Microloan gains footing; answers need for faster, easier credit
Throughout my tenure as State Executive Director for the Iowa Farm Service Agency, I have met several small and beginning farmers and ranchers, military veterans and disadvantaged producers interested in making a living in production agriculture. For many, the high cost of purchasing land and equipment can be prohibitive, compelling newcomers and those struggling against odds to take risks to finance their dreams by relying on credit cards and personal loans with high interest rates.
I am keenly aware, too, that the average age of our farmers and ranchers is increasing. I am concerned about where the next generation of farmers and ranchers will come from.
The U.S. Department of Agriculture understands the needs of these small, beginning and specialty crop producers. Through the FSA’s Farm Loan Programs division, the department responded to their needs by developing a new microloan program that will provide up to $35,000 to help bolster these producers during their start-up years.
Likewise, it will assist small, established producers who find themselves in extenuating financial circumstances.
Microloans are like other operating loans. They can be used to purchase livestock, equipment, feed, seed, fertilizer and related supplies. And here’s a real benefit when compared to those credit cards and personal loans; the current interest rate for a microloan is 1.125 percent.
It is imperative that we use solutions like the microloan to provide access to credit to those just starting out or those producing on a smaller scale in order to grow American agriculture. It’s important because Agriculture can provide new jobs that will build our economy and ensure a safe and affordable food supply at home and abroad. In addition, these loans keep people living in our rural communities, sending their children to our local schools and doing business in our local shops.
But here is how microloans are unlike traditional FSA loans. Applying for them is a simpler, more flexible process. By reducing the application form from 17 pages to eight and modifying requirements for experience, it‘s easy and far more convenient for both our customers and our employees.
Although some production experience is necessary, there are many producers who may not meet the managerial requirements for traditional loans but may be eligible for a microloan. FSA will consider an applicant’s small business experience, experience with a self-guided apprenticeship and specialized education to meet the prerequisite.
As the country moves toward more local food sources and joins the farm-to-table movement, there is an increasing number of people going back to the farm and selling their products through farmers markets and community supported agriculture. Microloans are perfect for those who want to grow niche crops.
Young future farmers and ranchers also will benefit. Prospects that previously used an FSA Youth Loan to finance an agricultural endeavor, successfully repaid the debt and are of the “age of majority” according to state law, are eligible for microloans. The microloan graduates producers to a new level and further prepares them for larger FSA operating loans or commercial loans through the FSA Guaranteed Loan Program.
By expanding access to credit, FSA continues to help grow the industry on which our country was built — Agriculture. Through FSA in Iowa, more than 10,250 loans totaling $1.3 billion have been issued since 2008. The number of loans to beginning farmers and ranchers has increased from 800 in 2008 to over 1,400 in 2012. More than 53 percent of USDA’s farm loans in Iowa now go to beginning farmers, including 80 percent of the loans made through FSA’s direct loan program. Lending to socially disadvantaged producers has increased by more than 200 percent since 2008.
At FSA, we aim for ways to help farmers and ranchers achieve their dreams, to be part of the American population that feeds the world whether they are large-scale or small-scale operations. By supporting America’s growers, we help all Americans. We provide a secure, low-cost food supply and make a major contribution to the U.S. economy. And we do these things while nourishing millions.