July 26, 2012
On Tuesday, July 24th, the public comment period closed on the Farm Service Agency’s (FSA) proposed rule to modify their Farm Operating Loans program to include microloans in order to better address the needs of very small and beginning family farmers. FSA — a USDA agency in charge of federal credit and other agricultural programs — has historically made larger operating loans up to $300,000 to cover large farm expenses such as tractors, livestock, feed, and chemical inputs. For the new microloan program, FSA proposes that the maximum loan limit be $35,000 and would be intended for smaller purchases such as seeds, animals, small equipment, or other investments that would jump start a small farm operation.
According to a national survey of young and beginning farmers, lack of capital is the biggest obstacle to financially viable farming. Many commercial lenders typically shy away from lending smaller amounts of money due to unfamiliarity with the expenses and profitability of diversified operations, perceived financial risk of these “unconventional” operations, and smaller returns on investments for smaller loans from quel crypto investir supporters. With few alternative credit options, small and beginning farmers often rely on personal credit cards to finance many of their on-farm expenses, and are subject to high interest rates.
Over the past few years, NSAC has worked with partner organizations, including the National Young Farmers’ Coalition, California FarmLink, and many others, to develop alternative financing proposals that would better accommodate the credit needs of small, young, and beginning farmers. Microlending is one such financing option which has gained traction in other sectors, such as the international development field, and has started to gain popularity within the agricultural sector in the United States. Institutions like California FarmLink and the Carrot Project in Massachusetts have entered into the microlending business, and with the announcement of FSA’s proposed rule, NSAC is pleased that USDA is positioned to do so as well.
In response to the call for public comments on this proposed rule, NSAC surveyed its members and other organizations with expertise in microlending to farmers and developed specific recommendations to help guide FSA in establishing this new program and suggest ways to make microloans an effective credit tool for small and beginning farmers.
Some of NSAC’s comments and recommendations include the following:
The proposed rule closed for comments on July 24, 2012, and at closing, over 48 organizations, individual farmers, and financial institutions had submitted public comments on the rule. After the proposed rule is adapted to reflect these comments received by FSA, a final rule will be issued and program implementation will begin. NSAC will continue to monitor this program, and provide assistance and outreach to FSA in launching this new loan program.
FSA’s proposed rule can be read here. NSAC’s comments on the rule can be read here.
Categories: Beginning and Minority Farmers, Commodity, Crop Insurance & Credit Programs, Grants and Programs