Agriculture Secretary Tom Vilsack talked with veterans, young, beginning and socially-disadvantaged producers today at a community center in San Antonio, Texas, about USDA's work to expand credit for their farming operations. USDA is hearing from excited producers all across the country about USDA's new microloan program, designed to help small and family operations secure loans under $35,000. Since 2009, said Vilsack, USDA has continued to expand the overall number of loans to beginning farmers and ranchers as well as its lending to socially-disadvantaged producers by significant margins.
"In his recent State of the Union Address, President Obama laid out a vision for reigniting America's engine of growth and good-paying jobs -- the American middle class," said Vilsack. "As a bright spot in our nation's economy, agriculture must continue to attract the smartest, hardest-working people in the nation so we can continue to feed our nation and the world. By further expanding access to credit to those just starting to put down roots in farming, USDA continues to help grow a new generation of farmers, while ensuring the strength of an American agriculture sector that drives our economy, creates jobs, and provides the most secure and affordable food supply in the world.”
The USDA announced the new microloan program in January to help small and family operations, beginning and socially disadvantaged farmers secure loans under $35,000. The new microloan program is aimed at bolstering the progress of producers through their start-up years by providing needed resources and helping to increase equity so that farmers may 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. The interest rate for microloans changes monthly and is currently 1.25 percent.
While USDA continues to introduce new products that are more responsive to the credit needs of its diverse customer base, the department continues to expand its traditional farms loans. In fact, since 2009USDA has made a record amount of farm loans -- more than 134,000 loans totaling nearly $18 billion. USDA has 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.
Through USDA's Strike Force Initiative, the department is also helping to relieve persistent poverty in high poverty counties by improving access to programs and services. Since Strike Force began, farm loans have helped hundreds of minority producers in high-poverty counties in states with large populations of minority farmers and ranchers, including Arkansas, Colorado, Georgia, Mississippi, Nevada, and New Mexico.
For example, in fiscal year 2011, USDA made 959 loans totaling $79 million, with 76 percent going to beginning and socially-disadvantaged producers. In fiscal year 2012, USDA made 1,144 direct farm loans totaling nearly $91 million to producers in these high-poverty counties, with 79 percent of the loans going to beginning and socially-disadvantaged producers -- a marked improvement.
These snapshots demonstrate how USDA continues to make year-over-year gains in expanding credit opportunities for minority, socially-disadvantaged and young and beginning farmers and ranchers across the United States.
Administered through USDA's Farm Service Agency (FSA) Operating Loan Program, the new microloan program offers credit options and solutions to a variety of producers. FSA has a long history of providing agricultural credit to the nation's farmers and ranchers through its Operating Loan Program. 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.
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 such as seed, fertilizer, utilities, land rents, marketing, and distribution expenses. 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 be to construct buildings or make farm improvements. Small farmers often rely on credit cards or personal loans, which carry high interest rates and have less flexible payment schedules, to finance their operations. Expanding access to credit, USDA's microloan will provide a simple and flexible loan process for small operations.
Producers interested in applying for a microloan may contact their local Farm Service Agency office.