USDA offering loans to farmers who grow for locals

MEMPHIS, Tenn. (AP) -- The U.S. Department of Agriculture has created a new loan program to help small farmers, including growers who want to take advantage of the soaring interest in locally produced food.

Agriculture Department Secretary Tom Vilsack told The Associated Press on Monday that new "microloans" of up to $35,000 are designed to help bolster family-run farms as well as minority growers and military veterans seeking to start a farm who might otherwise have trouble qualifying for small loans from banks or other USDA loan programs.

The loans can help farmers grow niche or organic crops to sell directly to ethnic and farmers markets, or contribute to community-supported agriculture programs. Vilsack noted direct-to-consumer sales was a fast-growing sector, with a 60 percent increase in farmers markets in the past three years.

The loan also can cover the costs of renting land, seed, equipment and other expenses. The goal is to create more opportunities for entrepreneurship and employment in the farming industry, Vilsack said.

"This smaller microloan program really is designed to help a producer that wants to get into the direct-to-consumer sales business or wants to help provide produce to, for example, a farmers market," Vilsack said. "It will help bolster the local and regional food system movement that is taking place."

Vilsack said the new loan program also helps organic producers and small farmers who had been benefiting from grants and programs under the 2008 farm bill, which has not been extended by Congress.

The microloan program also provides a more simplified application process in comparison with traditional farm loans.

Kay Jensen, an organic farmer who raises broccoli, strawberries and tomatoes in Sun Prairie, Wis., saw two immediate benefits to the microloan program — paperwork would go down from about 30 pages to seven, and it would be easier to borrow a manageable sum. She said some lending programs try to cut costs by only giving out sums of $100,000 or more, and she might consider a microloan for $3,000 to $10,000 to expand her irrigation systems.

"A lot times what we need is just small amounts of money, but a lot of times the only funding available is large amounts of money," she said. "This whole concept of a microloan, where you're looking at smaller, reasonable amounts of money, this really fits an incredible niche."

Vilsack spoke to The Associated Press ahead of the official announcement of the program, which happened Tuesday. He was in Tennessee to speak to the American Farm Bureau Federation's annual meeting in Nashville.

Vilsack said the loans represent an effort to expand credit to minority, socially disadvantaged and young and beginning farmers and ranchers. The interest rate changes monthly, and is currently 1.25 percent, according to the USDA. Also, the loan does not have to be repaid for seven years.

"It's about making sure that we have diversity within agriculture, that we have a good blend of large production facilities, medium-sized operations and smaller operations," Vilsack said.

Since 2009, the federal government has issued more than 128,000 loans totaling nearly $18 billion through the Farm Service Agency Operating Loan Program. It has increased the number of loans to beginning farmers and ranchers from 11,000 loans in 2008 to 15,000 loans in 2011.

Those interested in applying for a microloan may contact their local Farm Service Agency office.

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Associated Press writer Dinesh Ramde in Milwaukee contributed to this report.