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FSA Farm Loans Lender of First Opportunity Welcome Thomas DeCock Farm Loan Programs Specialist 651 602 7717 Thomas Decock mn usda

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FSA Farm Loans Lender of First Opportunity Welcome Thomas DeCock Farm Loan Programs Specialist 651 602 7717 Thomas Decock mn usda Powered By Docstoc
					FSA Farm Loans: Lender of First Opportunity



Welcome.

             Thomas DeCock, Farm Loan
             Programs Specialist.
             (651) 602-7717
             Thomas.Decock@mn.usda.gov


          Stuart Shelstad, Farm Loan
          Programs Chief.
          (651) 602-7715
          Stuart.Shelstad@mn.usda.gov
FSA Farm Loans: Lender of First Opportunity



Who We Help




We provide temporary credit to family farmers.
We energetically target groups such as:
   Beginning farmers.
   Socially disadvantaged farmers (women, minorities).
   Farmers recovering from adversity.
 FSA Farm Loans: Lender of First Opportunity


FSA helps thousands of Minnesota
farm families….

3,000 farm families with $300 million of direct loans
  Last year: 942 loans for $67,000,000

2,000 farm families with a $500 million of guaranteed loans
  Last year: 454 loans for $104,000,000

     …… About 1% past due on payments
                                          Direct Loans                                      Guaranteed Loans
                                                            BF/SDA
              OL          OL-Youth             FO            Down           EM              OL               FO
                                                          Payment FO
              Annual                                                                       Annual
                          Agricultural
            operating                      Real estate                    Recovery      operating         Real estate
 Loan                      Income                          Purchase
            expenses,                     purchase or                   from natural     expense,        purchase or
Purpose                   producing                       real estate
            livestock,                    development                      disaster      livestock,      development
                         youth project
           equipment                                                                    equipment
                                                           45% of
Maximum                                                   Purchase,                             $1,094,000
           $300,000         $5,000          $300,000                     $500,000
Amount                                                      up to                          OL & FO Combination
                                                          $225,000
Interest
              2.0%           2.0%             3.5%          1.5%           3.75%       Set by lender     Set by lender
 Rates
                                                           5% cash
                                                            down,                         1 year for
            1 year for                                                  Normally, on
                           1 year for                      45% FSA                         Annual
             Annual                                                      Chattel1-7
                            Annual                         20 years,                    Operating, -
           Operating,                                                     years, on
                           Operating,                     50% other                    Up to a 5 year
             Up to 7                        Up to 40                     Real Estate                        Up to
 Terms                   up to 7 years                     credit 30                   line of credit,
            years for                        years                      20-30 years                        40 years
                          for livestock                       year                         Up to 7
            livestock                                                      but not
                               and                          amort.,                       years for
               and                                                       more than
                          equipment                           can                      livestock and
           equipment                                                      40 years
                                                            balloon                      equipment
                                                            after 20
              Crops,         Crops,                                       Chattels         Crops,
Primary
           livestock &    livestock &       Real estate   Real estate      and/or       livestock &       Real estate
Security
           equipment      equipment                                      real estate    equipment
FSA Farm Loans: Lender of First Opportunity



FSA Has Two Types of Loans.

1. Direct Loans

   FSA loan officer works directly with farmers.
   Comprehensive financial planning services.
   Repayment terms tailored to farmer’s needs.
   Low interest, extended repayment.

                  Operating and Real Estate
FSA Farm Loans: Lender of First Opportunity



FSA Has Two Types of Loans.
2. Guaranteed Loans

   Farmer works directly with a lender (bank, farm credit
   or ag credit union). Then the lender works with FSA.
   FSA acts like a “co-signor” in case of loss to lender.
   Farmer is short of lender’s normal standards in:
   capacity, collateral or character.
   Repayment terms are the lender’s.


                  Operating and Real Estate
FSA Farm Loans: Lender of First Opportunity


General qualifications for all loans.

   Be family-sized farm, not just a rural residence.
   Minimum level of experience or education.
   Decent credit history.
   Minimum collateral.
   Cash flow that shows you can repay the loan and
   everything else.
FSA Farm Loans: Lender of First Opportunity


Direct Farm Loans.
Operating Loans.

   Buy livestock, equipment, crop inputs, feed, expenses,
   refinance debt.
   Low, fixed interest rate (2.00%).
   Repayment terms tailored to your operation.
   Typically 1 – 7 years.
   Maximum of $300,000.
   Minimum collateral: “1 to 1”, but FSA looks for more
   security when available.
FSA Farm Loans: Lender of First Opportunity


Direct Farm Loans.
Real Estate Loans.

   Purchase farmland, building sites, construction, repair.
   Low, fixed interest rate (1.5% - 5%).
   Repayment terms tailored to farmer, usually 20 - 40
   years.
   Maximum of $300,000.
   Minimum collateral: “1 to 1” (FSA looks for more).
   3 years previous management/farming experience.
FSA Farm Loans: Lender of First Opportunity


Direct Farm Loans – Real Estate.
Regular Farm Ownership - 100%.

   Purchase farms or construction/repairs projects.
   Open to beginning and non-beginning farmers.
   Generally no cash down payment is required.
   Interest rate is currently 3.5%.
   20-40 year repayment (“graduation” expected before
   the term is done).
   FSA takes First Lien position.
FSA Farm Loans: Lender of First Opportunity


Direct Farm Loans – Real Estate.
“Joint Financing” Farm Ownership

   Typically used to purchase and develop farms.
   Open to beginning and non-beginning farmers.
   Other Lender provides some financing & gets First Lien
   position.
   FSA takes Second Lien position.
FSA Farm Loans: Lender of First Opportunity


Direct Farm Loans – Real Estate.
Joint Financing - Example

$700,000 Farm Purchase
$400,000 Lender / Land Contract 1st
  Terms: 7% for 20 years
$300,000 FSA 2nd mtg
  Terms: 3.5% for 40 yrs.
FSA Farm Loans: Lender of First Opportunity


Direct Farm Loans – Real Estate.
Down Payment - 5/45/50

   “Best” real estate program
   Used only to purchase farms and land
   5% down payment required
   Open only to Beginning Farmers, Women & Minorities
FSA Farm Loans: Lender of First Opportunity


Direct Farm Loans – Real Estate.
Down Payment - 5/45/50 - Example

$500,000 Farm Purchase
  25,000 Cash down payment
$250,000 Other Lender
 Terms: 7%, 30 year amortization , balloon after 20 years)
$225,000 FSA 2nd mtg.
 Terms: 1.5% 20 yrs.
FSA Farm Loans: Lender of First Opportunity


Guaranteed Farm Loans.




Partners With Local Lenders.

   Lender’s loan, lender’s money.
   Maximum of $1,094,000
   Most Guarantees are for 90%.
FSA Farm Loans: Lender of First Opportunity


Guaranteed Farm Loans.
Operating Loans.

   Up to $1,094,000.
   Buy livestock, equipment, crop inputs and general
   operating expenses.
   Usually 1 – 7 years.
   5-year line of credits available.
   “Interest Assistance” available to pay 4% points of the
   interest cost on up to $400,000 (maximum
   $16,000/year for 5 years).
FSA Farm Loans: Lender of First Opportunity


Guaranteed Farm Loans.
Real Estate Loans.

   Up to $1,094,000.
   Buy farmland, construction, repairs, refinancing.
   Usually 20 - 30 years.
   Popular now to be sold on secondary market to lock
   in interest rates for a long period of time.
FSA Farm Loans: Lender of First Opportunity


Guaranteed Farm Loans.
Real Estate Loan Secondary Market.

   Long-term fixed rates unheard of with ag loans.
   Monthly variable all the way to 30 year fixed.


                  Lender           Farmer




                  Investors,
                Pension Funds,      Lender
                 Bond Buyers
Farmer Bill                                                April 1, 2009
Current Assets                           Current Liabilities
 Feed & Crops               $250,000      Open Accounts              $300,000
 Cream Check                $30,000       Lucky Lender               $100,000
Total Current Assets        $280,000     Total Current Debts         $400,000
Intermediate Assets                      Intermediate Debt
 Equipment                  $300,000      Lucky Lender               $500,000
 Dairy Herd                 $420,000      -                                -
Total Intermediate Assets   $720,000     Total Intermediate Debts    $500,000
Long Term Assets                         Long term Debts
 House & Barns              $1,400,000    Lucky Lender               $1,200,000


 Dirt - 260 Acres           $800,000          -                                -
Total Assets                3,200,000    Total Debts                 $2,100,000


                                         Net Worth                   $1,100,000
     LOAN TYPE         DOLLARS       SECURITY & LIEN POSITION

5-year G-LOC          $200,000   First Lien on: Crops, Feed &
($200,000 peak for      (zero    Milk. Second on Cattle & Third
new crop inputs)       initial   on Machinery. Fifth Lien on
                      advance)   Farm.
LNG (7-Year, 7%                First on Cattle, Second Lien on
Guaranteed Term OL    $400,000 Machinery & Crops/Feed/Milk.
with 4% IA)                    Fourth Lien on Farm.

FSA Term D-OL         $300,000 First on Machinery & Third Lien
(2%, 7 Years)                  on Farm
G-FO ( 25 years, 7%   $400,000 Second Lien on Farm (to be sold
fixed rate)                    on Secondary Market)
Non-G-FO (25 years,   $1,000,000 First Lien on Farm
6.5% variable)
      Shared Facility Loans
 Aid for Beginning Farmers.
 Recognize there will be some elements of
  Joint Operations.
 Need a good Working Agreement between
  the 2 parties.
 Other party’s lender must consent.
          Guaranteed Loan
       “New Lender” Workshops

 2-Day Training on making and
 servicing Guaranteed Loans.
  Redwood     Falls: April 21st &
   22nd
  Detroit   Lakes: October 6th &
   7th
  Sponsoredby the Minnesota
  Bankers Association:
         835-3900
    (866)
    www.minnbankers.com

				
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