Recently, the USDA just passed new rules for loan-making processes through the Farm Services Agency. Friends of Family Farmers knows that accessing USDA loans for any farm operations can be a scary and daunting process, especially for beginning and historically underserved farmers. That is why we are committed to understanding the resources available to help farmers access capital that should be available to them.
Historically, the USDA has had high barriers for accessing loans as well as rigorous loan repayment processes that have been arduous for farmers. We know that a lot of beginning and historically underserved farmers struggle with the USDA’s loan processes and struggle to even pay them off. Which is why we are excited to talk more about how the USDA is starting to accept this feedback and make some changes to make their loans through the FSA more accessible.
One of the rules that have changed is for financially distressed borrowers. We know that even after taking a loan, getting your farm to viability takes a lot of external factors so farmers can struggle with finances even after taking on loans. Farmers can defer a loan payment one time with a lower interest rate when they’re feeling financially distressed to not add on additional financial burdens if a season has been exceptionally tough. This is a rule that impacts farmers that are already in the USDA network and not new farmers necessarily. We think that this is still something that goes towards the positive direction since it helps already existing farmers gain financial ease to keep farming.
Another section of rules that have changed are for all applicants so they can build in more capital reserves into their farm through the loan application process. One of the changes makes it so farmers don’t have to put up as much collateral as they used to. Farmers would have to list personal assets like their home or personal property as financial security in order to get a direct farm operating loan. When the amount of financial security is lowered, farmers don’t have a higher financial burden in order to take on a farm operating loan. This makes loans a little bit more accessible to historically underserved farmers, especially young farmers who may not have homes to use as collateral.
There are multiple other changes but a couple of others we wanted to highlight include more paperless applications and shorter application processes. The FSA has cut their application from 29 pages to 13 pages. Friends of Family Farmers has specifically heard from farmers that they don’t have time to fill out long application forms and we appreciate the USDA’s efforts to take out parts of the application that didn’t need to be there. We also appreciate more paperless and electronic options to fill out application forms. This makes it easier for farmers to fill out forms on their own time without having to make consistent visits to FSA offices in their area, which may be far and inaccessible.
We encourage anyone who’s interested in accessing USDA loans for their farm operations to check out these new rule changes. While these rule changes are not revolutionary in overhauling the system, we appreciate how the USDA is taking in farmer’s feedback and experiences to make it possible for them to continue farming.
Check out more information about these rule changes here: https://www.fsa.usda.gov/Assets/USDA-FSA-Public/usdafiles/Farm-Loan-Programs/pdfs/enhancing-program-access/fact_sheet-farm_loan_rule.pdf