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Farm microloans from the USDA's Farm Service Agency: Leasing or own rural land?

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If you've leased (or own) land in a rural area of Sacramento or similar sites and want a micro-loan, that's a small loan less than $35,000 to do farming in a small space, such as 5 to 20 acres or so, the U.S. Department of Agriculture's, Farm Service Agency might lend you the money you need for supplies. Check out the December 12, 2013 Sacramento Bee's Cathie Anderson's column today, "A low-interest leg up."

If you've leased land (or own it), there is no minimum loan amount. The maximum loan amount for a Farm Service Agency microloan is $35,000.The maximum loan amount for a Direct Farm Operating Loan is $300,000. See the site, "Farm Loan Programs Funding Questions and Answers." Technically, you don't have to own any land or homes.

You theoretically could be homeless and sleeping in your car, or not even have a car. But if you've managed to lease some land to farm, it's your first step toward applying for a microloan to start farming, assuming you know how to grow your crops and where to sell them, and that the income from the crops, eggs, or livestock will be enough to pay back your microloan from the government's USDA for farming with the interest rate. "View Current Interest Rates."

There is no down payment requirement. And you don't have to own a home or own the land or any other property to get a microloan to do farming. In Sacramento, people don't have to more away from rural areas that they want to farm to make a living. The loans keep the rural areas from being abandoned for city life, especially for those who want to stay in rural areas and still be able to make a living by farming.

Lets say you don't own any type of home, but you lease some land. That's okay with the USDA. A bank may not be interested in lending you money to farm unless you have a home to hold as collateral, but with the USDA, you don't need to own any property. Leasing land to farm is fine. See the site, "Start 2 Farm Website."

Just make sure it's farming, not breeding earthworms or exotic birds or fish, for example, for collectors or breeding pets. The goal is farming, and selling your crops, eggs, or other livestock to make your living on the land you lease or own. Check out the site, "Find FSA Handbook Regulations."

Microloans to plant and grow vegetables or eggs or other livestock, for example may be available from the USDA's Farm Service Agency in California

So many of the older farmers are retiring. And in the Sacramento area and surrounding regional places, you see a number of young farmers have struggled getting the microloans they needed to plant and grow their tiny operations. If you take a look at Anderson's column, you can read how Say Hay Farms outside Woodland and more than 100 other Californians received small loans that they needed for supplies. The microloans came from the USDA Farm Service Agency of the US Department of Agriculture. Check out the site, "Farm Operating Loans & Microloans - USDA Farm Service Agency."

FSA’s Direct Farm Operating loans are a valuable resource to establish, maintain and strengthen your farm or ranch. Under its direct loan program, FSA loan officers are responsible for every aspect of the loan application process, and funding is provided through Congressional appropriation.

Microloans are direct farm operating loans with a shortened application process and reduced paperwork designed to meet the needs of smaller, non-traditional, and niche type operations. Apprentice and mentorship programs, non-farm business experience, and farm labor experience are acceptable alternative solutions for helping to meet farm experience and managerial requirements.

Operating loans may be used to purchase items such as the following supplies:

  • Livestock and feed
  • Farm equipment
  • Fuel, farm chemicals, insurance and other operating costs, including family living expenses
  • Minor improvements or repairs to buildings
  • Refinance certain farm-related debts, excluding real estate

Operating loan funds cannot be used to finance nonfarm enterprises, including earthworms, exotic birds, tropical fish, dogs or horses used for non-farm purposes (racing, pleasure, show and boarding).

The USDA encourages you to contact your local office or USDA Service Center to learn more about our programs and the information you will need for a complete application. To locate your local FSA office, click here or find a listing in the telephone directory in the section set aside for governmental/public organizations under the U.S. Department of Agriculture, Farm Service Agency. Our local FSA offices will be happy to provide you with further information and a loan application.

Banks usually don't make small loans to farmers or other entrepreneurs

The USDA’s Farm Service Agency in California can provide a lower-interest loan which has reduced paperwork associated with it. You don't have to qualify in the same ways as you would have to if you went to a bank, especially if you're a first-time borrower. For example, a bank might want you to own your home so they could hold it as collateral to collect in case you couldn't replay your loan. You could lose your home if you borrowed from a bank. And many banks don't like to lend small amounts known as microloans.

With a USDA microloan, it might give you the chance, if you wanted it, to expand from a few acres to more acres to grow your crops. For example, if you check out Anderson's column, you can read how one farmer interviewed in that article quadrupled production and went from 5 to 20 acres. The point is the microloan comes in handy when you have the type of expenses farmers have when they expand their acres to farm larger areas. Twenty acres is still considered a small farm as was the former five acres. But the vegetables and eggs produced on the farm mentioned in Anderson's article were a lot like what many other young farmers in the Sacramento area are thinking about when they think of expansion.

One advantage of a USDA loan instead of a bank loan for farmers who want to stay in rural areas is that the larger, commercial banks want to look at your tax returns to see whether you have enough of what they're looking to see on a tax return.

For a large loan, you still have to qualify with collateral, such as owning a home. The Farm Service Agency lets you apply for a larger loan if you want a larger loan, but to qualify you have to have a home as collateral or something equally expensive in value (as collateral). If you lease your land and don't own a home, the microloan probably is the way to go because that microloan usually is leased by a lien against your crops.

Assuming your crops don't wither and you can pay back the microloan from what you earn with your crops, at least the interest rate for a microloan is around 2 percent at this time. But keep checking with the Farm Service Agency to see what the interest rate is at the time you apply. See, "View Current Interest Rates."

The whole idea of farming with microloans is to enable farmers to stay in their rural areas and make a living from what they grow and produce. They don't have to leave the rural areas like ghost towns to huddle in the urban areas looking for work, especially if farming is what they like to do best. Programs such as farm microloans let people make a living and stay in rural areas. See the site, "Find Farm Loan Application Forms."

If you're interested in farming or leasing land and moving back to rural areas to grow your own crops to sell for a living, you might look into microloans if you need them and know how to grow those crops. It makes eating local more accessible. And young farmers are needed to get training, experience, and eventually replace those who have retired from making a living through farming.

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