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Aggie bond program now open for business

Qualified new and expanding farmers have access to low interest loans

The average age of farm operator in Oregon is increasing and above the national average. One way to try and reverse the trend is to provide financial assistance to young and beginning farmers who often don’t have the resources to get started or to expand their operations. The Beginning and Expanding Farmer Loan Program, better known as the Aggie Bond Program, is now up and running, ready to provide affordable financing to farmers who need to make capital purchases.

Oregon becomes the the 17th state to offer an Aggie Bond lending program.

“We recognize the challenges faced by young or beginning farmers and smaller farm operators who just don’t have the money to move forward,” says Oregon Department of Agriculture Director Katy Coba. “It takes capital to succeed in agriculture. These farmers are able and willing to do all that it takes to have a viable operation, they just need a financial shot in the arm. The Aggie Bond Program can be an effective tool to make it happen.”

The passage of HB 2700 by the 2013 Oregon Legislature gave birth to the program and created a low interest loan that can be used by qualified individuals to finance capital purchases, including agricultural land. The legislation directs Business Oregon, the state agency administering the program, to work with the borrower’s local lender to provide the financing by issuing a tax-exempt bond for the amount and within the terms of the loan. Because the interest income to the lender is exempt from federal income tax, the borrower is able to receive a lower rate. As indicated by Business Oregon, “loans may be used to acquire agricultural land, or new depreciable property in conjunction with agricultural land.” Aggie Bond proceeds may be used to finance agricultural related purposes:

  • Up to $250,000 for the purpose of depreciable agricultural property (including equipment, livestock, feed, fertilizer, and seeds) for first time farmers
  • Up to $62,600 on used equipment for first time farmers, and/or
  • Up to $509,600 for farmland purchases

Business Oregon has recently completed the associated administrative rules. In those rules, they state "The Program does not provide any state or federal money to repay Beginning and Expanding Farmer loans or to guarantee these loans nor to repay any Aggie Bonds that are issued under the Program. Those loans and the related Aggie Bonds are secured only by the resources that eligible Beginning Farmers provide to lenders." The rules also spell out specific requirements for those who participate in the program.

The Aggie Bond Program was a priority of several agricultural organizations during last year’s legislative session.

“It’s the story you often hear– it’s very challenging for beginning farmers to get into the business because of lack of access to affordable capital,” says Ivan Maluski, director of Friends of Family Farmers. “This program is valuable because it allows first time farmers that access to lower interest rate lending.”

Maluski says the ideal candidate for this program is someone with at least some agricultural experience. But qualified applicants either haven’t owned any land at all or haven’t owned “substantial” farmland, which is defined as greater than 30 percent of median farm size in a particular county.

A survey earlier this year by the American Farm Bureau Federation identified the ability to secure adequate land to grow crops and raise livestock as the top challenge facing young farmers and ranchers.

“We’ve heard from folks in agriculture whose kids are just starting to take over the farm and from young or beginning farmers themselves who are interested in acquiring land, but find it a challenge,” says ODA’s Stephanie Page, special assistant to the director. “Although the average age of farmer in Oregon is increasing, there are secondary operators waiting in the wings for an opportunity to have their own operation, whether they are children of farmers or employees of the farm. They are trying to find the resources that will allow them to make some of those large purchases that folks in agriculture have to make in order to have a farm operation.”

The average age of operator is now 59.6 years, up from 57.5 years in 2007 and 54.9 years in 2002. Oregon’s average age is higher than the national average. Resources like the Beginning and Expanding Farmer Loan Program may help stem the tide of an aging farm population in Oregon.

The Aggie Bond Program provides another tool for a state that seems to have a lot of interest and activity surrounding new and beginning farmers. Oregon State University’s Small Farms Program offers a number of programs specifically targeting new and beginning farmers. ODA has awarded specialty crop block grants to several organizations whose goal is to help farmers get started. As an example, Rogue Farm Corps received a $90,000 grant to expand its hands-on training, educational programming, and business development support to the next generation of farmers as it aims to transition aspiring students into successful business owners.

“There are also new resources identified in the Farm Bill that will become available,” says Page. “We will be learning more about those resources in the months to come and hope they can complement all the other efforts taking place in Oregon, including the Aggie Bond Program.”

Page emphasizes that the Aggie Bond Program is not a slam dunk for new and beginning farmers. The common fundamentals of a loan program are in play and individuals will need to qualify.

“You need to have a good business plan, a good idea of what you want to do, and you have to do your homework,” says Page. “It still involves working with a lender and making sure you qualify for a loan in the first place. If all that has taken place, then you can look at this new program.”

More information and online application

Media contact: Stephanie Page, ODA, (503) 931-5608.

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