The Agriculture Department will amend its farm loan rules, effective Sept. 25, to allow more flexibility in repayment terms for producers and to reduce the collateral required when they borrow money. “Implementing these improvements to our farm loan programs is the next step in our ongoing commitment to removing lending barriers that may prevent access to credit for borrowers, especially those who need it most,” said Zach Ducheneaux, administrator of the Farm Service Agency, on Wednesday.
By law, the USDA is the lender of last resort for creditworthy producers who cannot get financing from other sources. It offers direct and guaranteed loans for operating costs and for the purchase of farmland.
As part of the revisions, the USDA will create the Distressed Borrower Set-Aside program, available to distressed or delinquent borrowers who were loaned money directly by the USDA. Borrowers will be allowed to defer one annual loan installment at a reduced interest rate.
The USDA said flexible repayment plans would be available to eligible loan applicants as a way to improve their profitability and build cash reserves. “By creating upfront positive cash flow, borrowers can find opportunities in their farm operating plan budgets to include a reasonable margin for increased working capital reserves and savings, including for retirement and education,” said the USDA.
In addition, loan security requirements will be relaxed for direct farm loans, said the USDA.
“This will really be a game changer for a lot of our producers who really may want to have FSA as a lender but also want to explore other options,” Ducheneaux told DTN/Progressive Farmer. At present, the agency typically requires 150 percent security on a loan.