The Farm Storage
Facility Loans are provides financing for farmers to build or upgrade storage,
cold storage, and packing facilities.
Constructing on-farm
storage facilities can help farmers succeed financially by giving them greater
control over their products and the timing of marketing. USDA’s Farm Service
Agency (FSA) provides low-interest loans for farmers to build storage units or to
upgrade and expand existing storage. Historically, these loans have primarily
benefited grain farmers, but a provision in the 2008 Farm Bill extended the
program to fruit and vegetable producers for cold storage. Changes introduced
by FSA in 2014 now also extend the program to washing and packing sheds. This
will improve the ability of farmers selling in local and regional food markets
to finance the storage and packing sheds they need to keep food fresh and safe
prior to marketing. For fruit and vegetable growers, especially small and
mid-scale family farmers, packing and storage sheds are critical pieces of
their farm operations: this is where fresh produce is washed, sorted, graded,
labeled, boxed up, and stored before it heads to market.
Learn more about the Farm
Storage Facility Loans
The Farm Storage
Facility Loan (FSFL) Program, administered by FSA, provides low-interest loans
for producers to build or upgrade permanent facilities to store commodities,
including fruit and vegetable cold storage, washing, packing, and handling
buildings and equipment.
* Corn, grain sorghum,
rice, soybeans, oats, peanuts, wheat, barley or minor oilseeds harvested as
whole grain
* Corn, grain sorghum,
wheat, oats or barley harvested as other-than-whole grain
* Pulse crops (lentils,
chickpeas, dry peas)
* Fruits (includes nuts),
vegetables, honey, hay, and renewable biomass
* Grain storage cribs,
bins, and silos, and related electrical equipment
* Equipment to maintain,
improve, or monitor stored grain quality
* Grain drying equipment
* Hay and biomass storage
structures
* Cold storage buildings
and equipment
* Packing sheds and
handling equipment
* New structures suitable
for cold storage
* New walk-in
prefabricated permanently installed coolers
* New permanently affixed
cooling, circulating and monitoring equipment
* Electrical equipment
integral to the proper operation of a cold storage facility
* An addition or
modification to an existing storage facility
* Boxing equipment
* Baggers
* Brush polishers
* Cold dip tanks
* Conveyors
* Drying tunnels
* Food safety-related
equipment
* Hoppers
* Hydrocoolers
* Quality graders
* Sealants
* Sorting bins/tables
* Washers
* Waxers
* Weight graders
* Purchase price and sales
tax
* Cost of new materials
* Shipping and delivery
* Site preparation costs
* Installation costs
* Off-farm paid labor
* Appraisals and legal
fees
* Produce an eligible
commodity
* Demonstrate a storage
need
* Have a satisfactory
credit rating and the ability to repay the loan
* Provide proof of all
peril insurance and, if applicable, flood insurance
* Provide proof of
multi-peril crop insurance (MPCI) or Non-Insured Crop Assistance Program (NAP)
coverage; however, fruit and vegetable growers may request a waiver from FSA
from the requirement to hold MCPI or NAP coverage
* Instead of providing the
typically required three-year acreage yield reports, producers can now provide
information on sales, volume sold (based on farmers market space or vehicle
size), CSA shares, or other similar measures.
The FSFL requirement to
first obtain crop insurance or non-insurance crop disaster assistance program
(NAP) coverage can now be waived on a case-by-case basis, taking into account a
variety of factors that result in the determination that crop insurance or NAP
would not provide meaningful risk protection for the producer. These factors
may include, but are not limited to, the application burden, number of crops,
typical area planted to each crop, and whether the producer markets his or her
product in a way that commands a premium above traditional wholesale market
prices (e.g. direct-to-consumer, certified organic, etc.).
Because specialty crops
are often processed before being placed in cold storage to maintain quality,
the loans can now also finance packing sheds and certain handling equipment,
such as packaging, cold dip tanks, sorting and grading bins and tables,
washers, and waxers, among others.
Program Basics
The following
commodities are currently eligible for farm storage facility loans:
Eligible uses for these
types of loans include:
Structures and equipment
generally must have an expected useful life of at least 15 years. Portable
equipment, used bins, and used equipment are not eligible. Facilities that are
not for the sole use of the borrower(s) are also not eligible.
For fruit and vegetable
cold storage facilities, eligible uses include:
Additionally, fruit and
vegetable producers may use FSFLs for structures and permanently affixed
equipment required to get fruits and vegetables washed, treated and packed or
otherwise required to maintain the quality of the crop. Among the items that
can be financed are:
Among the eligible cost
items are:
The maximum loan amount
is $500,000. A cash down payment of 15 percent and a $100 non-refundable
application are required. Loan terms are for 7, 10, or 12 years depending on
the amount of the loan. The interest rate is fixed and set at the rate of
interest charged on comparable U.S. Treasury securities, a lower rate than
would be available commercially. Loans are repaid in equal amortized
installments.
For loans that exceed
$100,000, the borrower must provide a first lien on the real estate where the
facility is situated, other real estate sufficient to secure the loan, or a
letter of credit sufficient to protect the government’s interest. Loans of up
to $100,000 may be secured by a promissory note only.
One partial disbursement
of up to half the anticipated total cost is available when that portion of the
structure has been completed. The final disbursement will be made when the
entire structure has been completed and inspected by a USDA representative.
The local FSA county
committee must approve all loans.
Eligibility
To be eligible for these
loans, the borrower must:
Several other
eligibility criteria apply.
Coordination with Other
FSA Loan Programs — FSA Direct Operating Loans, including Microloans, can be used in conjunction with
FSFLs. FSA state and local offices have been encouraged by USDA headquarters to
leverage both programs as well as the knowledge and expertise of farm program
and farm loan staff to promote creative solutions to producers’ needs for
storage and equipment, including cold storage, packing sheds, and mobile
equipment for local and regional food producers. For instance, growers could
use a FSFL for building a cold storage and packing facility in combination with
a Microloan to finance scales, portable equipment, and packing materials. Using
both low-interest loan programs in combination may help finance the complete
needs of a grower for storage, washing, packing, and transport.
The Program in Action
Since the inception of
the program in 2000, more than 33,000 loans have been issued for on-farm
storage. One of the most recent of those loans made use of the 2014 revisions
to the program to benefit fruit and vegetable producers. Lindsay and Ben Shute,
owners of Hearty Roots Community Farm in the Hudson Valley of New York State,
received a FSFL to finance a cold storage and packing facility for their
community supported agriculture (CSA) operation. They received a waiver from
FSA from needing to have NAP or crop insurance coverage after demonstrating
that such insurance was not meaningful for a CSA. They were also able to use an
alternative method to determine their storage facility needs that were more
appropriate to a highly diversified operation. Their experience has helped open
the door for FSFLs to finance sorting, washing, grading and other critical
handling needs of small, diversified specialty crop farms. See more
at this USDA blog.
How to Apply and Program
Resources
Loan applications should
be filed in the local FSA Office that maintains the farm’s records. To find
your local office, use the service center locator.
The Farm Storage Loan
application form is CCC Form 0185 and can be found on the FSFL overview page
Program History,
Funding, and Farm Bill Changes
The FSFL program in its
current iteration was started administratively in 2000 by FSA. The program has
permanent mandatory funding through the Commodity Credit Corporation (CCC) and
does not require a congressional authorization or an appropriation. The costs
of running the loan program are automatically reimbursed to the CCC.
Congress got into the
act through the 2008 Farm Bill, which added hay and renewable biomass as well
as fruits and vegetables as eligible commodities, added cold storage as
eligible facilities, increased the maximum loan term to 12 years, increased the
maximum loan about to $500,000, and allowed for partial loan disbursement
during construction.
In 2014, FSA took several
actions to improve the program, particularly for small and mid-sized farms in
the local and regional food space:
The loan level that
triggers additional security requirements is now $100,000, up from the previous
$50,000 amount.
(Photo credit: USDA)
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