FSA loans

[dominiquer60]

Does anyone have any experience with FSA loans (Farm Service Agency). I understand that having to take out a loan is bad enough, and taking a loan from the government can’t be all that easy or good. However they offer loans to beginner farmers and minority farmers for as low as 4 or 5 percent, of course you have to be turned down by a number of other lenders first.

I read the Country Folks, Extension News and other more conventional periodicals to keep a finger on the pulse, and I never hear success stories about FSA loans, but likewise I never see anything bad about the program either, is no news good news? Does anyone have any insight on this possibility?

I have been saving up a good chunk of money for a down payment, and I might be able to use my mother’s brownstone as collateral, but I am afraid that I won’t be able to get even a small loan to get started. My first Vegetable mentor has a great story of his first loan from his wife’s uncle to buy a Kubota. Half way through the season the uncle was in a financial panic and wanted 1/2 of it back. My mentor was happy to give it to him and had the other half before the uncle even asked for it. A $15,000 tractor paid off before the end of the season mostly due to lettuce sales before CA flooded the fresh market. If only I had such an Uncle, I could have the market with fuel prices making CA prices rise close to local prices. If anyone has had loan success, I would be thankful for any advice that may come my way.

In the mean time I am sticking to my day job and taking every opportunity to learn while I am free. 8 AM will bring 150 broilers that will go under my knife, it is encouraging that gutting a bird has become an automatic motion, now if only they were my own clover raised roasters.

Erika

[Joshua Kingsley]

Erika, Be wary of FSA loans they are alot harder to deal with than you might imagine. We barrowed money from them for some expansion here on my dad’s farm and we have never had so much oversight from any other lender. They want to be your only lending angency and are very tight with their purse strings. To the point that they have to be where ever you are wanting to buy somthing so they can inspect your purchess before they will write a check even though you are paying on a loan for that money.
This is one experiance that I would not like to relive and it may be diffrent for others. from my prospective they are not an ideal lending agency though each person may have a diffrent experiance and I would love to hear of some others.

josh

[Gabe Ayers]

Erika,

I borrowed from the Farmer’s Home Administration to buy our place a long time ago (78). There happened to be a nice young guy that took over the district office, who I had gone to high school with his brother. I qualified for the low income limited resource program and borrowed under the farm ownership program for a 40 year loan at 5%. So I wouldn’t have been able to afford the farm without that program. I have borrowed operating money from FSA also.

The difficulty of working with the local agent is the key. Some are very reasonable and helpful, understanding and supportive. Other’s are beauracrats, that interpret the rules to make their job as easy and risk free as possible. It is an individual agent thing.

Even with a good local agent the details of a farm home plan are intense and satisfying all their requirements is just about a full time job in itself. After paying on it for several years and keeping up with the paper work, Mr. Bush decided to lock the interest rate in at 5% – because the prime dropped so low they were afraid farmer’s would ask for a lower rate and at that point the detailed reporting and plans were dropped. Now I just make my payments annually and will get it paid off when I am 82…. like I will live productively that long…. Get mortgage insurance in case you don’t live long enough to pay the loan off.

It is a hassle to deal with a government agency, but it is the only way this sharecropper’s grandson would have even owned a piece of land.

The agency needs clients to insure their own jobs, but interview them too….

I certainly am not recommending that approach today because it can be a hassle, but it is what we did years ago. Ideally it would be a great program if the folks that administrate it were experienced. The point is to keep some people actually farming….

But the hassles – For instance if you are late paying your taxes, you get a letter about a week later wanting to know why you haven’t…..(answer: didn’t have the money – duh). The farm home plan is a detailed eight page document that requires every piece of equipment photographed and a detailed plan for every penny of every year. Glad I don’t have to do that anymore….

I have avoided any further involvement with the government for the obvious reason’s mentioned by our fellow poster…. They offer all sorts of delayed payment deals, based on bad weather, crop disasters, but it just cost more interest to delay and we haven’t had to use them yet…

We keep hoping we will hit a big lick one day and pay some on the principle and pay it off early…it just hasn’t happened yet. Being sustainable doesn’t mean making a lot of money as everyone on this forum knows…Lots of FSA loans are paid off by subdividing the farm and giving up on farming.

Good luck.

[safrina]

All right, I’m currently thinking of opening a Euro account for savings. Saving from my paycheck every month hasn’t been an easy option as it is easily spent on something else. I was thinking if I took up a personal loan to start up a savings account (for future use) I would be obliged to really deduct this from my paycheck. Is it prudent to take up a personal loan in order to start saving?

[dominiquer60]

I am no financial whiz, but taking a loan out to start a savings account sounds counter productive unless you can find a loan with a lower interest rate than your savings account. I highly doubt the possibility of finding such a high savings rate and such a low loan rate, but anything is possible, let us know if you have any luck with that.

My personal strategy is to work like a dog at my own business and save every penny I can in as high interest of a savings account I can get from my credit union and short term low risk CDs. I am sure that there is a better way, but this is simple enough and low risk enough that I am content.

I also cut corners by living out of my truck as much as possible on the road, and bartering labor for food or materials with farmer friends, mentors and the like. I cut out costly forms of entertainment, gourmet dinners come from the garden and freezer, if I drive anywhere it is for multiple reasons and errands, if I splurge it is for health/quality of life reasons like new boots or the chiropractor and of course she will barter for food sometimes as well.

[goodcompanion]

@dominiquer60 2247 wrote:

My personal strategy is to work like a dog at my own business and save every penny I can in as high interest of a savings account I can get from my credit union and short term low risk CDs. I am sure that there is a better way, but this is simple enough and low risk enough that I am content.

If there is a better way then I guess I’ve never heard of it.

All the best. I assume you are looking to buy a farm? Where and to do what? Or are you still flexible?

[dominiquer60]

Erik,
Yes, I am saving for my own farm and I am still very flexible as all of my assets are in my bank or stored away in my fathers barn. Ideally I would like to have a small mixed produce and livestock farm, you know the type that makes the USDA cringe and sustains those of us in the know. I would like to find a piece of land tillable/pasture/forest near NY’s capital district, I grew up here and am in the network of small farmers after working in the business for 6 years, its comfortable.

I am currently looking at a 10 acres with house old barn, pond and surprising decent soil for the location, its one of those places in my home town that we used to drive by and as a kid I would daydream about what I would do with it if it where mine. Its a little small and the big hay field has been subdivided into large lots, but it is zoned Ag with lots of ag neighbors.

Three strong points are 1) soil, 2) community, I know many of the neighbors from 4-H and Farm Bureau, many have offered to help in any way to get me going, there is a grange hall, church and fire department with in walking distance, 3) It’s my home town, marketing is easy when you know so many people, I could have a 25 member CSA with half a days effort.

It is a little small and it lacks a wood lot, but there are plenty of older neighbors that would barter firewood or hay for labor, or lease a few acres if I wanted to expand. The small size is almost appealing because it is just me, myself and I that are going to run this farm, 10 is plenty for one person. A larger lot would be better if I had help and wanted a wood lot and more acres to rotate in veggies and grazing land.

That is what is on my mind about what and where.

Erika

[goodcompanion]

Sounds great.

I just was curious because I have connections in a different part of the state for a financial “leg up” into farming for the right farmer.

Erik

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