By Richard Sandberg

Several low interest loan programs are provided for farmers, ranchers and other agribusinesses. The loans have aided the agriculture community by providing funds when conventional loans are unavailable by:

• Providing funds for projects to assist operators in conserving resources and improving efficiency of operations.
• Assisting beginning farmers to purchase farm and ranch properties.
• Aiding financially distressed operators with long term funding.

The portfolios are comprised of approximately 800 loans, and the combined assets of the programs as of June 30, 2011 totaled nearly $51 million. Loans are funded from revolving funds that grow each year from the earnings of the programs. These programs benefit Utah’s economy in numerous ways. Loss history has been minimal.

Agriculture Resource Development Loan Program (ARDL)

The largest program in the loan section with 55 percent of its assets and more than 600 loans, ARDL is administered by the division for the Utah Conservation Commission. Technical service and marketing of the program are provided by local conservation districts and the Utah Association of Conservation Districts as well as other conservation partners, both federal and state. Examples of eligible projects include animal waste management, water usage management (irrigation systems), rangeland improvement, on farm energy projects, wind erosion control and disaster mitigation and cleanup. Borrowers are charged 3 percent interest and a 4 percent administration fee, which covers marketing and project planning costs, and loans have a maximum term of 12 years.

Producers are encouraged to use these loans to help fund projects jointly with federal and state grants. They can also fund stand alone projects.

Rural Rehabilitation Loan Programs

These programs, funded by both state and federal monies comprise the rest of the loan programs. They have been funded by both state and federal monies. The various purposes of the loans are to:

• Provide assistance to producers with financial problems with various causes (including Emergency Loan Programs totaling of $10.5 million initiated during the past two years).
• Assist beginning farmers to obtain farms and ranches. This includes providing financing to facilitate the transfer of ownership of family farms and ranches from one generation to another.

These are essentially loans of last resort requiring that applicants be declined by conventional commercial lenders. They are often granted in cooperation with other lenders such as the USDA Farm Service Agency. Terms range up to a maximum of ten years with amortization of greater terms. Interest rates charged are four percent or less. These long term real estate loans have helped numerous Utah agricultural operations to remain in business. Maximum loan size is limited to $250,000.

Success Story

A good example of a recent Rural Rehab Loan which illustrates how the program can help people, help the state’s economy and help the industry is reflected in the case of Brent Bowles in the South Jordan who has operated a meat cutting business successfully for several decades. The business was originally based on the availability of locally produced cattle. Since that activity has largely disappeared from the urban area, but is common in a more rural area of central Utah, and since Mr. Bowles was considering retirement and transferring the business to his son Richard and daughter-in-law Stephanie who had been working with him for years, they arrived at a plan.

They found an ideal location where there was a demand for their services and purchased a site in Fairview for relocation. Since they already owned all of the equipment needed to operate the business, all they needed was financial assistance to construct a new facility and move the business to the new location. Richard was able to qualify for the loan and secure it with the acquired property, which also included a residence for him and Stephanie. The banks and credit unions contacted were not interested in the loan, but UDAF had the funding and the desire to help with the relocation and intergenerational transfer of the business while helping the local rural economy and providing a needed service to the community. In addition to processing beef and lamb, they also process smoked meats and game. The low cost and long term of the loan makes it affordable and helps to ensure the success of the move.