WASHINGTON, Jan 15 (Reuters) - The U.S. Department of Agriculture announced a new program on Tuesday to help small farming operations, including those run by minority or socially disadvantaged farmers, improve their access to credit.
The program, administered through USDA’s Farm Service Agency, will offer various loans of up to $35,000 for terms of up to seven years to help recipients deal with farming’s often prohibitive start-up costs.
“History tells us micro loans in combination with technical assistance often results in a successful operation,” USDA Secretary Tom Vilsack told reporters on a conference call.
The program will require less paperwork than traditional USDA loans to farmers and ranchers - a mere eight forms to fill out instead of 17 and the provision of one year of records instead of three years.
“We hope this will be the next step up for those young people” who might be interested in agriculture, but have struggled with funding, Vilsack said.
USDA also cited returning veterans as among those who might want to give farming a try, but currently struggle with funding.
“Small farmers often rely on credit cards or personal loans, which carry high interest rates and have less flexible payment schedules, to finance their operations,” USDA said.
The final rule establishing the program will be published on Jan. 17 in the Federal Register.
Producers can apply for loans to pay for start-up expenses such as essential tools, irrigation, delivery vehicles and recurring expenses such as seed, fertilizer, rent and distribution expenses.
The agency anticipates that some applicants will graduate to operating loans up to $300,000 or obtain financing from a commercial lender under the Farm Service Agency’s guaranteed loan program.
Those larger loans can be used for a variety of purposes, including buying land and livestock.
The National Farmers Union, a group that represents mostly family farmers and ranchers, applauded the program.
“Access to credit is one of the greatest challenges that beginning farmers and ranchers face,” said NFU President Roger Johnson.