Lending to SDA borrowers is also on the rise, with about 7 percent of the funding going to these borrowers during fiscal 1999. Background FSA programs are meant to serve family farms unable to obtain credit from conventional sources at reasonable rates and terms. FSA makes direct loans through its county offices and guarantees loans made by private sector lenders. This is consistent with the mission of the FSA programs, which is to serve farm operations large enough to support the financial needs of a family. Those pursuing farming as a hobby or as a lifestyle are not targeted for service by the programs.
Smaller farms are more reliant on direct rather than guaranteed loans.
Limiting program indebtedness is one way FSA ensures loan programs serve family-sized farms. Because of lower limits on program indebtedness, direct loans are more likely to go to smaller farms than are guaranteed loans. While guaranteed loans are larger on average, their amounts are still modest enough to suggest that small family farmers are frequent recipients. Direct loans also are more often made in small amounts. USDA has entered into memoranda of understanding with 16 States to provide joint financing to beginning farmers and ranchers under a Federal-State partnership, as directed by the 1992 Act.