Agricultural Lending

Credit Program Changes and Restrictions

New FO loans can only be made to qualified beginning farmers or to those with less than 10 years of FSA borrowing experience. Direct FO loans used to refinance existing indebtedness are now prohibited. To facilitate graduation to commercial sources, FSA was authorized to make 95 percent guarantees of commercial loans used to refinance direct FO loans.

Direct OL loans can still be used to refinance existing indebtedness. But this is limited to applicants who have refinanced a direct or guaranteed loan fewer than five times before and who are existing, direct OL program borrowers that have suffered a qualifying loss because of a natural disaster, or are refinancing loans obtained outside FSA. FO or OL loans to finance nonfarm business purposes are no longer authorized.

OL program eligibility is also more restrictive. These loans can only be made to farmers who have not operated a farm or ranch for more than five years or to applicants with no more than six years of OL borrowing experience. Transitional eligibility rules for existing FSA borrowers apply to both loan programs.

Changes were made to the Emergency Loan (EM) program to reduce program costs. Stricter eligibility requirements are now applied, asset valuation procedures have been revised, and the $500M cap on the program now applies to the total program indebtedness of the borrower, instead of being applied only to a particular disaster.

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