Summary of Loan Programs
Beginning Farmer Loan Program and Loan Participation Program
Iowa Agricultural Development Authority
505 5th Avenue, Suite 327 Des Moines, Iowa 50309-2322 Ph: 515-281-6444 Fax: 515-281-8618 Email: iada@max.state.ia.us
IADA Mission
Iowa Code Chapter 175 IADA Board’s Mission: The Authority shall develop and provide programs for providing assistance to beginning farmers and other agricultural producers in this state.
IADA Board of Directors
9 volunteers representing Iowa agriculture 1 ex-officio member Michael L. Fitzgerald, Iowa Treasurer Meet once a month Approve board policy and IADA budget Approve beginning farmer, loan participation applications & tax credit applications Agency oversight
Presentation Outline
IADA Loan Programs
Beginning Farmer Loan Program (BFLP) Loan Participation Program (LPP)
Other Programs
– Beginning Farmer Tax Credit Program Iowa Agricultural Youth Institute (IAYI) Fed. Res. Bank Ag Advisory Committee Iowa Ag Awareness Coalition Sponsor FFA & PAS Programs USDA Beginning Farmer & Rancher Advisory Committee
IADA’s Loan Programs Beginning Farmer Loan Program
IADA can provide $57.4 million bonds per year 3,724 loans closed from 11-1-81 through 06-30-2009 for a total of $433,284,673 Types of projects funded: (through 12-30-04)
Land Ag Imprmts Deprc. Prop. Total Closed $344,177,240 $ 71,324,486 $ 17,782486 $433,284,673 79.43% 16.46% 4.10% 100.00%
Recent Legislative Changes To Aggie Bond Program
– Increased max. bond/loan amount to $469,200 – Net worth of applicants increased to $600,000,000 – Permits transactions between beginning farmers and their grandparents, or parents, or their siblings – Doubles the number of acres a beginning farmer can own and still be eligible for the BFLP & removes $125,000 max. real estate value
BFLP and FSA
– 50/50 – 50/45/5
Aggie Bond Usage 2008
Iowa $14,588,333 Illinois $ 9,600,000 South Dakota $ 1,500,000 Colorado $ 1,082,929 Nebraska $ 2,448,423 Kansas $ 2,120,778 Missouri $ 865,167 Others: Penn, Wisconsin, OK, MN New States – New York, Washington
Program Benefits
Uses Tax Exempt Bonds Provides Beginning Farmer With Reduced Interest Rate For Life of Loan Provides Bank, Contract Seller or Investor Tax Exempt Interest Income
BFLP Program Qualifications
Net Worth <$600,000 (indexed annually) Restrictions on Previous Land Ownership – 30% Median County Size Loan Maximums – $469,00 Land – $250,000 Farm Improvements – $125,000 New Depc. Property – $62,500 Used Depc. Property – Lifetime Maximums Must perform mgt. & labor
BFLP Program Qualifications
Corps., Partnerships & LLC’s ineligible $50 Application Fee 1.25% Loan Closing Fee To $250,000
– .625% Over $250K – Minimum $300
Bond Holder=Credit Decision IADA = Eligibility Decision
BFLP Program Qualifications
Training & Experience
– Sufficient education, training and experience. Submit letter
Use of Project
– Used for farming with “hands-on” involvement
Resident of Iowa At Closing
Bank Loans
Details
– Bank Purchases Bond From IADA – IADA Makes Loan to Borrower – IADA Assigns Loan to Purchaser
Loan Terms
– Negotiated with bank
Balloons will terminate tax exemption - use call options
Bank Loans
Assignment/Change of Terms
– Bonds may be sold to other institutions – Terms changed
Approval of board required
Proceeds must be disbursed within 18 months
Example
Using FSA 50/45/5 & Aggie Bond
– $730,700 purchase price – Down payment=$36,500 – Bank/Aggie Bond loan amt.=$469,200 – FSA loan amount=$225,000
Example
$469,200 @ 5% = $23,460 225,000 @1.5% = $ 3,375 1st Yr. Int. Cost = $26,835 Blended Rate on Borrowed Funds
3.87% Blended Rate Cost of Project 3.67%
IADA’s Loan Programs
Loan Participation Program
Program started 7-1-96 105 loans closed = $5,686,379 (12/31/08) 156 applications processed: 10 approved, 25 denied, 24 withdrawn Total of projects funded: (through 06-30-04)
Land Ag Imprmts Deprc. Prop. Total Closed $4,018,279 70.68% $ 1,621,400 10.54% $ 46,700 .82% $5,686,379 100.00%
BFLP and LPP Can Be Used At Same Time
– Both programs can be used for same project – IADA participates with bank by buying up to 30 percent of purchase price or $150,000 whichever is less – 5% fixed interest rate – No bond purchased for LPP – Funded by Iowa’s Rural Rehabilitation Trust Funds – Assists beginning farmers with down payment funds – IADA takes last-in/last-out collateral position
LOAN PARTICIPATION PROGRAM
Objective Of Loan Program:
Supplement qualified low-income farmer’s down payment so a loan can be arranged to purchase agricultural property through an agricultural lender.
Lender’s Involvement:
Request a last-in/last-out loan participation from the Iowa Agricultural Development Authority (IADA) by completing and submitting the Lender’s Security Analysis. Certify that applicant is a “low-income” farmer and no other private or state credit is available or can be obtained in a timely manner (application denial by FSA is not necessary).
Farmer’s Involvement:
Submit complete application and related records. If application is approved by the Iowa Agricultural Development Authority Board of directors, repay loan in full.
Application Deadline: Applications received by the 1st of the month will be reviewed at the next IADA board meeting.
If you have any questions, please call 515-281-6444.
Comparison of IADA Loan Programs
Beginning Farmer Loan Program Age Loan Participation Program At least 18 years old At least 18 years old No upper age limit No upper age limit
Eligible projects Breeding livestock, machinery, Breeding livestock, machinery, Land, farm improvements Land, farm improvements Lender’s Certification None Certify that no other private or state credit can be obtained FSA does not need to certify denial No restrictions
Land ownership Cannot own substantial farmland (30% of county median acres) Buy from close relatives Yes Yes
Minimum loan None None Maximum loan $469,200 -Fed Bond 30% purchase price or $500,000-State Bond $100,000 participation loan Maximum net worth $600,000 Maximum debt-before closing Application fee Closing fee Current ratio Debt to asset ratio Loan to net worth ratio Off-farm income Application deadline NA $300,000 $400,000
$50 1.25% of IADA Bond NA NA NA No restrictions 15th of the month
$100 1.25% of IADA participation loan Greater than 1.1 Cannot exceed 80% Cannot exceed 200% Cannot exceed 50% of total income 1st of the month
A beginning farmer can participate in both of these programs at the same time as long as the applicant and project meet both programs’ guidelines.
For More Information
Phone
– 515/281-6444 Web Site
– www.iada.state.ia.us – FAQ, Application, Rules, Contacts
E-Mail
– Jeff.ward@iowa.gov – iada@iada.state.ia.us