Microloan program finds traction for small growers

05/08/2014 08:58:00 AM
Tom Karst

Small fruit and vegetable producers — organic and conventional — and Community Supported Agriculture are among the target audience for the U.S. Department of Agriculture’s new microloan program

The microloan program began in January 2013 and so far the USDA has distributed about 6,000 loans worth $100 million, said Chris Beyerhelm, deputy administrator for farm loans programs of the USDA’s Farm Service Agency.

“We anticipated about 2,500 (loans) per year and we are substantially above that,” he said May 7.

The program is designed for niche growers, smaller growers, pick-your-own operations, organic producers and CSAs.

The loans, up to $35,000, can’t be used to purchase land but can fund a variety of expenses.

Some of the approved loans cover:

 

  • Start-up expenses;
  • Annual expenses such as seed, fertilizer and land rent;
  • Marketing and distribution expenses;
  • Machinery purchases; and
  • Irrigation.

 

The USDA offered similar loans before the microloans program, the new program is streamlined compared with a farm loan of $300,000. The application is two instead of 10 pages, experience requirements were lessened, and security requirements were reduced.

Although the number of loans has exceeded expectations Beyerhelm said the USDA believes still more operators could use the program.

“I’m sure there is an untapped market out there,” he said.

The program is a subset of the USDA’s operating loan program, Beyerhelm said, which relies on annual appropriations from Congress. For fiscal year 2014, Congress allocated $1.2 billion for large and small operating loan types.

Loans for planting expenses, fertilizer and other crop inputs are expected to be repaid after one year, but purchases of machinery and other longer-term assets have a seven-year repayment schedule.

More information on the USDA’s microloan program can be found at the USDA website.

The application for the loan cannot be done exclusively online, he said. “At some point there has to be a face-to-face discussion with a credit official, but we try to make this as convenient as possible,” he said.

A map of USDA of 2,100 USDA Farm Service Agency offices is viewable at the USDA website.

The farm bill passed in January did give Agriculture Secretary Tom Vilsack the authority to raise the maximum loan amount in the program from $35,000 to $50,000, Beyerhelm said.

“We’re currently looking at the possibilities of doing that,” he said.

Comparing the microloan program with traditional USDA farm loans, Beyerhelm said the Northeastern states have been more active in the microloan program than producers in those states have been for larger loans. The USDA also wants to extend microlaons to urban agriculture such as rooftop greenhouses, and developing vacant city lots, he said.



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