Money Available To Set Up Meat Goat Operation

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One of the biggest challenges facing the new meat goat producer is finding a way to pay for the purchase of their breeding stock and the land improvements required to raise them.

Assuming the producer already owns the land, the cost to set up a 400 head operation can easily exceed $50,000.00 when you include the cost of breeding stock, fencing, and working facilities. There are few producers that can write a check from their own account for that type of purchase.

Fortunately, financing options exist to help producers with these expenses.

Your first call should be to local banks that make agricultural loans. In most cases the bank will want you to make a 20% downpayment, and will only give you 3-5 years to payoff or refinance the loan. The bank will also require that you have acceptable credit and income.

If you don't meet the bank's guidelines, don't have 20% for a downpayment, or need a longer repayment period; you still won't be wasting your time contacting a conventional agricultural lender. If the bank participates in the Farm Service Agency's (FSA) guaranteed loan program, you may still be able to obtain financing through that bank on terms that are acceptable to you. If the bank does not participate, than you should try a bank or other lender that does.

Under the guaranteed loan program, FSA guarantees loans made by conventional agricultural lenders for up to 95 percent of the principal loan amount. The lender is responsible for servicing the borrower's account for the life of the loan. All loans must meet certain qualifying criteria to be eligible for guarantees, and FSA has the right and responsibility to monitor the lender's servicing activities. Farmers interested in guaranteed loans must apply to a conventional lender, which then arranges for the FSA guarantee.

FSA guarantees are available on two types of loans; farm ownership loans and operating loans.

Guaranteed farm ownership loans have a maximum loan amount of $759,000.00 which is indexed to inflation. The loan term may be up to 40 years, and the interest rate cannot exceed what the lender charges its average farm customers. The loan proceeds may be used to purchase land, construct buildings and other improvements, and/or implement soil and water conservation projects.

Guaranteed operating loans are available to purchase livestock, poultry, equipment, feed, seed, farm chemicals, and supplies. An operating loan may also be used for soil and water conservation, or refinancing indebtedness with certain limitations. Guaranteed operating loans have a term of 1-7 years and the interest rate cannot exceed what the lender charges its average farm customers. The maximum loan amount is $759,000.00 indexed to inflation.

To qualify for an FSA guarantee, a loan applicant must:

be a citizen of the United States (or legal resident alien), which includes Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, and certain former Pacific Trust Territories;

have the legal capacity to incur the obligations of the loan;

be unable to obtain credit without a guarantee;

have an acceptable credit history as determined by the lender;

not have caused FSA a loss by receiving debt forgiveness on more than 3 occasions;

be the owner or tenant operator of a family farm after the loan is closed (for an operating loan, the producer must be the operator of a family farm after the loan is closed, for a farm ownership loan, the producer needs to also own the farm); and

not be delinquent on any Federal debt.

Corporations, cooperatives, joint operations, and partnerships and their members/stockholders must meet these same eligibility requirements, and the entity must also be authorized to operate a farm or ranch in the State where the land is located.

In addition to meeting the eligibility criteria, the loan applicant must have a satisfactory credit history, demonstrate repayment ability, and provide sufficient security for the loan.

The following actions are usually taken as part of the guaranteed loan application process:

1. the producer and lender complete the guaranteed application and submit it to FSA (FSA will assist if needed);

2. FSA reviews the application for eligibility, repayment ability, security, and compliance with other regulations;

3. FSA approves and obligates the loan;

4. the lender receives a conditional commitment indicating funds have been set aside, and the loan may be closed;

5. the lender closes the loan and advances funds to the producer; and

6. FSA issues the guarantee.

If you cannot qualify for an FSA guaranteed loan, you may be able to obtain financing directly from FSA using one of their FSA direct loan programs. Direct loans are made and serviced by FSA officials, who also provide borrowers with supervision and credit counseling. Funding for direct loans is limited, and applicants sometimes have to wait for funds to become available. To qualify for a direct farm ownership or operating loan, the applicant must be able to show sufficient repayment ability and pledge enough collateral to fully secure the loan.

When purchasing goats the purchase price is considered their value when determining whether enough collateral has been pledged.

Direct farm ownership loans have a maximum loan amount of $200,000.00. The loan term may be up to 40 years, and the interest rate is based on FSA's borrowing cost. Currently the interest rate on direct farm ownership loans is 5.5%. The loan proceeds may be used to purchase land, construct buildings and other improvements, and/or implement soil and water conservation projects.

Direct operating loans are available to purchase livestock, poultry, equipment, feed, seed, farm chemicals, and supplies. An operating loan may also be used for soil and water conservation, or refinancing indebtedness with certain limitations. Direct operating loans have a term of 1-7 years and the interest rate is based on FSA's borrowing cost. Currently the interest rate on direct operating loans is 3.5%. The maximum loan amount is $200,000.00.

FSA does not compete with commercial lenders, so you must have a written denial from a commercial lender to be eligible for a direct loan from FSA.

A direct loan applicant must also:

have sufficient education, training, or experience in managing and operating a farm or ranch that demonstrates the managerial ability needed to succeed in farming;

be a citizen of the United States (or legal resident alien), which includes Puerto Rico, the Virgin Islands, Guam, American Samoa, and certain former Pacific Trust Territories;

have the legal capacity to incur the obligations of the loan;

be unable to obtain credit elsewhere;

have an acceptable credit history;

be the operator or tenant operator of a family farm after the loan is closed (for a farm ownership loan, the producer must also own the farm, for an operating or emergency loan, the producer need only be the operator);

not have had a previous loan which resulted in a loss to FSA (with certain exceptions); and

not be delinquent on any Federal debt.

Corporations, cooperatives, joint operations, and partnerships and their members/stockholders must meet these same eligibility requirements, and the entity must also be authorized to operate a farm or ranch in the State where the land is located.

The following actions are usually taken as part of the application process for a FSA direct loan:

1. loan applicant contacts the FSA office and receives an application package;

2. loan applicant completes the loan application, with FSA assistance if needed;

3. FSA and the loan applicant meet to review and discuss the application;

4. FSA determines if the applicant is eligible and reviews the application for repayment ability, security, and compliance with other regulations;

5. FSA approves and obligates the loan; and

6. loan is closed, and the loan applicant receives the funds.

To obtain more information about agricultural loans contact a lender or FSA. The phone number for your local FSA office may be found in the phone book under USDA or you may go to FSA's website at http://www.fsa.usda.gov/edso/ and locate the contact information for the FSA office that serves your area. More information about loan programs is also available on FSA's website at http://www.fsa.usda.gov/dafl/default.htm

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This page updated 12/16/02

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