Ask the Expert: A Q&A with Robert White about Avoiding Common Mistakes in Farm Loan Applications

The USDA Farm Service Agency (FSA) offers loans to help farmers and ranchers get the financing they need to start, expand, or maintain a family farm. In this Ask the Expert, Robert White answers questions about the FSA farm loan application process. Robert is the Deputy Director for FSA’s Loan Making Division. He and his colleagues address regulatory and policy initiatives and develop creative IT modernization processes to assist loan applicants and farm loan staff nationwide. He grew up on a family farm in Kansas and continues to maintain close ties to production agriculture.

What do you recommend as the first steps for someone interested in an FSA farm loan?

FSA recently rolled out two new products, which should be of interest to loan applicants. The Loan Assistance Tool offers a series of online questions, which help the applicant explore FSA direct and guaranteed loan programs, decide what loans may best suit their needs, determine eligibility and documentation requirements, and quickly access loan forms. Any interested applicant is encouraged to begin their search with the Loan Assistance Tool.

After visiting the Loan Assistance Tool site, applicants can apply by completing FSA's new Online Loan Application. To apply online, they must first sign up for a farmers.gov account. Once an account is established and linked to their profile, direct loan applicants will answer a series of questions and are provided the option to upload required documentation, saving the applicant time and a trip to their local service center. 

The information listed above may be accessed via in one easy and convenient place farmers.gov, USDA’s designated producer hub.  If producers prefer to apply conventionally, a paper application can be obtained by contacting their local FSA county office or by downloading here.

What are the most common errors applicants make when completing farm loan applications?

Generally, applicants can improve their chances of receiving a timely loan approval by ensuring their loan application responses are accurate and thorough. 

For example, prior to completing a loan application, all applicants should prioritize the development of their business plan. In most states, the Cooperative Extension Service can help with developing a business plan. Many states have additional resources, including FSA Cooperators who applicants can contact for assistance. Applicants needing help with their business plan should contact the local FSA Farm Loan team (see “Find Your Local Service Center” on Farmers.gov) for details on available resources.

Loan applicants can answer application questions about their business plan online or by using form FSA-2001, where they will be asked to provide a balance sheet and a cash flow projection. They can complete these as part of the application, or they have the option to attach/upload current documents containing the information.

It is very important for applicants to consider their business plan details, as the financial feasibility of the operating plan is the most common reason for a loan denial. Occasionally, an applicant’s business plan includes complexities or unique circumstances that are not clear from the balance sheet and cash flow projection provided. They can provide additional supporting information. Applicants can contact their local FSA Farm Loan team to schedule a phone call, virtual meeting, or in-person meeting to clarify the loan request, business plan, or other application matters.

Are there particular sections of the form FSA-2001 where errors are frequent?

Direct loan applicants should note that form FSA-2001 requires applicants to provide additional information for FSA to determine if the applicant has the training, education, or experience required for the requested loan types(s) and that the applicant meets other loan eligibility or approval requirements. There is an area on form FSA-2001 to provide additional details. 

Although the loan applicant is familiar with details associated with their responses, the answers may not be clear to FSA without additional details. To assist FSA in accurately determining eligibility or approval, applicants are encouraged to provide details to responses that may not be clear from the basic answers relating to loan eligibility or approval requirements. For example, to validate an applicant’s experience an attachment might be submitted detailing the specific roles and responsibilities they have previously held, or a copy of a degree awarded in a related field.

Applicants can provide a continued explanation using an attachment, providing supporting documentation, or by contacting the FSA Farm Loan team processing the loan application to clarify their answers.

What common misunderstandings do applicants have about loan eligibility criteria?

Along with other eligibility and approval requirements, FSA must determine that an applicant has an acceptable credit history demonstrated by debt repayment. FSA does not determine eligibility based on an applicant’s credit report score; but rather, FSA examines if any history of failures to repay past debts was within the applicant’s control and if those debt repayment issues show a pattern of unsatisfactory or slow payment. 

If FSA’s credit report or other forms of debt verification show a recent history of foreclosures, judgments, or delinquent payments, FSA will contact the applicant to learn more about these potential credit issues. An applicant can explain any circumstances applicable to these matters. They should provide details if the adverse action or delinquency was caused by circumstances that were temporary in nature and beyond their control; or the result of a refusal to make full payment because of defective goods or services or other justifiable dispute concerning purchasing or contracting for goods or services.

What occurs if the loan application submitted is not complete?

Within seven calendar days of receiving an application, FSA will advise the applicant if additional information is required. If the stated additional information is not received following the initial written request, the agency provides notice that the application will be withdrawn if the information is not received within an additional 15 calendar days of the date of the second notice. Complete applications are placed in the queue for processing by the loan official in the order of receipt.

If an application is withdrawn as incomplete, the applicant is encouraged to contact their local FSA office once the remainder of the incomplete items are available. Often, an applicant may simply update the previously withdrawn application and re-sign form FSA-2001 to establish a replacement application.

Robert White is the Deputy Director for FSA’s Loan Making Division. He can be reached at robert.white3@usda.gov.