Ag Bankers Praise Farm Bill's Credit Title

When President Donald Trump signs the farm bill into law on Thursday, one of the immediate changes will be an increase to Farm Service Agency loan guarantees and direct loans.

Lenders say it's an overdue fix, even though many would like to see even higher limits down the road.

"The biggest thing is these give more flexibility," said Ed Elfmann, senior vice president for ag and rural baking policy at the American Bankers Association. "The more flexibility you can have, the better, especially as these operations grow larger in size. We have to remember that ag is not -- farms are not -- small, little, family operations like they used to be. They're complex. They're multiple entities. They're growing in size and scope."

The Agricultural Act of 2018 raises FSA loan guarantees to $1.75 million from the current $1.399 million. It also doubles the loan limit for direct farm ownership, or real estate, loans to $600,000 and increases the limit on direct farm operating loans by $100,000 to $400,000.

Elfmann said lenders often use a combination of banking products to meet borrowers' needs. With an FSA loan guarantee, the bank or another lender closes the loan and advances the funds to the borrower. In the event the borrower defaults, FSA reimburses the bank. A direct loan is funded by the FSA, which also makes and services the loan.

Source: DTN