The U.S. Department of Agriculture (USDA) announced changes to the Farm Service Agency's (FSA) Farm Loan Programs on Aug. 7, 2024. The changes, led by FSA Administrator Zach Ducheneaux, a member of the Cheyenne River Sioux Tribe, remove barriers to increasing access to FSA loans for farmers and ranchers who find it difficult to access traditional lines of credit. These FSA policy changes implement recommendations long sought by the Native Farm Bill Coalition (NFBC), a coalition of more than 170 Tribes, Tribal organizations and allies.
The prevalence of barriers that impede access to credit is unfortunate but all too common in Indian Country. Tribal farmer and rancher operations require access to reliable, flexible and adaptable lines of credit to maintain, repair, adapt and/or prepare for and respond to unpredictable weather, disasters, changing demand, supply chain challenges and more. Yet, many of these Tribal producers are located in "credit deserts" where lines of credit with sustainable terms and conditions are few and far between.
The U.S. Government Accountability Office (GAO) points to land use restrictions, administrative process delays and load readiness as primary contributors to the lack of access to credit for Tribal producers. See GAO-19-464, P. 2. While Native Community Development Financial Institutions (CDFIs) have attempted to fill the credit gap by providing agricultural loans, they have found that the agricultural borrowing needs in Indian Country significantly exceed their lending capacity. See Food Financing Efforts 2014: Native CDFI Support of Native Farmers & Ranchers, P. 10. Perhaps even more concerning is that the NFBC has reported that "on average, Native producers carry more debt at higher and sometimes even predatory loan rates than other producers." See Gaining Ground, P. 58.
Recognizing these challenges, FSA's changes significantly increase access to reliable, low-interest credit by removing barriers that often disadvantage tribal producers when accessing FSA's Farm Loan Programs. Changes specifically benefitting tribal producers include amending the definitions of:
- "Family farm" in 7 CFR 761.2 to include commercial foraging operations to operate loan assistance where commodities are foraged on Indian land and add definitions for "commercially foraged," "Indian land" and "Indian Tribe."
- "Related by blood or marriage" and "Relative" in 7 CFR 761.2(b) to include additional familial relationships including husband, wife, parent, child, brother, sister, uncle, aunt, grandparent, son, daughter, sibling, stepparent, stepson, stepdaughter, stepbrother, stepsister, half-brother, half-sister, son-in-law, daughter-in-law, father-in-law, mother-in-law, nephew, niece, cousin, grandson, granddaughter or the spouses of any of those individuals.
- "Participated in the business operations of a farm" to clarify that owning a farm does not necessarily mean an individual has participated in the business operations of a farm (e.g., an absentee landowner, lessor, etc.); this definition relates to direct loan eligibility, which currently requires certain managerial experience and direct farm ownership experience.
- "Agricultural commodity, "Feasible plan," "Good faith" and "Youth loan."
The FSA also:
- Clarified that the interest rate for the Microloan (ML) Operating Loan (OL) Program and Indian Tribal Land Acquisition Program (ITLAP) is equal to the existing OL rate and Farm Ownership Loan (FO) Program rate but is not to exceed 5 percent.
- Indicated that the Distressed Borrower Set-Aside (DBSA) Program will administer a new loan servicing program for financially distressed borrowers that will allow for the deferral of one annual loan installment at a reduced interest rate; borrowers do not have to suffer a loss from a declared disaster to qualify for DBSA.
- Provided all eligible loan applicants access to flexible repayment terms that create upfront cash flow that borrowers can use to increase working capital reserves and savings, including for retirement and education.
- Reduced additional loan security requirements to enable borrowers to leverage equity.
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