With an increasing demand for low-interest loans by farmers, Minnesota’s Rural Finance Authority has seen its $35 million allotment approved last year by the Legislature whittle down to less than $7 million available.
To bolster funding for the next year, Gov. Mark Dayton last week urged the state Legislature to take immediate action to provide at least $35 million in additional funding for RFA. The authority, which was established in 1986 during the farm crisis of the time, partners with local lenders to provide low-interest loans to eligible farmers.
RFA offers four programs: the beginning farmer and seller-assisted loan program, which helps younger and beginning farmers purchase ag land; the agricultural improvement loan program, which finances farm improvements, such as grain handling facilities, machine storage and manure systems; the restructuring loan program, which helps farmers reorganize their farm debt to improve cash flow; and the livestock expansion loan program, which offers financing for new livestock production facilities.
Interest rates range from 2% to 3.5%, depending on the loan.
RFA expects to exhaust loan capital May 21
Without the additional investment this spring, Minnesota Department of Agriculture officials say RFA is expected to exhaust its available capital for loans before the 2018 legislative session concludes May 21.
Matt Wohlman, MDA deputy commissioner, says RFA assistance to farmers over the past year has seen the largest growth in its beginning farmer and seller-assisted loan program. Around 54% of the $27.5 million spent thus far, out of $35 million appropriated in 2017, has gone toward beginning farmer loans, he says.
Around 18% of the amount spent thus far has been on the ag improvement loan program. Another 18% has gone to the livestock expansion loan program, and around 10% has been for the restructuring loan program.
“We expect, though, to see an uptick in restructuring program loans,” he adds, given the state of the farm economy.
Since its inception, RFA has issued 3,074 loans totaling $259 million. Currently, the authority’s loan portfolio has 485 loans totaling $65 million.
Wohlman adds that with RFA using bonding money, the program doesn’t cost the state but rather is user-financed. In addition, since the authority started, less than 1% of its loans have defaulted — only 21 loans totaling $550,000.
To learn more about RFA, visit MDA’s Agricultural Finance/RFA Finance and Budget Division webpage, or call 651-201-6004.