Term Limits on Some Farm Loans Suspended

June 30, 2000

The crop insurance reform bill passed by Congress and signed into law provides that farmers previously denied loans can now become eligible. The act suspended for two years term limits for direct and guaranteed USDA operating loans.

USDA’s Farm Service Agency Administrator Keith Kelly said, "Some producers were denied operating loans earlier this year because they had reached limits imposed by the 1996 farm law on the number of years a farmer could receive operating loans from FSA. Anyone whose loan was denied, or who did not apply because they had hit the limit on the number of years they could receive a loan, should apply now if they still need credit."

The 1996 farm law contained a provision that limited the number of years in which a farmer was eligible to receive operating loans through FSA. Under that provision, a farmer could receive direct loans in no more than seven years and guaranteed loans or a combination of direct and guaranteed loans in no more than 15 years.

A transition period for borrowers near or past the limit was included. The requirement was intended to free up credit resources for beginning and minority farmers. However, financial stress from low farm prices has made it difficult or impossible for many farmers who borrow from FSA to make the financial progress necessary to move to another credit source. FSA finances only farmers who cannot get credit from other sources.

According to Kelly, without the change, some otherwise efficient farmers would have been unable to obtain credit and would have been forced out of business. Although it is relatively late in the crop year, FSA can still process a loan if the need is there. Kelly added there is ample funding available for both direct and guaranteed operating loans.