. Be sure not 

to sign any type of an agreement or make any promise until after you have discussed the 

sale or gift with FSA.

Lease of Collateral

Asmentioned in the ChangesinYour Financialor OperatingStatussection earlierin this 

guide, if you have real estate that serves as FSA loan collateral, you may be able to rent or 

lease out the collateral under the following conditions:

• FSA must approve your request.

• The length of the lease is sometimes limited to 3 or 5 years.

• The lease cannot cover livestock, machinery or equipment that is FSA loan collateral.

• The lease cannot have an option for sale orpurchase.

• If the collateral is part of your farm or ranch operation, FSA will need to know why

you will not be the operator.

There are different rules for leases for communication towers, wind turbines, nonfarm 

usage, or any type of minerals. Contact your local FSA office for help working through the 

process anytime you are thinking about leasing anything that is part of FSA loan collateral.

Page 36

Your FSA Farm Loan Compass
Borrowers Who Are Active Duty Members of the Armed Services

If you join the military and enter active duty or are activated from the National Guard or 

reserve status, contact FSA as soon as possible. FSA will help you plan for the future of 

your operation and discuss options for your FSA loans. You should consider giving

someone power of attorney so that he orshe can work with FSA and others on your behalf 

when you are unavailable to sign documents or discuss issues related to the farm. If you 

are considering lease or sale of loan collateral because of your activation, FSA will help 

you evaluate options. If you decide to lease or sell loan collateral, FSA will work with you 

to request and, if possible, approve one of these actions if you choose.

Active duty members of the U.S. Armed Services have the following additional rights 

related to the servicing of their loans:

• The interest rate on your loans cannot exceed 6 percent while you are in active

duty status. If the rate on any loan exceeds 6 percent, FSA will reduce the rate to

6 percent for the duration of your active duty. You do not need to request this; FSA

will reduce the rate automatically when you notify FSA that you are on active duty

by providing a copy of your military orders or other documentation to verify your

active duty status.

• If your FSA loans become delinquent or are delinquent, no offset of Government

payments may be taken after you enter active duty (offsets are discussed in this

guide), and loans will not be referred to the U.S. Department of Treasury for

collection.

Your FSA Farm Loan Compass Page 37
• FSA cannot declare your loans fully due and payable (called acceleration) or

foreclose on loan collateral while you are in active duty status.

• During a time of war or national emergency, interest and your payments can even

be suspended for a period.

Some of these rights apply not just to FSA loans, but certain loans with other lenders 

as well. If you have loans with other lenders, you should also contact them as soon as 

possible. If you are having financial difficulties while on active duty, you may want to 

consult a legal advisor about your rights under the “Service Members Civil Relief Act of 

2003.”

What To Do If You Cannot Make a Payment

If you know that you are not going to be able to make your full payment on time, you 

should contact your local FSA office as soon as possible. Do not wait until you miss a 

payment. It can be hard to discuss what you believe is a bad situation with your loan 

officer. But, the sooner you and FSA begin working together on the problems you face, the 

more likely it will be that something can be worked out. FSA will work with you to try and 

restructure your loan so that the payment plan better matches your current situation. FSA 

can:

• consider you for Primary Loan Servicing (PLS) (discussed later in this guide) if you

are under financial distress, even if you have not missed a payment yet. For this

to happen, you will need to provide FSA with information and a complete servicing

application.

Page 38 Your FSA Farm Loan Compass
• provide technical assistance to help identify the cause and potential solution for

your problems. As discussed earlier, it is very important to pay what you can

because it will help minimize the amount of interest you must pay and reduce

other problems.

• sometimes set part of the payment aside if the problem making your FSA loan

payment is because your operation was affected by a natural disaster. You can find

more information about Disaster Set-Aside in the next section.

If you become delinquent on payments, FSA sends detailed letters with information about 

servicing in the mail. Be sure to pay very close attention to any mail or letters you receive from 

FSA and call your local office any time you have questions.

Disaster Set-Aside

When there are unfortunate natural events like bad storms, floods, or drought, the 

President or Secretary of Agriculture may declare the event a natural disaster. When a 

disaster is declared, FSA can make emergency loans, and Disaster Set-Aside becomes 

available for borrowers who are having problems because of the disaster.

The Disaster Set-Aside program allows FSA to set aside part of the annual payment for 

many kinds of FSA loans until the last year of the loan. The amount cannot exceed 1 year’s 

payment, and it continues to accrue interest while set aside. Disaster Set-Aside does not 

apply to annual operating loans, and there are some other conditions that need to be met.

FSA will send you a letter about Disaster Set-Aside once a year, if the county where you 

farm or ranch, or a neighboring county, is officially declared a disaster. If you are usually 

able to pay all your expenses and loan payments, but are now having trouble because of a 

disaster, contact your local FSA office to find out more about Disaster Set-Aside.

Your FSA Farm Loan Compass Page 39
Primary Loan Servicing Options

If you do not make your payments by the due date, you 

will be delinquent on your FSA loans. FSA has several 

loan servicing options that can be used to bring your 

account current and can often make a new restructured 

payment plan specifically for your operation. FSA calls 

this process Primary Loan Servicing.

By law, Primary Loan Servicing actions must follow some

very detailed guidelines with important deadlines. When 

you have been delinquent on your payments for 90 days,

FSA will send you a letter telling you about Primary Loan

Servicing and exactly what you must do to apply. You will

have 60 days to provide a complete application to FSA, but it

is important that you get started right away. You will receive a

reminder letter from FSA in about 30 days to make sure you know 

exactly where you are in the application process.

ImportantNote: Itisvery importanttocompletetheapplication by the 

60-daydeadline. This is a legal requirementthat FSA cannotwaive. Ifyoudo

not apply by the deadline, FSA generally cannot provide Primary Loan Servicing.

FSA can often help by restructuring your loans and setting up new payments. There are 

several ways this can be done:

Rescheduling/Reamortization which means your payments are rearranged over the 

remaining term of the loan. Sometimes a longer term can be used to give you more time 

over which to make the payments.

Page 40 Your FSA Farm Loan Compass
Deferral is when you are given a period up to 5 years during which you make reduced 

payments or no payment. However, interest will continue to be charged on the whole 

loan.

Write Down/Debt Forgiveness is when a part of the debt is forgiven (written off). This 

can only be done as a last resort and depends on the value of your loan collateral. You can 

only get this type of help one time, and it will prevent you from being able to receive certain

types of FSA loans in the future. You might also have to pay income taxes on the amount 

of principal written down. Write down of debt secured by real estate includes a recapture 

provision, which means that you could also be required to repay all or part of the debt 

forgiveness if the real estate collateral increases in value during the 5 years after the write 

down.

Interest Rate Reduction allows loans to be restructured at the lower of:

• the existing rate on your loan, or

• the rate that is being charged on new loans at the time of restructuring, or

• the rate in effect at the time of application for Primary Loan Servicing, whichever is

lower.

The rates on your loans will not increase, but they may be reduced depending on current 

interest rates.

Your FSA Farm Loan Compass Page 41
FSA’s Consideration of Primary Loan Servicing Requests

FSA uses a computer program called eDALR$ to evaluate primary loan servicing requests. 

All Primary Loan Servicing action calculations must be made with eDALR$. There are

some key reasons FSA uses eDALR$:

• There are usually several different servicing actions possible for each loan. eDALR$

can quickly evaluate every combination to ensure that if there is any possible

combination of actions that would make Primary Loan Servicing feasible, it will be

found.

• eDALR$ follows the same process every time for every borrower and loan. This

ensures that everyone with a complete Primary Loan Servicing application receives

the same consideration of all possible servicing alternatives in the same way.

• Much of the data needed for the complex calculations is entered into eDALR$

automatically from the FSA farm business plan system and the FSA accounting

system. This reduces the possibility that a mistake in data entry could cause a

result that isincorrect.

If you submit a complete request for Primary Loan Servicing, you will be provided a copy 

of a printout of the result of eDALR$ calculations when a final decision is made on your 

request.

Page 42 Your FSA Farm Loan Compass
Results of a Request for Primary Loan Servicing

Based on the results of eDALR$ calculations, FSA will either:

• offer to restructure your loans. If restructuring is possible, you must accept the

offer within 45 days of when you receive the offer.

• deny the request. If restructuring is not feasible, your request will be denied. You will

receive a letter explaining why your request was denied and what additional options

you have, if any. The letter will include your rights for an appeal of the decision.

IMPORTANT REMINDER: The law governing FSA loan restructuring is very specific on 

timeframes and decisions. Youonly have one opportunity to apply for loan restructuring, 

and the decision you make about applying or not applying is final. FSA cannot consider 

an application received after the 60-day deadline. If you do not apply by the deadline

but later decide to apply, your application cannot be processed. If you receive an offer to 

restructure and do not accept it within 45 days (if you appeal terms of the offer, the 45-day 

clock stops until the appeal is resolved), your loans cannot be restructured. For these 

reasons, if you receive any kind of letter from FSA, especially if it is sent by certified mail, 

you should always read it very carefully. Contact your local FSA office if you do not 

understand it or have questions. 

Your FSA Farm Loan Compass Page 43
Offsets

If you are 90 days late in making your loan payment, FSA is required by the “Debt 

Collection Improvement Act” to start withholding money you normally expect to receive 

from FSA and other Government programs. This is called an offset and applies to things 

like FSA Farm Program payments, Social Security payments, and Federal tax refunds. FSA 

is also required to refer delinquent loans to the U.S. Department of Treasury for collection. 

If offset is necessary, you will be sent a letter to let you know before an offset happens.

This is an appealable decision, and the letter will include instructions to follow if you 

wish to appeal. However, the law says that FSA must take all actions possible to collect 

delinquent debt.

Conservation Contracts

A conservation contract is a legal agreement between FSA and an FSA borrower whose 

loan is secured with real estate. FSA agrees to reduce the amount of the FSA loan that 

must be paid back, and the borrower agrees not to use part of the land the borrower owns 

so it can be used for conservation purposes to benefit the environment.

Example: Using the land for wildlife habitat or for a buffer next to a natural resource like a 

wetland, stream, or lake.

The land must be suitable for a conservation purpose for your loan to be reduced by a 

conservation contract. The contract agreement must be for at least 10 years; however, it

can be for 30 or 50 years in return for a larger reduction in the amount you must pay back.

You can ask for a conservation contract at any time; however, you will also be told about 

the Conservation Contract Program whenever you are sent a letter about Primary Loan 

Servicing. If you think you might be interested in a conservation contract, contact your 

local FSA office. If you are eligible, they will put together a Conservation Contract Review 

Team, with experts from the USDA Natural Resources Conservation Service and other

agencies. FSA and the team will work together with you to see if your land is suitable, and 

if it is, FSA will help you with the processes and legal paperwork.

Page 44 Your FSA Farm Loan Compass
Alternatives When Primary Loan Servicing Is Not Possible

If you default on your FSA loan and a feasible business plan is not possible after 

considering FSA’s Primary Loan Servicing options, or if you do not apply within the 60-day 

time period, there are still a few options that may be available:

Pay Current or in Full – You can pay the amount you owe FSA at any time. 

Market Value Buy Out of Loan Collateral – Under this option, you may keep the 

collateral even if that amount is less than the amount you owe FSA.

Voluntary Liquidation – You may sell the collateral for its current market value and pay 

FSA the amount you receive. You will still need to work with FSA to settle your loan 

account if a balance remains after all collateral is sold.

Foreclosure – If you do not resolve your account voluntarily, FSA is required to liquidate 

the loan collateral through foreclosure. Foreclosure is a last resort and the worst outcome 

for both FSA and the borrower. Voluntary resolutions are almost always better than the 

process of foreclosure. In the case of a foreclosure, the collateral for the loan will be

sold and the money used toward paying off the loan and any costs associated with the 

foreclosure.

Your FSA Farm Loan Compass Page 45
OtherServicingandCollectionActivities

Homestead Protection

If your home is part of FSA loan collateral and because of foreclosure or voluntary 

conveyance FSA takes possession of it, then Homestead Protection will give you the right 

to lease the house and up to 10 acres from FSA. The lease can be for up to 5 years if 

certain conditions are met. The purpose is to give you time to decide or look for financing

so you can buy the house back from FSA. If you are an American Indian or Alaskan 

Native, Asian, Black or African American, Native Hawaiian or other Pacific Islander, 

Hispanic, or a woman, and you are able to lease the homestead property, you can also 

give a member of your immediate family the right to buy the home under Homestead 

Protection. FSA tells borrowers that might be eligible for Homestead Protection about it 

during Primary Loan Servicing and again if the house comes into FSA’s possession.

Treasury Servicing and Offset

In most cases, if there is a remaining balance owed after all loan collateral is sold, FSA is 

required to turn over loan collection to the U.S. Department of the Treasury. Treasury will 

use both the offset process and private collection agencies to collect the money owed. The 

Treasury offset program (TOP) covers all Federal Government payments and many other

Page 46 Your FSA Farm Loan Compass
kinds of income including some state income tax returns. Treasury servicing may include 

garnishment of wages or Federal salary offset.

Debt Settlement

Sometimes, as part of settling the balance on an account, a portion of the debt is forgiven 

or written off. As noted earlier, you can only get debt forgiveness once from FSA, and it 

will prevent you from receiving certain types of FSA loans in the future.

These are all very serious legal actions which FSA works to avoid, but to do so, FSA will 

need your help. That is why it is very important to communicate and work with your 

local FSA office, even in difficult situations. Always remember when you borrow money 

from FSA, it is taxpayer money and must be repaid with interest.

Guaranteed Loan

Program

Overview

Guaranteed loans are made and serviced by commercial lenders, such as banks, the Farm 

Credit System, or credit unions. FSA guarantees the lender’s loan against loss up to 95 

percent. FSA is responsible for reviewing these loans and providing oversight of the lender’s 

activities.

Your FSA Farm Loan Compass Page 47
Servicing of Guaranteed Loans

Lenders are responsible for supervising guaranteed loan borrowers in the same way 

they do their other agricultural loan customers; therefore, lenders are expected to apply

standard agricultural loan servicing policies to their guaranteed loan customers. If you are a 

guaranteed loan borrower, you are responsible for keeping the promises you made in the loan 

agreements you have with your lender. FSA’s servicing of guaranteed loans is limited to 

checking on the lender’s supervision of the guaranteed loan and letting the lender know in 

writing about any problems.

Communication with your lender is very important. Many loan agreements require 

periodic reporting and notification of changes in the operation, similar to FSA 

requirements. Keeping your lender informed of changes can improve the lender’s confidence 

in you and increase the likelihood of a positive decision when you request additional loans.

If you have both direct and guaranteed loans, FSA will work with you and the guaranteed 

lender on servicing your accounts. Any financial or production information you report to 

the guaranteed lender may be submitted to FSA in the same format – it is not necessary to 

copy the data onto FSA forms.

Page 48 Your FSA Farm Loan Compass
FSA Responsibilities

FSA has several responsibilities to you as a borrower.

Customer Service

You are entitled to good customer service. When you call or visit an FSA office, you can 

expect to be treated professionally and with courtesy. In some cases, FSA staff will ask 

that you make an appointment for a face-to-face meeting. However, you cannot be 

required to schedule an appointment to submit an application for FSA assistance, either 

for a new loan or for any type of loan servicing action. Applications may be submitted to

FSA at any time, in person, or by fax, email, or regular mail. If for some reason FSA

cannot approve a request, it is agency policy to discuss adverse decisions with you, if 

possible, before giving them in writing.

Timeliness

FSA realizes that timing is critical for many decisions and activities in farming and 

ranching. FSA is committed to providing timely service.

Page 49
Technical Assistance

One of the key differences between FSA and other lenders is technical assistance. FSA 

is required to provide you with technical assistance to help you make financial progress

and reach your goals. There are many possible activities covered by technical assistance, 

ranging from help in completing an application for a loan or for servicing, identifying 

strengths and weaknesses in your operation, and finding outside experts to help you 

address a complex production issue. As a part of technical assistance, if FSA cannot 

approve what you have requested, a loan official can identify alternatives that might make 

a farm business plan viable, or possible changes that might allow a denied servicing action 

to be approved, for example. Do not be reluctant to ask FSA for help – it is part of the 

agency’s responsibility.

Receipt for Service

When you ask for assistance, request an application, or submit an application, FSA will 

provide you a Receipt for Service.

Written Notificationof FSA Decisions

All FSA Farm Loan Programs decisions must be given in writing, either hard copy, email, or 

both. An FSA official may not approve or deny a request for a loan, or any servicing action, 

without giving written notice of the decision. If the request is approved, the notification 

must include any requirements and conditions. If the request is denied, the notification 

must provide the reasons for the denial. The notice must also specify the requirements in 

FSA handbooks and regulations that resulted in the denial decision.

Page 50 Your FSA Farm Loan Compass
Notification if Your Request Is Denied

Commitment to good service does not mean FSA will approve every request. Sometimes 

a request for a loan servicing action cannot be approved. Requests may only be approved 

if all applicable requirements have been met. Whenever a request is denied, FSA staff will 

explain why and provide alternatives, if possible, that might allow the Agency to approve a 

later request.

A denial letter must include any applicable appeal rights. Appeals of FSA decisions are

handled by the National Appeals Division (NAD) of USDA. NAD is an independent agency 

and has no connection to FSA. In some cases, FSA may determine that a decision is

not appealable. Non-appealable decisions typically involve program requirements where 

there is no judgment involved. For example, if you request a Disaster Set-Aside, but did 

not farm in a declared disaster area, FSA must deny the request because operating in

a declared disaster area is a requirement to receive a Disaster Set-Aside. There is no 

judgment involved in determining that the county was not part of a disaster declaration, 

so the decision is not appealable. However, even in cases like this, if you believe FSA is 

wrong and you should be allowed to appeal, you can ask the Director of NAD to review 

the FSA decision that the denial is not appealable. The denial letter from FSA will include 

instructions on how to request a NAD review of the decision.

If your request is denied, the denial letter will tell you how to request the following options 

that are available to you:

Reconsideration, which provides you with the opportunity to meet with the FSA loan 

officer to present additional information and explain why you believe FSA’s decision may be 

in error. If you do not agree with the outcome of the reconsideration process, you can then 

request mediation or an appeal.

Your FSA Farm Loan Compass Page 51
Mediation, which is a process for resolution of a disagreement between two or more 

parties. A trained, neutral mediator helps the parties look at the issues, consider all 

available options, and attempt to agree on an acceptable solution. Mediation may be 

helpful especially if there are other creditors involved in your situation. Many States have 

USDA approved mediation programs. If you request mediation, FSA will contact the 

appropriate mediation coordinator. If your State does not have a mediation program, FSA 

will help if you wish to meet with creditors to explore alternatives that might allow your 

request to be approved.

Appeal to the USDA National Appeals Division, which is an independent organization 

within USDA where you may present evidence that demonstrates why you believe that 

FSA’s decision may be wrong. If you choose to appeal, be sure to make your request 

before the deadline in the denial letter. NAD will not accept appeal requests submitted 

after the deadline.

Availability of FSA Forms and Documents

All blank FSA forms and documents are available in FSA offices, and most are also 

available on the FSA website at: 

https://forms.sc.egov.usda.gov/eForms/welcomeAction.do?Home. FSA does not require an 

appointment to submit a loan application or a servicing request. However, if you need help

completing a form or other document, we encourage you to make an appointment

to ensure that our staff has adequate time scheduled to give you their full attention and 

answer all your questions.

Page 52 Your FSA Farm Loan Compass
Availability of Regulations and Directives

FSA’s program regulations and directives for Farm Loan Programs are available to the 

public. Regulations are published in the Code of Federal Regulations (CFR), available 

through the U.S. Government Printing Office website. Farm Loan Programs’ policy, 

procedures, instructions, and information are issued in FSA directives. Long-term and 

permanent guidance is issued in handbooks, whereas short-term or temporary guidance

is addressed in notices.

Much of the CFR language is included in our handbooks. Handbooks and notices are

available on the FSA website and are also available for review in local FSA offices. The 

FSA staff is required to follow the directions and requirements in handbooks and notices. 

If you make a request for a loan or loan servicing and the request is denied, the written 

notice of the decision must include a reference to the specific handbook requirements or 

guidelines that the decision was based on.

Availability of Your Loan File

You have the right to review your loan file. You may need to schedule an appointment to 

see your file so that an FSA staff member will be available to provide it for you. There is no

cost for copying the first 100 pages; however, after that a fee may be charged.

Your FSA Farm Loan Compass Page 53
Conclusion

Congratulations on getting your loan from FSA’s Farm Loan Programs. At this point, you 

have developed a strong relationship with the staff at your local FSA office. 

Remember, when you borrow money, you have many responsibilities, but with FSA, 

you also have a partner who wants to help you succeed in achieving a successful career in 

farming or ranching. We hope this guide will help you answer questions that come up as 

you operate; however, keep in mind that FSA staff is still available every step of the way 

from making your first payment to graduating to a commercial lender.

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Appendix A: 

Resources and 

Contact Information

USDA Agencies

Agricultural Marketing Service (AMS)

Website: https://www.ams.usda.gov

AMS facilitates the strategic marketing of agricultural products in domestic and 

international markets while ensuring fair trading practices and promoting a competitive 

and efficient marketplace. AMS constantly works to develop new marketing services to 

increase customer satisfaction.

Agricultural Research Service (ARS)

Website: https://www.ars.usda.gov

ARS is USDA’s principal in-house research agency. ARS leads America towards a better 

future through agricultural research and information.

Animal and Plant Health Inspection Service (APHIS)

Website: https://www.aphis.usda.gov/aphis/home

APHIS provides leadership in ensuring the health and care of animals and plants.

The agency improves agricultural productivity and competitiveness and contributes to the 

national economy and the public health.

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Center for Nutrition Policy and Promotion (CNPP)

Website: https://www.fns.usda.gov/cnpp

CNPP works to improve the health and well-being of Americans by developing and 

promoting dietary guidance that links scientific research to the nutrition needs of 

consumers.

Economic Research Service (ERS)

Website: https://www.ers.usda.gov

ERS is USDA’s principal social science research agency. Each year, ERS communicates 

research results and socioeconomic indicators via briefings, analyses for policymakers and 

their staffs, market analysis updates, and major reports.

Farm Service Agency (FSA)

Website: https://www.fsa.usda.gov

The Farm Service Agency implements agricultural policy, administers credit and loan programs, 

and manages conservation, commodity, disaster, and farm marketing programs through a 

national network of offices.

Food and Nutrition Service (FNS)

Website: https://www.fns.usda.gov

FNS increases food security and reduces hunger in partnership with cooperating 

organizations by providing children and low-income people access to food, a healthy diet, 

and nutrition education in a manner that supports American agriculture and inspires public 

confidence.

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Food Safety and Inspection Service (FSIS)

Website: https://www.fsis.usda.gov/wps/portal/fsis/home

FSIS enhances public health and well-being by protecting the public from foodborne illness 

and ensuring that the Nation’s meat, poultry, and egg products are safe, wholesome, and 

correctly packaged.

Foreign Agricultural Service (FAS)

Website: https://www.fas.usda.gov

FAS works to improve foreign market access for U.S. products. This USDA agency operates 

programs designed to build new markets and improve the competitive position of

U.S. agriculture in the global marketplace.

Forest Service (FS)

Website: https://www.fs.fed.us

FS sustains the health, diversity, and productivity of the Nation’s forests and grasslands to 

meet the needs of present and future generations.

National Agricultural Library (NAL)

Website: https://www.nal.usda.gov

NAL ensures and enhances access to agricultural information for a better quality of life.

National Agricultural Statistics Service (NASS)

Website: https://www.nass.usda.gov

NASS serves the basic agricultural and rural data needs of the country by providing 

objective, important, and accurate statistical information and servicesto farmers, ranchers, 

agribusinesses, and public officials. This data is vital to monitoring the ever-changing 

agricultural sector and carrying out farm policy.

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National Institute of Food and Agriculture (NIFA)

Website: https://nifa.usda.gov

NIFA’s unique mission is to advance knowledge for agriculture, the environment, human

health and well-being, and communities by supporting research, education, and extension 

programs in the Land-Grant University System and other partner organizations. NIFA does 

not perform actual research, education, and extension, but rather helps fund it at the State 

and local level and provides program leadership in these areas.

Natural Resources Conservation Service (NRCS)

Website: https://www.nrcs.usda.gov/wps/portal/nrcs/site/national/home

NRCS provides leadership in a partnership effort to help people conserve, maintain, and 

improve our natural resources and environment.

Risk Management Agency (RMA) 

Website: https://www.rma.usda.gov

RMA helps to ensure that farmers have the financial tools necessary to manage their 

agricultural risks. RMA provides coverage through the Federal Crop Insurance Corporation, 

which promotes national welfare by improving the economic stability of agriculture.

Rural Development (RD)

Website: https://www.rd.usda.gov

RD helps rural areas to develop and grow by offering Federal assistance that improves 

quality of life. RD targets communities in need and then empowers them with financial 

and technical resources.

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Other Organizations

Cooperative Extension System Offices

Website: https://nifa.usda.gov

Each U.S. State and territory has a Cooperative Extension State office at its land-grant 

university and a network of local or regional offices. These offices are staffed by one or 

more experts who provide useful, practical, and research-based information to agricultural 

producers, small business owners, youth, consumers, and others in rural areas and 

communities of all sizes.

Small Business Counselors (SCORE)

Website: https://www.score.org

SCORE, a nonprofit organization, is a network of volunteers who provide resources to 

help entrepreneurs start, grow, and succeed in their business. SCORE operates through 

364 chapters located throughout the United States and provides confidential business 

counseling services at no charge.

Extension Risk Management Education (ERME) Centers

Website: http://extensionrme.org/

The four regional ERME Centers provide funds on a competitive basis to extension educators

and farm management consultants who have the expertise to develop and deliver risk 

mitigation materials to agricultural producers. The Digital Center serves as the 

clearinghouse for risk management material and provides risk management curricula, 

information, tools, and assistance through an online resource called the National Ag Risk 

Education Library. 

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Additional Resources for American Indians/Alaskan Natives

Intertribal Agriculture Council (IAC)

Website: http://www.indianaglink.com

The Intertribal Agriculture Council pursues and promotes conservation, development, and 

use of agricultural resources for the betterment of American Indians/Alaskan Natives.

IAC Regional Technical Assistance Program Offices

Website: http://www.indianaglink.com/our-programs/technical-assistance-program

Through assistance from USDA’s Office of Tribal Relations, the Intertribal Agriculture 

Council has established IAC Regional Technical Assistance Program Offices. These regional 

offices provide technical assistance and outreach to Indian producers and tribes. They 

provide guidance through the regulations and processes of Federal agencies and:

• teach intensive financial, business, and marketing planning skills and

understanding of basic and advanced farm and ranch business management skills

to American Indian/Alaskan Native farmers and ranchers.

• teach leasing requirements for tribal trust and restricted lands to American Indian/

Alaskan Native farmers and ranchers in coordination with the Bureau of Indian

Affairs; and

• support the deployment of tribal agriculture advocates and technical assistance

providers in key locations throughout Indian Country, who will serve alongside

consolidated sub-offices at tribal headquarters, tribal agriculture USDA liaisons,

third-party regional employees, and others.

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Indian Land Tenure Foundation

Website: https://iltf.org

The Indian Land Tenure Foundation is a community-based nonprofit organization 

focused on the recovery, management, and control of American Indian lands by Indian 

people. They work with Indian people, Indian organizations, tribal communities, tribal 

governments, and others connected to Indian land issues.

Indian Land Working Group

Website: http://www.indianlandworkinggroup.org

The Indian Land Working Group is dedicated to the restoration and recovery of the native 

land base, and the control, use, and management of this land base by tribal communities.

Note: The information describing these organizations was obtained primarily from their 

websites.

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Appendix B: 

Definition of Terms

Accrued interest: Interest that has been charged to a loan account but has not been 

paid.

After-acquired clause: A provision in security agreements which specifies that if you

acquire additional property such as crops, livestock, machinery, or equipment after the 

agreement is signed, it is covered by the agreement and treated as collateral for the loan(s) 

even though that property is not listed on the agreement.

Amortize: To schedule regular payments to reduce a debt over time.

Assumption: An agreement to be responsible for someone else’s loan. The original 

borrower remains responsible unless he or she is released by the lender.

Beginning farmer/rancher: Someone who has not operated a farm or ranch before or has 

not operated a farm or ranch for more than 10 years.

Capitalize: To convert unpaid interest to loan principal when a loan is restructured.

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Collateral: Specific property pledged to FSA to ensure repayment of a loan. The items 

used as loan security provide a second source of repayment in case payments are not 

made on the loan. For example: land and buildings, fixtures, growing or stored crops, 

livestock, machinery, equipment, trucks, trailers, and in unusual cases, even cars and 

boats. A lender has a legal right to take possession of the property or goods pledged as 

security if the loan is not repaid. Collateral may also be referred to as security.

Continuation statement: An amendment that is attached to a borrower’s financing 

statement which extends the lender’s lien on the borrower’s collateral past the original 

expiration date. The actual continuation statement itself must be filed with the State’s 

Secretary of State or other appropriate authority before it can be attached to the financing 

statement.

Deed of Trust: A document that gives a lender or other creditor a lien on real estate. A 

deed of trust usually includes requirements in addition to making loan payments as agreed, 

such as paying property taxes, keeping insurance on the property, and keeping other 

agreements with the lender. In some States, this document is called a mortgage.

Default: Failure to keep a promise agreed to in loan documents. There are two kinds of 

default. Not making payments by the due date is monetary default, but usually simply 

called default and is the most frequent type of default. Monetary default can be resolved 

by paying the past-due payment, or often, through the primary loan servicing process. 

The second form of default is nonmonetary default, which refers to the situation when a 

borrower breaks a loan agreement or does not meet a loan requirement other than 

repayment. See the definition of nonmonetary default for more information on that 

situation

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Deferral: An approved delay in the repayment of a loan.

Delinquent: When a loan payment is not made on or before the date when due.

Easement: The legal right to access or use another person or entity’s land for a specific 

purpose.

Financing Statement: Also known as a UCC-1 Form, this is a standardized form that 

a lender files with the State to secure its interest in collateral from a borrower. Should 

the borrower default, or fail to pay back the loan, the lender is then entitled to take the 

collateral in place of the loan repayment. This legal form gives the public notice of a 

lender’s claim to the collateral. 

Note: UCC is the Uniform Commercial Code.

Fixture: An item of personal property attached to real estate in such a way that it cannot 

be removed without defacing or dismantling the structure, or damaging the item itself.

Foreclosure: Occurs when a lender uses his or her legal right to sell loan collateral 

because the borrower is in default. The legal process a lender must follow.

Graduation: Getting a loan from a commercial lender and paying off FSA loans. This 

is required by law when a borrower has made financial progress and is able to get 

commercial credit.

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Lien: A lien is a legal claim on property to secure a debt owed to someone other than 

the property owner. A lien given to a lender grants the lender a legal right to take 

possession of and sell the property covered by the lien to repay the loan, if the loan is not 

repaid as agreed, or if other agreements are not kept. A mortgage, deed of trust, and 

financing statement are examples of legal documents that result in a lien.

Loan Agreement: A contract between the borrower and the lender that contains certain 

lender and borrower agreements, conditions, limitations, and responsibilities for credit 

extension and acceptance.

Market Value: The price an item would be expected to sell for on the open market given a 

willing, not forced, buyer and seller and a reasonable time for an agreement to be reached.

Mineral Rights: The right of ownership to naturally occurring substances or resources 

that might exist on or in the ground. Examples of items covered by mineral rights include 

coal, gravel, and stone. Oil and gas may also be covered under mineral rights but often 

are considered separately under oil and gas rights. Dealings with any of these rights can 

be legally and financially complex. It may be best to get expert advice when considering 

offers for lease or sale of mineral, oil, and gas rights.

Mortgage: A document that gives a lender or other creditor a lien on real estate. A 

mortgage usually includes requirements in addition to making loan payments as agreed, 

such as paying property taxes, keeping insurance on the property, and keeping other 

agreements with the lender. In some States, this document is called a Deed of Trust.

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Nonmonetary Default: Failure to meet or follow a requirement in a loan agreement, a 

promissory note, or real estate mortgage/deed of trust. Examples of actions FSA considers 

nonmonetary default include disposing of loan collateral or using the proceeds from the 

disposition without FSA prior approval, leasing the farm or ranch without FSA’s consent, 

failing to pay real estate taxes, and not keeping other agreements made with FSA.

Offset: A deduction or withholding of all or part of a benefit or payment due to a borrower 

from another Government source. If the offset is the result of a delinquent FSA loan, the 

money withheld is applied as a regular payment on the delinquent loan.

Primary Loan Servicing: The process of considering loans for primary loan servicing 

programs including restructuring or other modification of payments and/or reduction of loan 

amounts through a conservation contract or write down.

Promissory Note (or “note”): A legal contract, an agreement in which a borrowerpromises 

in writing in return for a loan, to repay the lender a specific sum of money on specific 

terms. A note usually includes requirements in addition to repayment, such as providing 

information, meeting specific conditions, cooperating with the lender, and so forth.

Reamortize: To revise the payment schedule on a real estate loan. Except in unusual 

cases, the repayment term is not extended and the reamortized payments are based on the 

remaining term of the loan. The interest rate may be changed.

Reschedule: The process of revising the payment schedule, including extending the term 

of an operating type loan. Operating loans may be rescheduled for up to a 15-year term to 

improve repayment ability. The interest rate may be changed.

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Your FSA Farm Loan Compass
Restructure: A general term for changing the payment schedule and other terms on 

one or more loans. Restructuring may include any or all primary loan servicing actions, 

depending on the individual situation.

Security Agreement: A document that gives a lender or other creditor a lien on crops, 

livestock, machinery, or equipment much like a mortgage or deed of trust.

Security Instrument: Any legal document giving a lender a legal interest or claim to 

goods or property pledged to secure a loan. Examples include a mortgage or deed of 

trust, security agreement and financing statement.

Subordination: A written agreement giving another lender priority over FSA’s current 

lien or interest in loan collateral. When FSA subordinates its lien to another lender, that 

lender gets claim to the value of the collateral before FSA. Subordinations are often used 

to allow a lender to make a loan instead of FSA making a loan.

Term Limit: The end of a person’s eligibility for a certain type of FSA loans. Term limits

are determined differently for each kind of loan (operating and ownership).

Uniform Commercial Code (UCC): A set of laws with similar requirements in each State 

that govern commercial dealings, including loans. The UCC provides a process for a lender 

to obtain a lien on personal property such as crops, livestock, machinery, or equipment. 

These lien documents are commonly referred to as UCC filings.

Your FSA Farm Loan Compass Page 67
Appendix C: 

Example Scenarios

Making Payments

Example 1: Monique’s FSA loan payments are due on January 1. The payments are to be 

made from the sale of feeder calves. The calves grew better than expected and the market 

price was high, so Monique sold the calves in late October, rather than mid-December, as 

planned. She made her FSA payment on October 29, when she received the money for 

the calves. She did not wait until January 1. This was required, since she and FSA agreed 

that she would use the calf sales to make the payment. As a bonus, she saved 2 months of

interest by paying early!

Example 2: Sam is a little nervous about the payment on his farm ownership loan. His 

installment of $12,535 is due on January 1, and it’s been challenging making it the first 

couple years. He just paid off the loan on his pickup and decides to put that money

towards the farm ownership loan payment. He sends $425 per month to the FSA office, 

beginning in January. On January 1 of the next year, he only needs to pay the remaining

$7,435 as he made payments throughout the year.

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Term Limits

Example 1: Susan began with FSA as a beginning farmer and received operating loans in 

each of 9 years. She has now farmed for more than 10 years and is no longer considered 

a beginning farmer under FSA regulations. She has reached the Operating Loan (OL) term 

limit. Susan has an OL loan she used to buy equipment that still has several thousand 

dollars to be repaid. Susan cannot borrow additional money through the operating loan 

program.

Changes in Financial or Operating Status

Example 1: Juan got a loan from FSA to grow cotton, but after he planted and got a good 

stand, his crop was destroyed by hail. He immediately goes to see his FSA Farm Loan Officer 

thinking that this year will be a total loss. Juan’s Farm Loan Officer puts Juan in contact with 

the County Extension Agent and between them it is determined that Juan can switch to grain 

sorghum, cut his operating expenses for the less expensive crop, and successfully meet all his 

debt payments for the year.

Example 2: Terri’s cattle operation had a very difficult year with a severe drought resulting 

in the price of feed being much higher than what had been planned and a lower-thanexpected calving rate. It became obvious that she was not going to be able to make all her 

payments to FSA. While she was aware that she needed to go see her Farm Loan Manager 

when she saw that she could not make her payment, she got busy and no contact was 

made. She received a certified letter from FSA several months after she was supposed to 

make her payment. The letter offered her several options to restructure the loan. After 

reviewing the letter, she determined another application would be required and she thought 

she might be able to operate on her own and make the FSA payment later. Later, her tax

Your FSA Farm Loan Compass Page 69
refund was offset (collected) by the U.S. Department of the Treasury and she received 

another certified letter from FSA but did not read it. A few months later, she received a 

notice that all her FSA loans were due, and FSA was going to have to liquidate her cattle and 

other loan collateral to pay on the FSA debt. Had Terri contacted the office when she realized 

she could not make her payment and applied for Primary Loan Servicing when she received

her certified letter, FSA may have been able to assist her by restructuring her outstanding 

loans. Unfortunately, because Terri missed the application deadlines established by law, FSA 

is now unable to assist her with loan restructuring.

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Appendix D: Quick 

Reference Index

This section is designed to help you quickly find the section of this guide that addresses 

the issue or situation you are dealing with or have questions about.

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In accordance with Federal civil rights law and U.S. Department of Agriculture (USDA) civil rights regulations and 

policies, the USDA, its Agencies, offices, and employees, and institutions participating in or administering USDA 

programs are prohibited from discriminating based on race, color, national origin, religion, sex, gender identity 

(including gender expression), sexual orientation, disability, age, marital status, family/parental status, income 

derived from a public assistance program, political beliefs, or reprisal or retaliation for prior civil rights activity,

in any program or activity conducted or funded by USDA (not all bases apply to all programs). Remedies and 

complaint filing deadlines vary by program or incident.

Persons with disabilities who require alternative means of communication for program information (e.g., Braille, 

large print, audiotape, American Sign Language, etc.) should contact the responsible Agency or USDA’s TARGET 

Center at (202) 720-2600 (voice and TTY) or contact USDA through the Federal Relay Service at (800) 877- 8339. 

Additionally, program information may be made available in languages other than English.

To file a program discrimination complaint, complete the USDA Program Discrimination Complaint Form, AD-3027,

found online at https://www.ascr.usda.gov/filing-program-discrimination-complaint-usda-customer and at any USDA 

office or write a letter addressed to USDA and provide in the letter all of the information requested in the form. To 

request a copy of the complaint form, call (866) 632-9992. Submit your completed form or letter to USDA by:

(1) mail: U.S. Department of Agriculture, Office of the Assistant Secretary for Civil Rights, 1400 Independence Avenue,

SW, Washington, D.C. 20250-9410; (2) fax: (202) 690-7442; or (3) email: program.intake@usda.gov.

USDA is an equal opportunity provider, employer, and lender.
FSA-BK-02, Revised March 2021