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All You Need To Know About Emergency Farm Loans

Dec 26, 2007
The emergency farm loans are made available through Farm Service Agency (FSA) of USDA. These are provided to the small farmers or businesspersons to help recover from production and material losses caused by drought, flood, other natural calamities, or quarantine.

A summary of the loan fund uses:

1) To restore, repair or replace, or to acquire or increase the property permissible by the rules and regulations of this loan.

2) To pay all or a portion of the production expenses that incurred related to the year of the disaster.

3) To pay essential sustenance costs to run the family.

4) To rearrange the agricultural schedule.

5) To refinance the debts permissible by the regulations of this loan.

Eligibility conditions:
. The applicant for loan must own or operate land in the county where the disaster has taken place. The claim of being from a disaster area must meet the requirements of this loan.
. The applicant must fulfill the conditions to qualify as a farmer.
. The applicant must be a US citizen or permanent resident of USA.
. The production losses suffered and claimed must be at least 30 percent in crop yield, or physical losses in terms of damage to livestock property, livestock products, real estate, or chattel
. The applicant must have a satisfactory credit history
Applicant should be able to provide collateral for the loan
. The applicant must have the ability to repay the loan

Some additional FSA loan requirements:

The applicant must keep farm records as prescribed. The applicant may have to undergo a training program related to financial management and acquire crop insurance

Need for collateral: Collateral is needed for an emergency farm loan. The details of it may vary as per the intention, ability to repay, and individual requirement of the applicant. If the applicant is unable to provide collateral, the ability to repay can be considered as collateral. Whatever property or yield acquired, produced or refinanced with the loan is used to create a first lien.

Loan limit: Emergency farm loan can be availed up to maximum amount of $500,000 or for maximum recovery of 100 percent for the actual losses suffered in terms of physical or production damages.

Loan terms: Loan taken for actual physical losses such as crop, livestock and chattel is to be repaid within a period of 1 to 7 years. This period is decided over the factors such as the need to seek this loan, ability to repay, and available collateral. This period can be extended up to 20 years as well, if need be, in special cases. The period to repay loans provided for physical damages to the real estate is up to 30 years, in general. However, in some situations, this period may be extended up to 40 years.

Interest rate: The present annual interest rate for an emergency farm loan is 3.75 percent.

Application deadline: Application for emergency farm loan must reach the concerned offices within 8 months of the disaster designation date or quarantine designation date.

Temporary assistance: Emergency farm loan is considered a temporary credit source. Borrowers should turn to other commercially available sources of credit. Borrowers are reviewed periodically to check if their ability to return to mainstream credit sources in the commercial market.

You can visit local USDA service centers to know more about farm loan program.
About the Author
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