Direct Operating FSA Loans: Benefits

The Direct Operating Loan is one of the FSA Loans that is granted to owners of farms and ranches who are not able to obtain loans from private lenders. It offers various advantages to its applicants of whom 50% of the beneficiaries are beginning farmers/ranchers and socially disadvantaged agricultural producers. Here are some benefits that applicants can gain once they are approved of a Direct OL.

Operating Capital Financing

Farmers and ranchers who are just starting their business in the farming industry are the major beneficiaries of the Direct OL. These farm loans aim to assist these new farmers and ranchers to finance the purchase of operating equipment and facilities. Agricultural items such as livestock, feeds, seeds, farm tractors, fertilizers, fuel and farm chemicals, are just a few of the things that the borrower can buy using this government small business loan. In addition, this FSA loan can also be used to acquire a farm insurance which is a necessity for the protection of the business from damages and loss caused by natural calamities.

Use of Funds for Minor Operating Needs

Direct OL cannot only be used to fund the operation of a start-up farm business. It can also be used to pay the cost of labor and purchase of items used for minor building improvements and renovations. These FSA loans can also be used to finance the family's food and other living expenses, as well as for water and land development. In special conditions, this loan program may also be used to refinance any existing debts that the borrower has.

Easy Application Process and Speedy Disbursement

FSA loans applications are done through the agency's local office. If the applicant meets the criteria, all he or she needs to do is comply and submit all the necessary forms and documents. The submitted application will be reviewed, evaluated and decided by a designated FSA staff. As long as all requirements are accomplished and satisfied the reviewer, the loan is approved and the disbursement of funds comes next.

Availability of Adequate Amount

A farm or ranch owner can secure the FSA loan funds under the Direct OL to a maximum amount of $300,000. However, if his or her operating needs do not cost that much, he or she may wish to borrow the allowed average amount from the agricultural funding program.

Lower Interest Rate/Reasonable Term

Since Direct OL is a part of FSA loans which is a government-funded program, the interest rate charged per year is very low. The Farm Service Agency only applies 2.5% (subject for change) of interest rate for this loan program. The repayment term for Direct OL is 7 years. However, the borrower's repayment capability and the value of collateral may also affect the rate and the loan term. For farm producers whose income and resources are limited, the government may impose much lower interest rates. Their loans are reviewed in periodic manner and the interest rates will be adjusted based on his or her financial capacity to repay the borrowed fund.