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Farm Service Agency

U.S. DEPARTMENT OF AGRICULTURE

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# Guaranteed Farm Loans

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- Beginning Farmers and Ranchers Loans
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- Guaranteed Farm Loans    - Guaranteed Loans Lender Toolkit
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FSA’s Guaranteed Farm Loan Programs help family farmers and ranchers to obtain loans from USDA-approved commercial lenders at reasonable terms to buy farmland or finance agricultural production. FSA will guarantee farm loans through a commercial lender up to $2,236,000. Financial institutions receive additional loan business as well as benefit from the safety net the FSA provides by guaranteeing farm loans up to 95 percent against possible financial loss of principal and interest.

## Resources

                              - National Agricultural Library Farm Business Overview
                              - U.S. Small Business Administration Starting and Managing Your Business

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## Guaranteed Farm Loan Frequently Asked Questions

**Guaranteed versus Direct Farm Loans**

With a guaranteed farm loan, the lender is FSA's customer, not the loan applicant. Guaranteed loans are the property and responsibility of the lender. The lender and loan applicant complete the Application for Guarantee and submit it to the FSA Service Center in their lending area. The Service Center works with the commercial lender to process the guarantee. The Farm Loan Officer reviews the application for applicant eligibility, repayment ability, adequacy of collateral, and compliance with other regulations, and if the applicant meets those requirements, the request is approved. The Service Center issues the lender a conditional commitment outlining the terms of the loan guarantee and indicating that the loan may be closed. The lender closes the loan and advances funds to the applicant, after which the Service Center staff issues the guarantee. The lender makes the loan and services it to conclusion. In the event the lender suffers a loss, FSA will reimburse the lender according to the terms and conditions specified in the guarantee.

A direct loan is funded directly by the Agency. The money used for direct loans comes from annual Congressional appropriations received as part of the USDA budget. The Agency is responsible for making and servicing the loan.

**Types of Guaranteed Farm Loans**

**FARM OWNERSHIP** loans may be used to purchase farmland, construct or repair buildings and other fixtures, develop farmland to promote soil and water conservation, or to refinance debt.

**FARM OPERATING** loans may be used to purchase livestock, farm equipment, feed, seed, fuel, farm chemicals, insurance, and other operating expenses. Operating loans also may be used to pay for minor improvements to buildings, costs associated with land and water development, family living expenses, and to refinance debt under certain conditions. These loans may be structured as term loans or lines of credit depending upon the purpose and intended term of the loan.

The ***EZ GUARANTEE*** Program is available for smaller loans. This program provides a simplified Guaranteed Loan application process to help small, new or underserved family farmers with early financial assistance. The EZ Guarantee is available for loan applications up to $100,000 for farm operating or farm ownership purposes. Streamlined financial underwriting is available for these loans, allowing all approved lenders to analyze the request in the same manner in which they would analyze a nonguaranteed loan request of the same size and type. All existing eligibility, loan purpose, security, and other requirements remain the same.

In addition to the most common types of loans outlined above, FSA also offers guaranteed Conservation Loans and Land Contract Guarantees.

**Qualifications**

To qualify for an FSA Guarantee, a loan applicant must:
                            - be a citizen of the United States (or legal resident alien), which includes Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, and certain former Pacific Trust Territories
                            - have an acceptable credit history as determined by the lender
                            - have the legal capacity to incur responsibility for the loan obligation
                            - be unable to obtain a loan without an FSA guarantee
                            - not have caused FSA a financial loss by receiving debt forgiveness on more than 3 occasions on or prior to April 4, 1996, or any occasion after April 4, 1996, on either an FSA direct or guarantee loan
                            - be the owner-operator or tenant-operator of a family farm after the loan is closed. For an Operating loan, the producer must be the operator of a family farm after the loan is closed. For a Farm Ownership loan, the producer also needs to own the farm
                            - not be delinquent on any Federal debt.

Conservation Loan applicants do not have to meet the "family farm" definition nor do they have to be unable to obtain a loan without an FSA guarantee. All other eligibility requirements must be met.

**Family Farmer Definition**

Every farm operation is reviewed on a case-by-case basis. There are 3 primary questions you can ask yourself in determining whether your farm enterprise is a family farm:
                            - Is your operation considered a family farm by community standards? In most areas of the country and in most farming operations, the family provides most of the day to day labor, with some exceptions.
                            - Are all the day to day management and operational decisions made by members of the family? The use of consultants, advisors, and other experts is certainly allowed; however, a family member must be the decision maker.
                            - What does your labor force look like? One distinct characteristic of a family farm is that family members provide both physical labor and management for the farm. Loan recipients may not necessarily perform the majority of farm labor but it should be significant. The use of seasonal labor is permitted, including labor required for specific high-value, labor-intensive crops.

**Maximum Loan Limits**

FSA can guarantee standard Operating loans, Farm Ownership loans, and Conservation loans up to $2,236,000; this amount is adjusted annually each Fiscal Year based on inflation.

The maximum loan limit for Land Contract Guarantees is $500,000.

**Interest Rates**

The Guaranteed loan interest rate and payment terms are negotiated between the lender and the applicant and may not exceed the maximum rates established by FSA.

**Repayment Terms**

Repayment terms vary according to the type of loan made, the collateral securing the loan, and the producer's ability to repay. Operating Loans are normally repaid within 7 years and Farm Ownership loans cannot exceed 40 years. Operating Lines of Credit may be advanced for up to five years and all advances must be repaid within 7 years of the date of the loan guarantee.

**Locating a Lender**

You may click on one of the link below and select the desired state for a list of current FSA guaranteed lenders.
                            - Guaranteed Lender List By State , Effective December 2022 (XLS, 275 KB)

Please note that this list is intended to get you started by providing very basic lender contact information. It may not contain all agricultural lenders in your area, and some lenders have multiple branches which are not specifically listed. Your local FSA Farm Loan Team can help you connect with a local lender, too, or provide you with a list of lenders known to make agricultural loans in your geographic location.

**After the Loan Application is Submitted**

FSA reviews the loan application to determine if the loan applicant is eligible for the requested loan. The applicant's lender will receive written notification of each step in the process, such as when the application is received, when more information is needed, when an eligibility determination is made, and when a final decision is made. If the application is approved, FSA notifies the lender, the lender closes the loan, and loan funds are distributed as needed. If the application is not approved, both the lender and the loan applicant are notified in writing of the specific reasons for not approving the loan, and loan applicants are provided reconsideration and appeal rights.

**Additional Assistance**

More information on FSA Guaranteed Farm Loans is available at the Agency's local county offices or USDA Service Centers. These offices are usually listed in telephone directories in the section set aside for governmental/public organizations under the U.S. Department of Agriculture, Farm Service Agency. Our staff is happy to help.

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Farm Service Agency

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