Source: NATIONAL SUSTAINABLE AGRICULTURE COALITION, 12/18/14

Finding a way to finance a new farming operation before money starts coming in at the end of the growing season is a challenge that all new farmers face. And while some farmers are able to save enough before they start farming, there are always inevitable start-up and annual operating expenses – like seeds, inputs, tractors, hoophouses, fencing, and livestock – that require up-front financing.

USDA’s Farm Service Agency (FSA) has been a long-standing resource to new farmers and prides themselves on being the “lender of first opportunity” for those farmers who struggle to obtain financing from a commercial bank or other private lender.

Last year, FSA launched a new streamlined farm loan program to specifically target the credit needs of smaller farms – including those just starting out and those selling to local and regional markets. This microloan program officially launched in January of 2013, and has made over 8,400 loans in every state throughout the country, freeing up approximately $161 million in financing to new, minority, and small farmers.  Check out our Grassroots Guide to learn more about how this program works.
Last fall, NSAC did an analysis of this new loan program to see how well these new loans were working in various regions across the U.S. With the close of Fiscal Year 2014, we have once again taken a closer look at where microloans are being used the most and how well they are reaching beginning farmers as well as farmers of color, veterans and female operators.

Microloan Overview
In total, nearly 5,000 microloans were made in Fiscal Year 2014 (running from September of 2013 to September 2014) in every state across the U.S. This is 1,562 more loans and 45 percent higher than the total number of microloans made in 2013. Part of the reason for this increase is the longer period for which loans were offered in 2014, since the microloan program wasn’t up and running until January of 2013, and thus last year’s loan totals only account for 9 rather than 12 months of loan-making activities.

But still, the 2014 data averages to about 416 loans per month (though it can be assumed that the majority of these loans were made earlier in the year at the start of the growing season), whereas 2013 data shows a monthly average of 381. Additionally, the total amount of microloans made in 2014 was 55 percent higher than the value of loans made the year prior. This indicates that FSA made larger microloans than in 2013.  In 2014, the average size micro loan was $19,732 compared to $18,381 in 2013.

The maximum loan amount for micro loans was $35,000 in 2014, but the 2014 Farm Bill increases this amount to $50,000.

From this data, it is clear that more and more farmers are finding out about this new loan program and finding that it meets their farming needs. Although, there are some interesting regional trends that show which parts of the country are finding this loan program more useful than others. Some of the key findings from the 2014 microloan data include:
• Two regions — Appalachia and the Delta — continue to dominate in making both the most number and highest percentages of microloans.
• Across the country, states are making on average slightly more microloans in 2014 than in 2013, though there are several outliers that actually made fewer loans this year.
• There continue to be states that have surprisingly low microloan usage compared to the number of small farms in that state.
• The vast majority of microloans target beginning farmers, and a higher percentage of microloans are used by minority and women farmers than other FSA loan programs.

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