We previously discussed the South Dakota Beginning Farmer Bond Program (SDBFBP) eligibility and qualification requirements. This post discusses some of the nuances involved with SDBFBP.
Is there a minimum loan amount for the SDBFBP?
No. There is, however, a maximum amount. Under federal law, the loan maximums are %501,000 for agricultural land and agricultural improvements and $250,000 for new depreciable agricultural property. Of the depreciable agricultural property, no more than $62,500 may be used for used property.
Can the beginning farmer purchase a residence with the proceeds from the loan or sales contract which is secured by the bond?
Yes if certain stipulations are met. If the residence is a minor part of a farm or acreage purchase, it can be included as part of the loan. No more than 5% of the bond proceeds can be used towards the purchase of a house.
Can I purchase farmland that is enrolled in CRP?
The purchase of farmland that is entirely enrolled in CRP is not permitted. However, depending upon whether a portion of the bond proceeds are used to purchase a residence (which cannot exceed 5% of the bond proceeds), 20-25% of the bond proceeds may be used to purchase CRP farmland.
Can I purchase “working capital” such as feed, see, fertilizer etc.?
No. The financing of working capital is not permitted. This limitation also includes feeder cattle, feeder pigs, and/or feeder lambs. However, livestock used for breeding or dairy purposes may be purchased.
Is it possible to re-finance existing debt?
No. Any debt that has been incurred by the beginning farmer prior to 60 days of the approval of the bond may not be re-financed.
These are some of the common questions and answers above. The SDBFBP may seem complicated but it may be the program for a beginning farmer. You may have additional questions and we welcome that! If you have any questions, feel free to contact Legal Aid of Nebraska at 855-660-1391.