Farm Service Agency Introduction to Guaranteed Farm Loan

Farm Service Agency Introduction to Guaranteed Farm Loan Programs USDA is an equal opportunity provider, employer, and lender.

Farm Service Agency • Farm Loan Programs provide loans, loan guarantees, and technical assistance to eligible farmers and ranchers to build and sustain family farms in support of a thriving agricultural economy FSA is the Farm Lender of First Opportunity USDA is an equal opportunity provider, employer, and lender.

Farm Service Agency Structure FSA National Office-Develops policy and provides policy guidance to FSA staff and lenders FSA State Offices-In charge of implementing FSA programs in their respective states and providing guidance to county office staff FSA County Offices-Process loan applications and deliver the programs to the customer (producers and lenders) USDA is an equal opportunity provider, employer, and lender.

Farm Loan Program Overview Quick primer on Farm Loan Programs Direct Loans- FSA is the lender ▫ ▫ Applicant cannot qualify for commercial credit Large portion targeted to Beginning and Socially Disadvantaged Include technical assistance Intended to be temporary Guaranteed Loans- FSA guarantees a loan made by a commercial lender in the event of loss ▫ FSA is not the lender ▫ Lender will not make loan without a guarantee ▫ Loans often sold on the secondary market USDA is an equal opportunity provider, employer, and lender.

Farm Loan Program Overview Quick primer on Farm Loan Programs Operating ▫ Direct- includes microloans and youth loans ▫ Guaranteed Operating Line of Credit Farm Ownership ▫ Direct- includes downpayment, participation, and microloans ▫ Guaranteed Emergency ▫ Direct Conservation ▫ Guaranteed USDA is an equal opportunity provider, employer, and lender.

Guaranteed Loan Program Benefits • Manage credit risk. Transfer a portion of the credit risk to FSA and reduce the risk of loss. • Increase Customers. By reducing credit risk, the lender can provide credit to customers they would otherwise have to turn away. • Improve liquidity. By selling loans in secondary market, the lender can free up additional funds to lend to other customers. • Manage interest rate risk. By selling loans in the secondary market, the lender can offer fixed rates over a longer term. USDA is an equal opportunity provider, employer, and lender.

Guaranteed Loan Applicant Eligibility • In addition to other eligibility requirements, the loan applicant must be the operator or owner-operator of a family size farm. ü Operator (not investor). Must provide labor and management ü Operation must be a family size farm business. ü Operation must be a farm. Must produce an agricultural commodity for sale. Other eligibility requirements include citizenship, no false statements in past dealings with agency, acceptable credit history, unable to receive credit without guarantee, legal capacity, no agency loss, not delinquent on federal debt, no outstanding judgments, no controlled substances convictions. USDA is an equal opportunity provider, employer, and lender.

Guaranteed Loan Purposes Real Estate (FO) Chattel-Term (OL) • Purchase farmland • Machinery • Capital Improvements • Breeding Livestock • Refinance Debt (OL purpose) • Farm debt payments USDA is an equal opportunity provider, employer, and lender. Line of Credit (OL/LOC) • Operating Expenses • Living Expenses • Feeder livestock • Farm debt payments

Guaranteed Loan Rates, Terms, and Other Things Farm Ownership (FO) Operating (OL) Rate Determined by lender Term Up to 40 years • Term loans up to 7 years • Lines of Credit 5 years of advances; 7 year maximum maturity Guarantee Percent Up to 90% (95% in some situations) Funds Targeted A portion of funds are set aside for: • Beginning Farmers • Underserved Producers USDA is an equal opportunity provider, employer, and lender.

Guaranteed Loan Fee Typically a fee of 1. 5% is charged for the Guarantee • Guarantee Fee Waived for: • Loans to refinance FSA Direct Loans • Beginning or Underserved Farmers Participating in Direct FO Down Payment Program • Beginning or Underserved Farmers participating in a qualified State Beginning Farmer program USDA is an equal opportunity provider, employer, and lender.

Loan Limits • $1, 750, 000 total outstanding FSA guaranteed debt ▫ Includes any outstanding balances on FSA guaranteed debt plus the new amount being proposed USDA is an equal opportunity provider, employer, and lender.

Lender Status • Standard Eligible Lender (SEL) • Certified Lender Program (CLP) • Preferred Lender Program (PLP) USDA is an equal opportunity provider, employer, and lender.

Standard Eligible Lender (SEL) • Most basic lender status for lenders with the least FSA experience ▫ ▫ Must have experience making sound agricultural loans Must have capability to make/service the requested guaranteed loan Must be subject to credit examination/supervision and not be debarred Must be a local lender • Required to submit significant supporting documentation • Required to follow FSA’s underwriting criteria USDA is an equal opportunity provider, employer, and lender.

Certified Lender Program (CLP) • Designed with lender’s with moderate FSA experience ▫ Must meet all SEL eligibility criteria ▫ Must meet certain loan volume and loss rate criteria ▫ Must designate qualified persons who will process and service FSA guaranteed loans ▫ CLP status granted by the FSA State Office • Less supporting documentation required to be submitted with loan applications • Typically quicker turnaround time for applications USDA is an equal opportunity provider, employer, and lender.

Preferred Lender Program (PLP) • Designed for lender’s with extensive FSA experience ▫ ▫ Must meet all CLP criteria Must meet more stringent loan volume and loss rate requirements Must have a Credit Management System (CMS) acceptable to FSA PLP status granted by the FSA National Office • Generally only an application form and loan narrative are submitted with an application • Results in faster turnaround times for guaranteed loan applications USDA is an equal opportunity provider, employer, and lender.

FSA Guaranteed Financing Activity, FY 18 • Top 5 types of agriculture for FY 18 Guaranteed Loans ▫ ▫ ▫ Cash Grain Beef/Cattle Dairy Poultry Hogs USDA is an equal opportunity provider, employer, and lender.

FSA Loan Portfolio Growth 30 Billions of $ 25 20 14, 9 15 8, 9 10 8, 9 9, 3 5 6, 8 7, 2 7, 9 0 2008 2009 2010 12, 5 13, 3 10, 3 11, 1 11, 4 11, 5 8, 2 8, 3 8, 1 8, 6 9, 1 9, 2 2011 2012 2013 2014 2015 2016 Direct Loans USDA is an equal opportunity provider, employer, and lender. Guaranteed loans 15, 7 10, 7 11, 1 2017 2018

Funding Outlook for FY 2019 • FY 2019 funding allocations based on appropriations bill signed in February 2019: ▫ Guaranteed Farm Ownership- $2, 750, 000 ▫ Guaranteed Farm Operating- $1, 960, 000 ▫ Direct Farm Ownership- $1, 500, 000 ▫ Direct Farm Operating- $1, 530, 000 USDA is an equal opportunity provider, employer, and lender.

Resources • Web Site: ▫ https: //www. fsa. usda. gov/programs-and-services/farm-loanprograms/index USDA is an equal opportunity provider, employer, and lender.

Questions? USDA is an equal opportunity provider, employer, and lender.