§ 1941.15 - Special beginning farmer or rancher OL loan assistance.

(a) Objectives. The basic objective of this special OL loan program is to provide the applicant, whose primary occupation is or will be farming, with a reliable source of operating credit for annual operating and capital expenses needed to conduct a financially viable farming or ranching operation. Supervision will be provided to the extent necessary to achieve the objectives of the loan and to protect the interests of the Government in accordance with subpart B of part 1924 of this chapter.

(b) Eligibility requirements for special beginning farmer or rancher OL loan assistance. Applicants must:

(1) Meet the “beginning farmer or rancher” definition in § 1941.4 of this subpart, and

(2) Have not operated a farm or ranch, or have operated a farm or ranch for not more than 5 years. This requirement applies to all members of an entity.

(3) During the 5-year period prior to applying for assistance, have sufficient education and experience to indicate that the applicant is able to conduct a successful farming or ranching operation.

(4) Own, lease, or have a commitment to lease the site of the operation, that is or will be sufficient to carry out the planned operation.

(5) Present a plan of operation in accordance with paragraph (e) of this section, which projects feasibility for each year of the 5-year period, and a financial projection reflecting a financially viable operation at the end of the commitment period referenced in paragraph (f) of this section.

(6) Have or will have access to livestock and equipment, sufficient to carry out the planned operation.

(c) Loan purposes. Loan purposes are as set forth in § 1941.16 of this subpart. Applicants approved for loan assistance under this section will also receive priority in the purchase of Agency inventory equipment as stated in § 1955.122(a) of subpart C of part 1955 of this chapter.

(d) Loan limitations. In addition to the loan limitations stated in § 1941.17 of this subpart, the following limitations apply:

(1) The borrower shall not be eligible to receive additional special direct OL loan assistance during the commitment period referenced in paragraph (f) of this section after 8 years from the date of receiving the first such loan. This does not prohibit the borrower from receiving an additional 2 years of OL loan assistance under the regular direct OL loan program during the commitment period.

(2) The borrower is not eligible for special beginning farmer OL loan assistance for a 3-year period beginning on the date that a previous commitment is terminated under paragraph (h) of this section.

(e) Plan of operation for special beginning farmer OL loan assistance. In addition to the planning requirements set forth in § 1924.56 of subpart B of part 1924 of this chapter and subject to paragraph (e)(3) of this section, the following information must be submitted to the County Supervisor with the application:

(1) A first-year plan of the farming operation from the applicant providing the following details:

(i) How the operation is to be conducted.

(ii) The types and quantities of commodities to be produced.

(iii) The production methods to be employed by the operator.

(iv) The conservation measures to be utilized in the operation.

(v) The livestock and equipment needed to conduct the farming operation (including expected replacements or additions), and whether the applicant owns, leases, or has access to the item(s), or plans to purchase or lease the needed item(s).

(vi) The expected income and expenses of the operation.

(vii) The expected credit needs, including the types, amounts and sources.

(viii) The site or sites where the farming operation is, or will be, located.

(2) Upon receipt of the plan from the applicant, including any future planned purchases and changes to the operation, the County Supervisor will develop a 5-year plan by use of an automated analysis, described in § 1910.4 (b) of subpart A of part 1910 of this chapter, and a projection of the financial status of the farming operation after special beginning farmer OL loan assistance (direct/guaranteed OL) has been provided for the period necessary, not to exceed 10 years. The projected plan must indicate the operation will be financially viable without further Agency assistance within 10 years. This plan will detail the specific goals addressed by the applicant in order to graduate to other credit in an expeditious manner. Failure to meet these goals may result in termination of the commitment under paragraph (h) of this section.

(3) An applicant has the option to develop the 5-year plan and financial projection without the use of the Agency's automated Farm and Home Plan system. The County Supervisor will notify the applicant of this option. For each year of the 5-year plan, the items listed under paragraph (e)(1) of this section must be provided. The financial projection must conform with the requirements set out in paragraph (e)(2) of this section.

(f) Commitment period. In making OL loans under this section, the County Supervisor will make a commitment to the borrower to provide direct and guaranteed operating credit for a period not to exceed 10 years, subject to loan limitations stated in paragraph (d) of this section. FmHA Form Letter 1941-A-2, “Conditional Commitment to Provide Special Operating Loan Assistance to Beginning Farmers or Ranchers,” will be used for this purpose, and provided to the applicant when the loan is approved. The following conditions apply:

(1) The length of the commitment period will be determined by an automated analysis of projected financial and income data reflecting a financially viable operation as defined in § 1941.4 of this subpart.

(2) After the first year, subsequent loans under this section are contingent on the revision of the projected plan of operation required in paragraph (e)(1) of this section. The plan will be for the 5-year period beginning with the particular year for which assistance is requested, or if shorter, the period beginning with the particular year for which assistance is requested and ending with the year the plan projects a financially viable operation. A revised plan will be developed each year. This must be based on an analysis of the prior year's operation. The plan must be revised at least 60 days before the assistance will be needed for that particular year. The type of assistance provided each year (direct OL-Limited Resource, direct OL, guaranteed OL-Interest Assistance, or guaranteed OL) will depend upon the financial progress made by the loan applicant in accordance with the eligibility requirements for each of the listed types of assistance.

(3) Borrowers under this section must demonstrate progress toward the specified goals with the objective of eliminating the need for Agency credit after not more than 10 years. A borrower will be considered to have met the goals if Agency payments are made on a timely basis, agreements Agency are kept, and financial progress is made such that the operation continues to be financially viable.

(g) Extension of commitment period. If a commitment has been issued for less than 10 years, the commitment period may be extended subject to the 10-year limit providing:

(1) The annual plan is revised in accordance with paragraph (f)(2) of this section;

(2) The failure to achieve the goals within the commitment period was due to circumstances beyond the control of the borrower. Acceptable new document circumstances for not achieving the goals include, but are not limited to:

(i) The reduction in essential income from a nonfarm job due to unemployment or underemployment of the borrower-operator or spouse caused by circumstances beyond the borrower's control.

(ii) Illness, injury, or death of an individual borrower, stockholder, member or partner who operates the farm.

(iii) Natural disasters, an outbreak of uncontrollable disease, and/or uncontrollable insect damage which caused severe loss of agricultural production that reduced the repayment ability of the borrower so that scheduled payments cannot be made.

(iv) Economic factors that are widespread and not limited to an individual case, such as high interest rates or low market prices for agricultural commodities as compared to production costs, that reduce the repayment ability of the borrower so that scheduled payments cannot be made, and;

(3) The failure to achieve such goals has not materially reduced the likelihood of the farming operation becoming financially viable.

(h) Termination of commitment period. (1) The commitment will be revoked if the Agency fails to recertify the applicant as eligible for the regular direct and/or guaranteed OL loan programs under paragraph (k)(2) of this section.

(2) The commitment for operating credit also shall be revoked if the applicant fails, for 2 consecutive years, to meet the goals specified in the plan, unless both of the following are met:

(i) The failure has not materially reduced the likelihood of the operation becoming financially viable. (An updated projection of the financial status of the operation still reflects financial viability at the end of the commitment period.)

(ii) The failure to meet the goals of the 5-year plan was due to circumstances beyond the control of the borrower as described in paragraph (g)(2) of this section.

(3) Upon revocation of the commitment, the borrower will be given appeal rights in accordance with 7 CFR part 780.

(i) Relationship between Agency loans, direct and guaranteed. The provisions of § 1941.29 of this subpart apply as stated. When a commitment is made to an applicant for 8 or more years, and no guaranteed special OLs are made, all direct operating loans are to be special operating loans for the first 8 years. OL loans made in the 9th and/or 10th years will be regular direct operating loans. With respect to loan objectives as stated in paragraph (a) of this section, and in accordance with paragraph (f)(2) of this section, whether the borrower receives a direct or guaranteed OL loan during the commitment period will depend on the borrower's financial condition, the projected 5-year plan of operation, and the availability of credit.

(j) Completion of the 10-year commitment period. If the borrower is unable to graduate to other credit without the Agency's assistance, Agency may provide direct or guaranteed loan assistance subject to the lifetime loan limitations set forth in § 1941.17 of this subpart and § 1980.175 (d) of subpart B of part 1980 of this chapter and all other loan making regulations of this chapter.

(k) Agency certification. A special beginning farmer OL application will only be considered after the applicant submits a complete 5-year plan of operation and a projection of the financial status of the operation as set forth in paragraph (e) of this section. In addition to the requirements of § 1941.30, the following conditions apply:

(1) Agency certifications of eligibility under paragraph (b) of this section are effective throughout the commitment period.

(2) For subsequent loan requests during the commitment period, the Agency will certify as to the applicant meeting the eligibility requirements for the regular direct or guaranteed OL loan programs, as appropriate. Such certification is unnecessary if a 5-year eligibility certification has not yet expired unless the County Supervisor has determined that the applicant's situation has changed such that the eligibility determination would potentially be affected. If recertification is rejected, no subsequent loan will be made under the commitment and the commitment will be revoked in accordance with paragraph (h) of this section.

(l) Loan approval or disapproval. In addition to the requirements of § 1941.33 of this subpart, it must be determined that:

(1) Initial loans. (i) The plan of operation reflects that farm income is sufficient to cover farm operating expenses, replacement of capital items, debt service, and that part of living expenses not covered by nonfarm income (if any) for each year. Nonfarm income cannot be relied on to cover farm expenses or debt service.

(ii) At the end of the commitment period the operation will project financial viability without further assistance from FmHA or its successor agency under Public Law 103-354, and the identified goals are reasonable and practicable.

(2) Subsequent loans. Subsequent loans will be approved or disapproved in accordance with FmHA Form Letter 1941-A-2 and paragraph (f) of this section.