The USDA’s Microloans Program is a loan opportunity that specifically targets small farms of all types, especially those run by young and beginning farmers growing for local and regional food markets. Itâ€™s administered through the Farm Service Agency, the USDAâ€™s credit and lending division. The microloans program illustrates a small but significant positive shift in funding opportunities within the FSA as the agency embraces and supports the growth of small-scale farm operations that often have smaller credit needs.
Specifically, these microloans are offered up to $35,000, which is much lower than the $300,000 maximum for the regular FSA farm-operating loans. Small loans mean less paperwork and a simpler, streamlined application process. Intended for smaller purchases that invest in and grow your farm business, these funds can be used for things like seed, livestock, equipment, marketing and distribution. Youâ€™ll still need collateral in the form of farm property worth a minimum of the loan amount. If you donâ€™t have that, you can have a third party with collateral co-sign.
Additionally, you must show sufficient prior-farming experience to prove this loan is a solid investment in your business. However, on a good note, the FSA has flexibility in determining what this experience is. For example, you donâ€™t need an agriculture degreeâ€”your experience could consist of internships, classes and on-farm employment. Interest rates are based on the regular FSA rates at the time of your closing, which are much lower than a regular bank loanâ€”as low as 1 to 2 percent.
Matt and Peg Sheaffer, of Sandhill Family Farms in Brodhead, Wis., tapped into the FSA microloans program to purchase a refrigerated box-delivery truck to help support their growing community-supported-agriculture business.
â€śThis new truck now helps us improve the quality and freshness of our farm produce when we deliver into the Chicago market,â€ť explains Peg Sheaffer. â€śWe also diversified to add cheese, meat and fruit shares, and this truck supports us in these added deliveries, as well.â€ť
Sheaffer found the process for their $25,000 loan straightforward:
â€śOur local FSA representative talked us through the process, and it wasnâ€™t that daunting,â€ť she says. â€śWe needed this truck and would have figured out a way to purchase it eventually, but thanks to this new microloans program, we were able to do it quicker and take advantage of terrific terms and interest rates.â€ť
For more information, contact your local FSA office. The Farmersâ€™ Legal Action Group also offers a free Farmersâ€™ Guide to the Farm Service Agency Microloan Program, written by farmers to help navigate the microloan process.