New grant will allow WSU to help underserved farmers apply for loans

Starting or improving a farm requires money, but applying for and obtaining a bank loan can be challenging for some farmers, especially those in underserved communities.

A farmer stands in a field surrounded by a variety of plants.

Most farms that apply for USDA’s Farm Service Agency (FSA) loans are smaller scale producers that help diversify local food sources and production. Underserved loan applicants include African American, Hispanic, and Native American growers.

To help, the FSA offers programs for growers who have difficulty getting conventional loans. The USDA also recently awarded Washington State University a grant for a pilot program that will support farmers who need help navigating the FSA loan application process. The grant also includes the USDA’s National Institute of Food and Agriculture.

WSU’s Western Extension Risk Management Education Center (WERMEC) is leading the project, which is funded with $2.85 million for five years. The goal is to launch a technical assistance provider network that informs eligible farmers about loans and helps them complete their applications.

“The FSA has invested a lot of resources in developing an online application tool,” said Shannon Neibergs, WSU Extension specialist and WERMEC director. “However, it’s quite complicated. Many underserved producers don’t have regular access to the internet, the skills to complete the forms, or the knowledge of financial terms that would let them be successful in the grant process.”

The first step in the Extension project, which is already underway, is examining FSA application metrics to determine where the provider network would be most effective. Neibergs and his colleagues’ best educated guess is that the programs would be most successful in western and southern states, which is why WERMEC is leading the project and working closely with the Southern Extension Risk Management Education Center at the University of Arkansas.

The FSA is paying for this pilot project, rather than helping loan applicants directly, because of potential conflicts of interest and lender liability concerns if loan officers assist applicants.

“There could be problems if a loan officer helps someone set up a repayment plan or develop a business plan,” Neibergs said. “We want to create a service where we help growers produce business plans that will be successful in the farm loan program. The whole premise is to establish and grow farming operations.”

After the most impactful areas are identified, years two, three, and four of the project will be spent developing and executing a pilot network to aid producers. That may include working with local nonprofit organizations, Extension offices, or other firms to best help applicants.

During the final year of the grant, Neibergs and his colleagues will produce a report on the program’s impact, evaluating growers’ success in attaining loans. If they do well, then the FSA would likely continue and expand the technical assistance provider network.

“The application process is very complicated and challenges the capacity of many people to be successful,” Neibergs said. “Nobody wants that to be the limiting factor of a farm’s success. If you have a good plan, then an application shouldn’t impede your farm’s financial progress.”