New USDA Microloan Proposal Helps Small Farmers Avoid High-Interest Credit Card and Personal Loans
May 23, 2012 | USDA
News Release – RICHMOND, Va., May 23, 2012 – Agriculture Secretary Tom Vilsack announced today that the U.S. Department of Agriculture has made substantial, year-over-year gains in expanding credit opportunities for farmers and ranchers across the United States. The increase in farm and operating loans has helped improve farmer and rancher productivity, launched new start-up operations, and ensured opportunities in agriculture for many more Americans. With expanded access to credit, USDA is helping a new generation of farmers sustain and build upon what is now the most productive period in history for American agriculture. To that end, Vilsack announced the Department is seeking comments on a new microloan program to help small and family operations progress through their start-up years with needed resources, while building capacity, increasing equity, and eventually graduating to commercial credit.
“Over the past three years, we have expanded farm and operating loans to Americans from all backgrounds to help raise a new crop of producers across the country,” said Vilsack. “As we expand options in agriculture, we’re seeing a new vibrancy across the countryside as younger people—many of whom are now involved in local and regional production—pursue livelihoods in farming, raising food for local consumption. By leveraging USDA’s lending programs for beginning farmers and ranchers and smaller producers, we’re helping to rebuild and revitalize our rural communities.”
In the past 3 years, USDA has provided 103,000 loans to family farmers totaling $14.6 billion, and under Secretary Vilsack’s leadership, the department is expanding the availability of farm credit with a special focus on beginning farmers and ranchers, as well as socially disadvantaged producers:
- Since 2008, the number of loans to beginning farmers and ranchers has climbed from 11,000 to 15,000. More than 40 percent of USDA’s farm loans now go to beginning farmers;
- Over 50 percent of the loans went to beginning and socially disadvantaged farmers and ranchers. USDA has increased lending to socially-disadvantaged producers by nearly 50 percent since 2008.
- The total value of loans in persistent-poverty counties is 60 percent higher today than in 2010.
USDA farm loans can be used to purchase land, livestock, equipment, feed, seed, and supplies, or to construct buildings or make farm improvements. For beginning farmers and ranchers, USDA provides affordable credit, including loans under the Beginning Farmer and Rancher Program and Youth Loans. In addition, USDA provides grants under the Beginning Farmer and Rancher Development Program. The establishment of a coordinating office for USDA beginning farmer programs has supported education and training for more than 15,000 beginning farmers and ranchers.
As part of ongoing efforts to streamline and modernize its service to American agriculture, Vilsack announced today that USDA is also seeking comments on a proposal to improve its Operating Loan Program to better meet the needs of small farmers with a new microloan program. Under the microloan proposal, producers who need a loan for less than $35,000 may apply using simplified and streamlined procedures. The program will cut the required paperwork in half and simplify the process to obtain a loan. The goal of the microloan program is to better meet the credit needs of small farm operations while making more effective use of FSA resources. 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. The improvements aim to offer a more efficient processing time for smaller loans, adding flexibility to some of the eligibility requirements and reducing the application requirements.
The proposed rule may be viewed at http://www.fsa.usda.gov/FSA/federalNotices?area=home&subject=lare&topic=frd-pi or through the FSA home page at http://www.fsa.usda.gov.