Agricultural Loan Programs FAQ

FSA guaranteed loans provide lenders (e.g., banks, Farm Credit System Institutions, credit unions) with a guarantee of up to 95 percent of the loss of principal and interest on a loan. Farmers and ranchers apply to Valley, which then arranges for the guarantee. The FSA guarantee permits Valley to make agricultural credit available to farmers who do not meet Conventional Landers’s normal underwriting criteria.

FSA guaranteed loans are for both Farm Ownership and Operating purposes.

Guaranteed Farm Ownership (FO) Loans may be made to purchase farmland, construct or repair buildings and other fixtures, develop farmland to perennial crops, or to refinance debt. The loans are usually amortized up to 20 years. Payments are dictated by the cash flow of the operation.

Guaranteed Operating Loans (OL) may be used to purchase livestock, farm equipment, feed, seed, fuel, farm chemicals, insurance, and other operating expenses. Operating Loans can also be used to pay for minor improvements to buildings, costs associated with land and water development, family living expenses, and to refinance debts under certain conditions. These loans normally have an annual maturity.

FSA can guarantee OL or FO loans up to $1,399,000 (amount adjusted annually based on inflation).

• 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 the obligations of the loan.
• Be unable to obtain a loan without a guarantee.
• Not have caused FSA a loss by receiving debt forgiveness on more than 3 occasions on or prior to April 4, 1996; or any occasion after April 4, 1996.
• Be the owner or tenant operator of a family farm after the loan is closed. For an OL, the producer must be the operator of a family farm after the loan is closed. For an FO loan, the producer needs to also own the farm.
• Not delinquent on any Federal debt.

For most loans, FSA charges a guarantee fee of 1.5 percent of the guaranteed portion of the loan. This fee is passed on to the borrower. The guarantee fee is waived for:

Guaranteed loans are the property and responsibility of Valley. Valley makes the loan and services it to conclusion. If successful, the borrower is able to repay the loan and not taxpayer money will be used except for administrative expenses. If a loan fails, and Valley suffers a loss, FSA will reimburse the lender with Federal funds according to the terms and conditions specified in the guarantee.

Valley must notify FSA when a borrower is 30 days overdue on a payment and is unlikely to bring the account current within 60 days, or if a loan is otherwise a problem. Lenders are encouraged to work with the borrower to resolve any problems.

Once the Borrower has provided a complete Loan application, it takes one to two weeks to review the loan application and obtain Loan Committee and Board approval. At that point:

• The Borrower and Valley will complete the guaranteed application and submit it to FSA.
• FSA reviews the application for eligibility, repayment ability, security, and compliance with other regulations.
• FSA approves and obligates the loan.
• Valley receives a conditional commitment indicating funds have been set aside, and the loan may be closed.
• The lender closes the loan and advances funds to the producer.
• FSA issues the guarantee.

The Borrower works with Valley; Valley works directly with FSA.

Since Valley is a Preferred Lender with FSA, this process takes 20 days or less, subject to any real estate appraisals that might be required.

A beginning farmer is defined as one who:

• Has not operated a farm or ranch for than 10 years
• Does not own a farm or ranch greater than 30 percent of the median size farm in the county as determined by the most current Census for Agriculture
• Meets the loan eligibility requirements of the program to which he/she is applying
• Substantially participates in the operation

Valley participates in the Beginning Farmer Program with FSA to help farmers purchase their first property. This program is attractive since it only requires that the Borrower contributes 10% of the project cost. Valley will provide 50% of the purchase with an FSA loan guarantee subject of conventional rates and farms. FSA will provide the 40% portion secured by a 2nd Trust Deed up to $300,000. This loan can be amortized for 20-40 years at a fixed interest rate of 3.125%.

Purchase Price	$700,000
10% – Down Payment from Borrower	$70,000
50% – Valley	350,000
40% – FSA	280,000
Total Project Cost	$700,000