Banks Laud Plan to Aid Neophyte Farmers
WASHINGTON -- Bankers are supporting creation of a government-guaranteed loan program for fledgling farmers and ranchers.
The "stand still" debt program would be similar to the one that allows college students to defer repayment of government-guaranteed loans while they are in school, said Paul Freeman, an American Bankers Association representative.
Mr. Freeman, a vice president at First National Bank of Texhoma, Okla., told a congressional committee Tuesday that the deferred payment plan would allow new farmers and ranchers to remain in business long enough to build a positive cash flow.
Often, new farmers are so heavily in debt that the first bad growing season wipes them out. Mr. Freeman said the majority of beginning farmers who received 100% financing under the Farmers Home Administration's Limited Resources Program failed because of heavy debt and no capital.
"Equity, not debt, is the only thing that will enable these farmers and ranchers to become viable over the long run," he said.
Agricultural banks would benefit from the stand still debt arrangement, too.
"With a portion of the borrower's debt on stand still, these beginning farmers and ranchers should have sufficient positive cash flow to manage some market rate debt," Mr. Freeman told the House Agricultural Committee's subcommittee on conservation, credit, and rural development.
La Verne Ausman, who testified on behalf of the Farmers Home Administration, said the agency has sufficient government funding for such a program.
Ms. Hockstader writes for the Medill News Service.