Image Here
Who Can Apply?
To qualify for an FSA Guaranteed loan, an applicant must:
• Be a U.S. citizen or legal resident alien which
includes Puerto Rico, the U.S. Virgin Islands, Guam,
American Samoa and certain former Pacic Trust
Territories
• Have an acceptable credit history as determined by
the lender
• Demonstrate ability to repay the loan
• Provide sucient security for the loan
• Have the legal capacity to incur the obligations
of the loan
• Be unable to obtain a loan without a guarantee
• Have not received FSA debt forgiveness on more
than three occasions on or prior to April 4, 1996; or
any occasion after April 4, 1996
• Be the owner or tenant operator of a family farm after
the loan is closed. For Operating Loans, the applicant
must be the operator of a family farm after the loan
is closed.
• Not be delinquent on any federal debt
• Not have outstanding unpaid judgments obtained by
the U.S. in any court, excluding judgments led in
U.S. Tax Courts;
• Not have provided FSA with false or misleading
documents or statements in the past;
Overview
The U.S. Department of Agriculture (USDA) Farm
Service Agency (FSA) oers Guaranteed loans to
farmers and ranchers to promote, build and sustain
family farms for a thriving agricultural economy.
Agricultural producers can apply for a Guaranteed loan
through FSA-approved commercial lenders.
FSA Guaranteed loans are made and serviced by
commercial lenders, such as banks, Farm Credit System
institutions, or credit unions. FSA guarantees up to
95 percent of the loss of principal and interest on a
loan. Farmers and ranchers apply to an agricultural
lender, which then arranges for the guarantee. The FSA
guarantee permits lenders to make agricultural credit
available to farmers who do not meet the lender’s normal
underwriting criteria.
FSA Guaranteed loans are for both farm ownership and
farm operating purposes. FSA guarantees loans up to
$1,776,000 (amount adjusted annually based
on ination).
Guaranteed Farm Ownership Loans
Guaranteed Farm Ownership Loans may be made to
purchase farmland, construct or repair buildings and
other xtures, develop farmland to promote soil and
water conservation or to renance debt.
Guaranteed Operating Loans
Guaranteed Operating Loans may be used to purchase
livestock, farm equipment, feed, seed,
fuel, farm chemicals, insurance and other operating
expenses. The loans also can be used to pay for minor
improvements to buildings, costs associated with land
and water development and family living expenses, and
to renance debts under certain conditions.
FACT SHEET
March 2020
Guaranteed Loan Program
1
Collateral for Farm Ownership loans consists of real
estate or a combination of real estate and chattel. FSA
sta determines whether the collateral proposed by the
lender is adequate.
Percent of Guarantee
For most loans, the maximum guarantee is 90 percent.
The guarantee percentage will be determined by FSA
based on the risk involved in the loan. The lender may
receive a 95 percent guarantee when:
• The purpose of the loan is to renance Direct FSA
farm loan. If only a portion of the loan is for this
purpose, a weighted percentage of guarantee will be
used; or
• The loan is made to a beginning farmer to participate
in the Down Payment Loan Program or a qualifying
state beginning farmer program; or
• The loan is made to a socially disadvantaged farmer
to participate in the Down Payment Loan Program.
FSA Fee for Guaranteed Loans
For most loans, FSA charges the lender a guarantee fee
of 1.5 percent of the guaranteed portion of the loan.
This fee may be passed on to the borrower. The
guarantee fee is waived when:
• The majority of the loan is to renance a Direct FSA
farm loan; or
• The loan is made to a beginning farmer to participate
in the Down Payment Loan Program or a qualifying
state beginning farmer program; or
• The loan is made to a socially disadvantaged farmer
to participate in the Down Payment Loan Program.
• Not have been convicted under federal or state
laws of planting, cultivating, growing, producing,
harvesting, or storing a controlled substance within
the last 5 crop years.
Applications may also be made by entities. Entities
are corporations, cooperatives, joint operations,
partnerships, trusts and limited liability companies.
Their members/stockholders must meet these same
eligibility requirements. The entity must also be
authorized to operate a farm or ranch in the state
where the land is located.
Loan Terms and Interest Rates
Loan terms vary according to the type of loan, the
collateral securing the loan, and the producer’s ability to
repay. Operating Loans cannot exceed seven years and
Farm Ownership loans cannot exceed 40 years.
The Guaranteed loan interest rate and payment terms are
negotiated between the lender and the applicant. Interest
rates on Farm Ownership and Operating Loans may not
exceed the maximum rates established by FSA.
Securing the Loan
Each loan must be adequately secured. Collateral for
Operating Loans may consist of crops, livestock and
equipment, and real estate when necessary. A lien may
be taken on other chattel or real estate property.
GUARANTEED LOAN PROGRAM - MARCH 2020
USDA is an equal opportunity provider, employer, and lender.
2
How is the Loan Managed?
Guaranteed loans are the property and the responsibility
of the lender from the time of loan making, through
loan servicing, until the loan satised. The lender is
responsible for servicing their Guaranteed loans as they
service any other loan in their portfolio and complying
with all FSA program requirements.
Secondary Market
The lender may resell the guaranteed portion of the loan
to an interested party. The purchaser then becomes the
holder of the loan, but the original lender must retain
the loan servicing responsibilities. Investors who are
looking for safe investments with a reasonable return are
attracted to these loans because of the government’s full
faith and credit guarantee against default. The existence
of the secondary market makes Guaranteed loan notes
more liquid. By reselling the guaranteed portions, lenders
reduce interest rate exposure, increase their lending
capabilities and generate fees.
GUARANTEED LOAN PROGRAM - MARCH 2020
Advantages of Using the Secondary
Market
Selling the guaranteed portion of the loan to other
investors oers a number of advantages, including:
• Reduced interest rate risk. Lenders can transfer risk
of interest rate increases on the guaranteed portion of
a xed rate loan;
• Increased Liquidity. Selling the loan on the secondary
market frees the funds for additional lending or
investing activity;
• Increased Lending or Investing Capabilities.
• Increased Return on Investment. The sale of the
guaranteed portion of the loan in the secondary
market increases the lender’s overall return on
investment. Each time a bank sells a guaranteed
portion, it generally retains a servicing fee; and
• Rates and Terms. Lenders may be able to oer the
borrower more exible repayment terms, as well
as xed and/or reduced interest rates to improve
cash ow.
More Information
For more information about FSA and its programs,
visit fsa.usda.gov or contact your local FSA oce.
To nd your local FSA oce, visit farmers.gov/
service-locator.
USDA is an equal opportunity provider, employer, and lender.
3