Microloans Now Available for Small Farms

The USDA launches a microloan program to aid small-scale and beginning farmers with start-up costs.

by Dani Yokhna
Family farmers and beginning farmers are among those targeted to receive loans from the USDA's newly launched microloan program. Photo courtesy Digital Vision/Thinkstock (HobbyFarms.com)

Courtesy Digital Vision/Thinkstock
Family farmers and beginning farmers are among those targeted to receive loans from the USDA’s newly launched microloan program.

A new microloan program launched by the USDA in Jan. 2013 is gaining applause from small-scale and family-farm advocates across the country. Designed to help small and family farms as well as beginning and socially disadvantaged farmers secure loans under $35,000, the microloan program aims to bolster the progress of start-up producers by providing needed resources and helping to increase equity so farmers can eventually graduate to commercial credit and expand their operations. The microloan program will also provide a less burdensome, more simplified application process in comparison to traditional farm loans.

“This new program will provide young and beginning farmers with much needed capital to jumpstart their farm operations and help grow the next generation of farmers,” says Juli Obudzinski, policy associate for the National Sustainable Agriculture Coalition. “We are also excited that these new microloans will be available to finance the initial credit needs of the new wave of young farmers selling to local and regional markets and will further expand the growth of local and regional food systems.

Administered through USDA’s Farm Service Agency Operating Loan Program, the new microloan program offers credit options and solutions to a variety of producers. In assessing its programs, FSA evaluated the needs of smaller farm operations and any unintended barriers to obtaining financing. For beginning farmers and ranchers, for instance, the new microloan program offers a simplified loan application process. In addition, for those who want to grow niche crops to sell directly to ethnic markets and farmers’ markets, the microloan program offers a path to obtain financing. For past FSA Rural Youth Loan recipients, the microloan program provides a bridge to successfully transition to larger-scale operations. The interest rate for USDA’s new microloan product changes monthly and is currently 1.25 percent.

“Beginning farmers and ranchers and veterans will greatly benefit from this program, and a streamlined application process is of great value,” says Roger Johnson, president of the National Farmers Union. “Access to credit is one of the greatest challenges that beginning farmers and ranchers face, and I commend [the USDA] for prosing a common-sense way to alleviate the problem.”

Producers can apply for a maximum of $35,000 to pay for initial start-up expenses, such as hoop houses to extend the growing season, essential tools, irrigation, delivery vehicles and annual expenses, including seed, fertilizer, utilities, land rents, marketing and distribution. As their financing needs increase, applicants can apply for an operating loan up to the maximum amount of $300,000 or obtain financing from a commercial lender under FSA’s Guaranteed Loan Program. USDA farm loans can be used to purchase land, livestock, equipment, feed, seed and supplies or to construct buildings or make farm improvements.

Since 2009, the USDA has made more than 128,000 farm loans totaling nearly $18 billion through FSA. The USDA increased the number of loans to beginning farmers and ranchers from 11,000 loans in 2008 to 15,000 loans in 2011. More than 40 percent of USDA’s farm loans now go to beginning farmers. In addition, USDA has increased its lending to socially-disadvantaged producers by nearly 50 percent since 2008.

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Farmers interested in applying for a microloan can contact their local Farm Service Agency office.


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