FSA Loans for Commodity Marketing Assistance: Qualifying with Bad Credit

FSA loans for commodity marketing assistance are loans available for farmers who produce crops. The loans are distributed by the Department of Agriculture’s Farm Service Agency. These loans are provided to farmers needing financial assistance during the harvesting season. The loans are designed as a way to keep farmers afloat and producing.

Types of Loans

The FSA has two different types of commodity assistance loans. The loans are non-recourse marketing loans and recourse marketing loans. Non-recourse marketing loans are loans provided to farmers to help finance cash flow during the harvest season without their having to sell their commodities at a time when market prices are low. For repayment, farmers pledge collateral to repay the loan and have the option to use the commodity as a means to repay the loan. Recourse marketing loans are loans that must be repaid at principal plus interest. Recourse marketing loans apply to specific types of commodities. The commodity produced cannot be used as collateral to repay the loan obligation. The qualifications for both loans are the same.

Qualifying

FSA loans for commodity marketing assistance function very similarly to private loans with the exception that the credit qualifications are more lenient. There are loan caps (maximum loan amount) and tighter repayment terms (usually 10 months and one lump sum payment instead of monthly payments) associated with the FSA loans. The criteria to qualify are imposed on both the farmer and the commodity being produced. Both have to meet standards set forth by the FSA. The standards range from the type of commodity being produced to meeting adjusted gross income limitations. The complete list of guidelines can be found on the FSA website. Adherence to the standards set forth by the FSA can help ensure that the farmer is working in good faith to repay his or her loan obligation. The value of the commodity can ensure that the loan will be repaid at the terms set forth in the contract.

Bad Credit

As with almost all financial applications, applicants must have good credit to qualify. An applicant may meet all the criteria to apply but may have credit issues. If an applicant has bad credit, it does not automatically disqualify him or her from receiving the loan. An applicant should be prepared to meet additional requirements that a lender may request. The request could range anywhere from having additional collateral to having a cosigner. These additional criteria will ensure that the applicant will meet his or her loan obligation. An applicant who has questions should contact his or her local FSA office for more information.

Considerations

If an applicant already has bad credit, he or she should consider if a loan is an obligation he or she will be able to repay. If the applicant defaults on the loan obligation, it could further damage his or her credit. If the applicant uses additional collateral or a cosigner, he or she could lose the collateral and damage the cosigner’s credit. The applicant should weigh all available options and his or her financial situation prior to applying for the loan.