What is the Farm Service Agency (FSA) Loan Guarantee Program?

The FSA loan guarantee program is a contract between a producers credit provider (lender) and the Farm Service Agency. The program guarantees the lender will recoup 90% of any loss incurred on a guaranteed loan.

The program offers a lender an incentive to extend credit to producers who for various reasons, i.e. collateral deficiency, cash flow problems, do not qualify or represent substantial risk under the bank's normal underwriting criteria.

Producer Targeted Loan Program

The targeted loan guarantee program offers a special 1 billion dollar allocation of funds to guarantee producers operating loans. It also offers paperwork and documentation relief to lenders submitting applications to FSA for guarantee.

How To Apply

The loan guarantee program is strictly an agreement between the lending institution and FSA. Producers that feel a guarantee will enhance their ability to maintain their existing credit relationship should encourage their lender to submit their loan application to FSA for consideration of a guarantee. Producers are encouraged to act immediately to ensure availability of funds.

With the revision of the required documentation requirements, most producers should find their existing lender has the existing documentation necessary to apply for a guarantee. Current year end information including a financial statement and income statement will be necessary. Lenders simply submit their normal loan underwriting package to FSA for guarantee approval.

The current targeted program is for operating funds only, however FSA has an existing guarantee program for term loans. The term loan funds can be used to guarantee "carryover" operating debt incurred due to operating losses, restructure existing debt or guarantee deferred payments made by the lender. FSA also has an existing interest assistance program. Under this program, FSA will pay up to 4% of a producers interest cost based upon cash flow needs. Producers are encouraged to urge their lenders to also consider these option during their lender negotiations. The targeted or existing loan guarantee funds cannot be used for construction of new operations.

Guaranteed loans are limited to an aggregate of $700,000 per borrower.

Contacts at NPPC:
Jeff Ward, Producer Education Director, 515-223-2633
Earl Dotson, VP Education, Environment & Production Research, 515-223-2766

Additional Reference:
Contact your lender for more information.

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