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Farm Operating Loans

Program Descriptions

Program Number



Farm Operating Loans


Federal Agency




Farm and Rural Development Act, as amended, Subtitle B, Sections 311-317, Public Law 92-419, 7 U.S.C. 1942; Agriculture Act of 1961, Title III, Public Law 87-128.






To enable operators of not larger than family farms through the extension of credit and supervisory assistance, to make efficient use of their land, labor, and other resources, and to establish and maintain financially viable farming and ranching operations.


Types of Assistance

Direct Loans; Guaranteed/Insured Loans.


Uses and Use Restrictions

Loan funds may be used to: (1) Purchase livestock, poultry, fur bearing and other farm animals, fish, and bees; (2) purchase farm equipment; (3) provide operating expenses for farm enterprise; (4) meet family subsistence needs and purchase essential home equipment; (5) refinance secured and unsecured debts subject to certain restrictions; (6) pay property taxes; (7) pay insurance premiums on real estate and personal property; and (8) finance youth projects. Use restrictions are shown under Applicant Eligibility.


Eligibility Requirements

Applicant Eligibility

Except for youth loans, individual applicants must: (1) Not have caused a loss to the Agency after April 4, 1996, or received debt forgiveness on more than 3 occasions prior to April 4, 1996 to receive a guaranteed loan; (2) have the necessary education and/or farm experience or training (1 year's complete production and marketing cycle within the last 5 years); (3) do not exceed the limitation on the number of years that assistance may be received; (4) possess the legal capacity to incur the obligations of the loan; (5) be unable to obtain sufficient credit elsewhere at reasonable rates, and terms; (6) project the ability to repay the loan; (7) be a citizen or permanent resident of the United States; (8) after the loan is closed, be an owner/tenant operator of a family farm; and (9) comply with the highly erodible land and wetland conservation provisions of Public Law 99-198 of the Food Security Act of 1985 (FSA); Certain corporations, cooperatives, partnerships and joint operations ("entities") operating family-sized farms are also eligible for farm operating loans. In brief, entity applicants must meet some of the same eligibility requirements as individual applicants. In addition, if members, stockholders or shareholders of the entity are related by blood or marriage, at least one stockholder, shareholder partner or joint operator must operate the family-sized farm. In the case when members are not related by blood or marriage, the majority interest holders in the entity must actually operate the family-sized farm to be eligible. The entity must be authorized to operate a farm in the State in which it is located. Limited resource applicants must meet the above requirements. In addition, they must have a low income and show a need for increased farm income. In the case of limited resource entities, all the partners, joint operators, members, or stockholders must be citizens and the entity must be the owner-operator of the family farm with at least one partner, joint operator, member or stockholder operating the farm. Assistance is authorized for eligible applicants in the 50 States, the Commonwealth of Puerto Rico, the Virgin Islands of the United States, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, and to the extent the Secretary determines it to be feasible and appropriate, the Trust Territories of the Pacific Islands. To be eligible to obtain a direct loan, a borrower must agree to abide by any "borrower training" requirements. Applicants/borrowers requesting guaranteed loan assistance must meet all lender requirements.

Beneficiary Eligibility

Applicants/borrowers are the direct beneficiaries and must meet the applicant eligibility requirements. Families, individuals, and entities who are farmers, ranchers or aquaculture operators are the beneficiaries.


Applicants must prove that credit is not available elsewhere for the requested purposes. This program is excluded from coverage under OMB Circular No. A- 87.


Application and Award Process

Preapplication Coordination

None required. However, an informal conference with the local county office staff is recommended. This program is excluded from coverage under OMB Circular No. A-102 and E.O. 12372.

Application Procedure

Applicants file Form FSA 410-1, Application for Direct Loan Assistance, with supporting information, at the local county office of the Farm Service Agency for direct loans or Form FSA 1980-25 with the prospective lender for loan guarantees. This program is excluded from coverage under OMB Circular No. A-110.

Award Procedure

Certification as to eligibility is made by the local county committee (unless that responsibility has been delegated to the Agency credit officials) and an approval determination is made by a FSA official as to loan feasibility and soundness, and whether there is adequate collateral to secure any loan.



Range of Approval/Disapproval Time

The loan approval official approves or disapproves a completed application within 60 days on a direct loan application and 30 days on a guaranteed loan application.


Applicants for direct and guaranteed loans, may appeal adverse action taken. The applicant is given an opportunity to appeal the decision to the National Appeals Division. The applicant may, in the final step of the appeals process, request a review by the Director, National Appeals Division, Washington, DC. For guaranteed loans, both the lender and the applicant must request the appeal.



Assistance Considerations

Formula and Matching Requirements

The selected criteria identify essential elements considered necessary to compare the needs of the various States, and to make the best use of available program funds. This program has no statutory formula or matching requirements.

Length and Time Phasing of Assistance

Loans are scheduled for repayment over periods up to 7 years, but when justified, loans may be consolidated or rescheduled for up to 15 additional years. The interest rate for guaranteed loans is negotiated between the lender and borrower. If eligible, FSA may provide interest rate assistance on guaranteed loans at the rate of 4 percent. The interest rate for direct loans is determined by the Secretary of Agriculture.


Post Assistance Requirements


Various States have USDA certified Agricultural Loan mediation programs, which are designed to assist farm borrowers and their creditors in resolving financial disputes through the process of mediation. Where a State has such a farm credit mediation program, the lender shall participate in accordance with the rules of that system. FSA is not bound by any agreements developed in mediation or findings of the mediation unless FSA agrees to them in writing.


Not applicable.


Records on production, income, expenses during the period of the loan.


Financial Information

Account Identification

12-4140-0-3-351; 12-1140-0-1-351.


(Direct Loans) FY 07 $643,500,000; FY 08 est not available; and FY 09 est not reported. (Unsubsidized Guaranteed Loans) FY 07 $1,025,610,000; FY 08 est not available; and FY 09 est not reported.

Range and Average of Financial Assistance

Direct loans up to $200,000; guaranteed loans up to $731,000 (amount adjusted annually for inflation); direct average loan size approximately $47,365 and guaranteed average loan size approximately $157,339 for fiscal year 2001.


Program Accomplishments

There were 14,023 direct and 11,444 guaranteed loans made in fiscal year 2001. Farm operating loans provide credit to: (1) Establish beginning farmers; (2) assist farmers suffering from the price/cost squeeze, which will enable them to remain on the farm and refinance secured and unsecured debts; and (3) expand farming operations.


Regulations, Guidelines and Literature

7 CFR, Part 1941, Subpart A and Part 762. Farm Service Agency Fact Sheets; FSA Handbook 2 FLP; Program Aids 1610 "Farm Service Agency Producer's Guide to Loan Programs"; 1620 "Lender's Guide to FSA Loan Programs"; and 1630 "Rural Youth Loans".


Information Contacts

Regional or Local Office

Contact the appropriate FSA State Office listed in Appendix IV of the Catalog.

Headquarters Office

Department of Agriculture, Farm Service Agency, Director, Loan Making Division, Ag Box 0522, Washington, DC 20250. Telephone: (202) 720-1632.

Web Site Address


Related Programs

10.407, Farm Ownership Loans
15.124, Indian Loans-Economic Development


Examples of Funded Projects

Not applicable.


Criteria for Selecting Proposals

Not applicable.


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