CZO—Lancaster Farming, Saturday, July 11,1981
Fourth in a series of six articles on
how to get started in farming
NEWARK, Del. Several kinds
of loans are available to farmers.
If you plan to go into farming, it
pays to know what financing op
tions are available.
The repayment period and type
of security required depend on the
purpose of the loan. The amount
and terms of the loan that in
stitutional lenders will make are
controlled by government and
institutional regulations, as well as
by experienced-based guidelines.
“Knowing the terms available will
help you prepare a better
management plan to support your
loan requests,” says University of
Delaware extension farm
management specialist Dr. Don
Tilmon.
Operating or “short-term” farm
loans are made for such seasonal
needs as seeds, fertilizer,
chemicals, feed, hired labor, fuel
and feeder cattle. These loans are
usually made for one year or less
because they’re used for annual
expenditures associated with the
production of crops and animal
products. You’re expected to pay
the loan back out of your
production proceeds.
Working capital or “in
termediate-term” loans are made
for such assets as machinery,
equipment, and breeding
livestock, or for major remodeling
or additions-to buildings. Amounts
borrowed under this type of loan
are usually larger than for
operating loans, says Tilmon.
Because they’re made for capital
items which have a useful life of a
number of years, the repayment
period may be five to seven years.
Usually a chattel mortgage is
required as security.
Real estate or “long-term” loans
WE STEEL-ROSCO
GRAIN BINS
Number Bushel Ft. Height
Diameter Model No. 01 Tiers Capacity Eaves Overall Cash Price
13.8 Ft. 144 4 1453 10.3 14.3 *822.60
13.8 Ft. 145 5 1769 12.8 16.8 $ 951.87
13.8 Ft. 146 6 2085 15.3 19.3 1,102.69
19.1 Ft. 194 4 2883 10.3 15.8 *1,326.00
19.1 Ft. 195 5 3488 12.8 18.3 * 1,549.83
19.1 Ft. 196 6 4093 15.3 20.8 * 1 ,799.52
19.1 Ft. 197 7 4698 17.8 23.3 $ 2, 012.27
19.1 Ft. 198 8 5302 20.3 25.8 $ 2,244.97
Prices Shown Are For Cash. FOB Manheim, PA K.D,
For More Information, Call or Send Coupon
EBERSOLE EQUIPMEIVT
F & SUPPLY COMPANY
lli JOHN R. EBERSOLE
RD 5, Box 190, Manheim, Pa. 17545
Phone 717-665-4201, 665-6861 or 738-1305
Getting started in farming
are used most often to buy land and
buildings. They can also be used tc
finance major real estate im
provements or consolidate short
and intermediate-term loans
through a refinancing of your debt
load. A mortgage on the real estate
involved serves as security.
Because of the large amount of
money involved, the repayment
perod may be as long as 35 years
or more. In most cases, these loans
are amortized that is, the
principal.and interest are paid in
uniform monthly, semi-annual or
annual payments.
To get the credit required to
start a farm business, you need to
know who the possible lenders are,
as well as the types of loans and
terms they offer. Terms will vary
with the source, says the
specialist. Some of the differences
are dictated by law or the
regulations under which certain
lenders operate.
There are a number of possible
credit sources including the Farm
Credit Service, Farmers Home
Administration, commercial
banks, insurance companies, as
well as individuals and dealers.
Loans are also available for some
purposes from the Commodity
Credit Corporation and the Small
Business Administration.
The Farm Credit Service makes
loans to farmers through local
cooperative associations. These
associations are chartered by the
federal government and are
subject to its supervision through
an independent government
agency the Farm Credit Ad
ministration. Each farmer
borrower becomes a member of
the local association and must hold
stock in it equal to 5% of the loan.
The cost of the stock can be added
to the amount of your loan if you
don’t already own adequate stock.
A board of directors elected by the
farmer membership governs each
local association.
The Farm Credit Service
provides short, intermediate, and
long-term credit. Security for
short-term production loans
ranges from a lien of the crop
produced or a chattel mortgage, to
a signature note. Security for in
termediate-term loans normally
consists of a chattel note. There
are also some cases where a
mortgage is required.
The Farmers Home Ad
ministration is a lending agency
that operates within the U.S.
Department of Agriculture. Ac
cording to Tilmon, it was created
to extend credit to farmers and
ranchers who weren’t able to get
clean trom omer maiuiitiuiictl
lenders, generally because they
didn’t have enough equity.
“Once a farmer or rancher
reaches a financial position which
makes him eligible to borrow from
these other lenders, he’s expected
to ‘graduate’ from FmHA and
obtain credit through regular
commercial sources,” explains the
specialist.
Loans from FmHA are available
to single farm proprietorships,
farm partnerships and farm
corporations. One member of a
family partnership must be a
farmer. However, all non-blood
related partners and all corporate
stockholders must be farmers to
qualify
Total loan funds available from
this source in each county are
limited by ceilings established by
Congress. In many areas, the
amounts authorized are less than
the total requested by farmers in
the county.
“Of all financial institutions.
commercial banks provide far
mers with the broadest range of
financial services,” sibys Tilmon.
They’re widely available and are a
convenient source of loans.
Banks provide short, in
termediate, and long-term credit
for operating, working, and real
estate loans. They also provide
consumer loans for such things as
cars, household furnishings, and
home remodeling. They provide
checking-account services,
savings accounts, and other in
terest-bearing investments. Some
banks provide services for in
vesting in government securities
and operate trust departments to
settle estates and manage in
vestments.
Life insurance companies are
another source of farm real estate
loans. Nationally they accounted
for about 14% of farm real estate
loans on January 1, 1978. But these
loans were more or less con
centrated in the major agricultural
areas of the country. They provide
only about 2% of the total farm real
estate loans in the northeast.
The major life insurance com
panies which make agricultural
loans have regional offices and
representatives in the field. Some
companies work through com
mercial banks, attorneys, mor
tgage brokers, or real estate
agencies.
Private lenders provide some
short- and intermediate-term
credit, but they’re most important
in extending long-term credit to
farmers tor real estate purposes.
Thirty-five percent of the national
farm real estate debt load on
January 1, 1978, was held by in
dividuals and nonreporting len
ders. This was slightly more than
the debt load of the Farm Credit
Service, which at the time held 2%
Feed Bins
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times more real estate loans than
any other institutional lender.
Most dealers and merchants who
supply farmers with production
supplies and maintenance services
provide open-account credit. When
a farmer buys supplies, the dealer
or merchant generally grants a
period of time for the bill to be
paid, even though the supplies
have already been delivered.
Fanners can obtain Commodity
Credit Corporation (CCC) loans to
install grain-drying equipment and
to build dry grain, high-moisture
grain and silage storage units. This
agency also finances remodeling of
existing structures. Eligible
producers may borrow up to 85% of
the cost of buying and installing
facilities and equipment, including
concrete and wiring costs. The
current limit is $50,000 for 8 years
at an interest rate of 10.6%. You
can apply for these loans through
your county agricultural
Stabilization and Conservation
service office.
The Small Business Ad
ministration has become another
source of agricultural loans in
recent years. But the loan activity
of this agency has been aimed
primarily at agriculturally related
businesses, rather than farm
production itself.
If you’re serious about going into
farming and have developed a
realistic management plan for
doing so, it should be possible to
obtain credit from one of these
sources. For the most part, the
funds available should be adequate
to meet the needs of most farmers.
Wisely used, credit is beneficial to
both the lender and the borrower.
See
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