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FSA has loans available to assist youth ag projects, beginning farmers

WILLMAR -- According to the 2007 Census of Agriculture, the average age of Minnesota's farmers is 55.3 years. That statistic alone highlights the urgency of encouraging young people to consider production agriculture as their occupation of choice. The very future of American agriculture will require passing onto the next generation the knowledge, experience and capability to succeed in an occupation related to production agriculture.

But for many youth, their occupational dream of succeeding in the business of production agriculture can be problematic. Profit margins are extremely tight; the cost of land, equipment and other inputs continues to increase; and obtaining the necessary capital to finance a farming operation can be a major obstacle for someone young.

In the interest of encouraging more young people into production agriculture, the Farm Service Agency has several lending programs designed specifically for youth and beginning farmers.

Youth loan program:

To provide rural youth with initial exposure to both the challenges and rewards connected with managing an agricultural enterprise, Farm Service Agency can provide loans of up to $5,000 for the purpose of establishing and operating an income-producing project of modest size.

In addition to crop and livestock production projects, FSA can assist with a variety of agricultural income-producing projects. Examples could include raising and breeding livestock; growing fruits or vegetables for resale; growing flowers or plants for resale; or producing field crops.

Eligible youth must live in a rural area or town with a population of 50,000 or less. Youth must be at least 10 years of age, but not older than 21.

Besides providing sufficient income to repay the loan, each project must be planned, managed and operated under the guidance and assistance of a project supervisor or adviser. A statement recommending loan approval from the project supervisor or adviser is required before a loan can be considered.

The adviser can be an adult connected with the youth's participation in a 4-H club, FFA or other youth organization. An agricultural lender for the youth's parents may also act as a youth project adviser.

Loan funds can be used to purchase animals, equipment and supplies; purchase, rent or repair needed tools and equipment; or pay for operating expenses related to the project.

The interest rate on youth project loans is typically less than conventional market rates and is based on the cost of funds from the government. The current interest rate is 2.875 percent.

Loan terms can range from one to seven years, with loan repayments tailored to the type of project being financed. If raising livestock or crops, the loan is usually paid when the product is sold.

Youth will be responsible for the loan amount and will need to sign a loan agreement. However, co-signers are typically not required.

Loans will be secured by a lien placed on the items being purchased with loan funds, any chattel property currently owned and any products produced for sale.

Beginning farmer loan program:

The Farm Service Agency also has several loan programs available to assist beginning farmers. Loans can be made for annual farm operating expenses, purchasing farmland, purchasing machinery, repairing older buildings or constructing new buildings.

For loan purposes, a "beginning farmer" is defined as a farmer who has 10 years or less of farming experience.

Applicants requesting a farm ownership loan can already own land. However, the applicant cannot own more than 30 percent of the median size farm for the county.

To receive a loan related to the purchase of real estate, at least three years of managerial farming experience is required. Farm experience can include participation in the operation of a farm or ranch. However, that experience does not require being the actual operator of a farming operation.

For a farm operating loan, actual farm operating experience can be substituted with farming or educational background.

Loan interest rates and loan repayment terms vary according to the type of loan and the applicant's ability to repay the loan. Farm operating loan terms are generally one to seven years in length. Farm ownership loans can be up to 40 years, with farm down payment loans having a 20-year term.

Since FSA's lending programs are not intended to compete with commercial lenders, loans will be issued only to "family-sized" farming operations unable to obtain commercial credit.

A primary purpose of these lending programs is to provide credit counseling and assist farmers in making profitable adjustments to their operations without loss to the government.

The ultimate goal of the lending programs is to help borrowers make enough financial progress that they can obtain commercial credit without the assistance of the government.

Wes Nelson is executive director of the USDA Farm Service Agency in Kandiyohi County.