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Important New Information Regarding the Minnesota Department of Agriculture Microloan Program

Posted on October 24, 2013

Contact:   Hli Xyooj, FLAG Staff Attorney: 651-223-5400 or lawyers@flaginc.org

The Minnesota Department of Agriculture’s (MDA) Microloan Program is an initiative by the Rural Finance Authority (RFA) and the State of Minnesota to assist smaller and non-traditional farmers to access credit to maintain and strengthen their farm businesses. Farmers can borrow up to $10,000 to be used for working capital (annual inputs such as seed, feed, fertilizer, land rent, etc.) or equipment and/or small farm machinery. Microloan funds cannot be used to purchase real estate or cooperative stock, nor refinance current debts. Loan amortization can be scheduled for a term of 1 to 6 years negotiated between the lender, applicant, and the RFA. Borrowers may use the program more than one time to an aggregate amount of $10,000. Interest rates and other specific terms will vary from lender to lender depending upon the conditions of the loan.

The Minnesota Department of Agriculture has announced these major changes to its Microloan Program:

• The interest rate has been dropped to 0 percent to the lenders who are acting as intermediaries for the program. This will give the lenders the ability to offer lower, more competitive rates to borrowers. This does not mean the farmer’s interest rate will be 0 percent, but it allows the intermediaries to offer lower rates to the farmers.

• The technical assistance/farm business management facilitation requirement has been dropped; and the agreement language requiring the lender to facilitate some type of technical assistance or farm business management training has been removed. Even though the Rural Finance Authority board feels this is a necessary resource towards a successful farm operation, they felt that the requirement may be too burdensome for the lender, without some funding support. The Rural Finance Authority will continue to pursue opportunities to help fund such resources for farmers.

• The shared loan-loss provision of agreement has been dropped. Participating lenders are fully responsible to repay allocated funds to Rural Finance Authority regardless of repayment by the borrower.

These changes are intended to make it easier for small and non-traditional farmers to access the credit they need to stabilize their operations and increase profits. If you have any questions about the Microloan Program or wish to apply, you can go to the Minnesota Department of Agriculture’s website at http://www.mda.state.mn.us/grants/loans/microloan.aspx.

Farmers needing help with farm plan development and financial documentation work can find resources at: http://www.mda.state.mn.us/mfan.

Interpretation services are available for non-English speaking clients.

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Farmers’ Legal Action Group is a nonprofit law center dedicated to providing legal services and support to family farmers and their communities in order to help keep family farmers on the land.