Direct Operating FSA Loans: Loan Requirements

The approval of your FSA loans application, specifically the Direct Operating Loan (OL) depends on the eligibility of the loan requirements you presented. For a guaranteed approval, check the following information and criteria, and see to it that you have them before you submit your application.

Citizenship - You must be a citizen of the United States, a non-citizen US national, or a foreigner/alien who proves your legal residency status that applies the Federal Immigration laws.

Federal debts - Your debt records is one of the most important criteria that will be evaluated by the FSA reviewers. If you have past loans from the government and was not able to repay them, it will reflect on your record and would reduce your chance of getting approved or would be a cause of your FSA loans application denial. Loan delinquency of federal funds causes government losses and therefore potential borrowers are evaluated under strict criteria.

Credit history - Your credit history from private lenders is also looked into. It will be scrutinized when you apply for a Direct OL. In fact, a fee will be charged on your part to pay the cost associated with your credit report. If the record shows a satisfactory past credit performance, your financing request can be considered.

Farming knowledge - Your agricultural experience, training, and education should be sufficient enough to satisfy the government's criteria. Your ability to manage and operate your farm or ranch business are evaluated based on your knowledge and skills. It is imperative that you demonstrate such qualities with acceptable farm records and the number of years you engage in farm operations. The FSA requires you of at least 3 to 10 years of experience in the
business.

Ineligibility for commercial loans - You can only avail the FSA loans if private/commercial lending institutions like banks and credit unions deny your loan requests. A proof of document may be necessary to prove your inability to obtain funding outside the federal government sources.

Collateral - FSA loans need to be secured through collateral. The federal government requires that the collateral for the Direct OL be taken from the first lien on crops or livestock to be produced as well as the machinery or equipment purchased or refinanced with loan funds. The FSA may also obtain the loan security from real estate property or other forms of chattel.

Training courses – In order to insure that the borrower will be competent enough to manage the farming business and its finances, all borrowers are required to undergo a thorough farm and financial training classes. Farm owners who can prove and demonstrate efficient knowledge and skills in subject matters covered by the course, may file a waiver and not take the class.

Farm ownership - When the Direct OL is approved and closed, the FSA requires that the borrower manages a family-sized farm where the funds will be used and serves as the operator or tenant operator of the business. A family-sized farm is an agricultural business that produces sufficient products from its operation, generates adequate income to finance farming operation necessities, family living expenses, and other related farming needs.