The 1994 Legislature passed a bill that established a value added agricultural product loan program to help farmers finance the purchase of stock in a cooperative, limited liability company, or limited liability partnership proposing to build or purchase and operate a facility located in Minnesota to process or produce marketable products from agriculture crops. Stock in certain cooperatives proposing to own and operate livestock processing facilities or farm-generated wind energy production facilities may also be eligible.
This is a loan participation program available through the Rural Finance Authority (RFA). The farmer will work through their local lender. If the lender agrees to make a secured loan to the applicant, the lender and applicant will jointly complete an application for an RFA participation. The RFA must have a completed Master Participation Agreement with the lender on file.
Applicants must meet the following criteria:
- Be a resident of Minnesota, a domestic family farm corporation or family farm partnership as defined in Minnesota Statutes 500.24, subdivision 2;
- Be a grower of the agricultural product which is to be processed by an agricultural product processing facility;
- Demonstrate an ability to repay the loan;
- Have a total net worth of less than $556,605 in 2023 (indexed annually for inflation), including the assets and liabilities of their spouse and dependents.
A lender and an applicant must jointly complete and sign an application form and prepare all supporting documents. In the case of new issue stock, application may not be made until stock is actually available for issuance from the cooperative. Previously issued stock is also eligible.
A $50 application fee must be submitted with each application.
Security for the loan must be the stock purchased, a personal note signed by the borrower and other security as required by the lender or the RFA. Value of the security must equal at least 150% of the total loan.
Loan Terms and Conditions
The RFA may participate on a loan up to 45% of the loan principal to a maximum of $40,000. The loan will be for a maximum of eight years. Loan payments of interest only are permitted for up to two years, with a fully amortized repayment schedule of interest and principal calculated for the remaining years. The lender may use a variable interest rate. Interest rate on the RFA portion will be a fixed rate of 2.0 percent or one-half of the lender's effective rate (APR) at time of closing, whichever is lower.
No more than 95 percent of the purchase price of the stock purchased will be financed under this program.
Completed applications from eligible lenders will be accepted on a first-come, first-served basis while funds are available.