From the Farm: Farm Loans

Agriculture

CENTRAL ILLINOIS (WCIA) – Farm real estate brokers say land prices are increasing at an unbelievable rate. Land prices in Iowa have reached the mid-$20,000 range, but Illinois isn’t quite that high yet.

The relationship between commercial banks and USDA loan programs may allow young farmers the chance to compete in the land market.

“The direct loan program, we loan money directly from the treasury to beginning farmers, for example, said John Gehrke of the Illinois Farm Service Agency. “On guaranteed loans, it could be beginning farmers or any farmers, we back conventional loans, and that increases the access to credit for people who maybe otherwise couldn’t get it.

Gehrke says the guaranteed loan program has worked quite well.

“The majority of our loans have been used for real estate purchases, especially the guaranteed loans,” he said. “There has been an easier avenue to the secondary market which allows farmers to lock in long term, fixed rate loans.”

Gehrke explained how the process works.

“For example, if a beginning farmer is buying his first farm, we can loan a portion of the funds, the bank can loan a portion of the funds, we can guarantee the bank’s loan and they can get access to long term rates there,” Gehrke explained. “So between the bank’s rates and our rates, you blend those together and it helps the cash flow situation. So the majority, roughly 83% of our loan funds, have been for real estate here in Illinois.”

Gehrke says that isn’t the case for every state.

“It’s all driven by the lending industry, what the banks want. So if we go to another state, the banks may want FSA to loan operating money,” Gehrke said. “Here in Illinois for the most part, operating credit has been available. They are more interested in how we can assist beginning farmers with the real estate market. So that is where our concentration has been for the most part.”

Farmers should visit with the local FSA office for details.

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