The Record’s Ag Report
With farm program loan dollars increasing $42,000,000 over what was budgeted for 2012, the Bank of North Dakota (BND) plans to review the dollar limitations for future funding.
Last year’s budget for farm loans was set at just over $300,000,000. At the end of 2012, there were 2,221 farm loans outstanding, totaling $342,825,000, compared with 2,185 farm loans outstanding totaling $289,003,000 at the end of 2011.
BND Senior Vice President of Lending Bob Humann said even though producers have had some good years and have a better working capital position, it takes more cash now then years ago to make a profit.
“Farmers have increased their acreage, input costs are swelling and farmers need to borrow a lot more money to cover their expenses,” Humann said.
Humann said they will be looking at the present net worth requirements and possibly increasing that dollar amount along with related loan amounts.
“We will be doing a survey with banks in all areas of North Dakota to get a better idea of where we should be with those dollar amounts,” he said.
Even though the BND only does direct lending on real estate, they have several programs offered for chattel loan purposes also. One of those programs is the Farm and Ranch Participation Loan Program.
Farm Loan Manager Rod Anheluk said under this program BND considers a broad range of loan applications.
“It is considered a ‘catch all’ and with it, we are able to provide funds for all sorts of loan requests,”Anheluk said.
Under the participation loan program, the borrower works primarily with their lead lender. The BND’s participation is needed to assist the financial institution with a borrower whose financing needs have outgrown the legal lending limits of the lender.
“The lead lender sets the rates, terms and conditions offered to the borrower,” Anheluk said. “So the borrower basically does everything with their local lender.”
Humann pointed out there is not a huge incentive offered to the borrower with the participation program.
“There is not an incentive such as a buy down with this program. The program is used when the borrower’s loan amounts get too big for their local bank,” Humann said.
It enables lenders to compete with other financial institutions when it comes to larger sized credits.
“Banks like to use this program as they want to take care of their customer rather than transferring them to another financial institution,” Humann said.
BND also offers a number of farm loan programs to young or beginning farmers that make financing more affordable and easier to access.
Through the beginning farmer loan program, the BND provides an additional $400,000 to finance chattels at below-market interest rates.
The Farm Real Estate Loan Guarantee Program is another program offered to farmers and ranchers. It assists farmers and ranchers with the purchase of agricultural real estate by providing a financial institution with a 75 percent guarantee of the total loan not exceeding $400,000 to an individual borrower.
With BND’s beginning farmer loan programs, they require that farming is the principal occupation.
The Ag PACE program is a program that has been around for a long time but in the past few years, they have expanded the purposes of the program.
“Ag PACE was designed to help producers diversify their income sources beyond the traditional sources of crop and livestock,” Humann said.
In Emmons County, one of those non-traditional sources that the Ag PACE program funded years ago was buffalo.
In more recent years, theAg PACE program is providing incentive financing through the purchase of shares in the start up or expansion of ag processing plants intended to process North Dakota grown products.
Humann said there are several farmers in Emmons County who have taken advantage of Ag PACE funds in buying shares in companies such as Red Trail Energy in Richardton.
Ag PACE funds can also be used for developing new irrigated acreage, developing a business that can be integrated into the farming operation, improving or expanding finishing facilities for livestock retention, purchasing or improving dairy facilities or developing subsurface field tiling projects (more common in the eastern part of the state).
An incentive in using this program includes an interest buy down.
“Qualifying borrowers receive an interest buy down that can reduce the interest rate by up to four percent,” Humann said.
For this biennium (2011- 2013), the State Legislature appropriated $1,400,000 for the interest buy down for Ag PACE. For the next biennium, the BND will be asking for $2,000,000, as that program is expanding and the additional funds will be needed.
Humann also said they will be requesting additional funding for their beginning farmer program loans.
“We barely had enough for this past biennium and dug into the revolving funds this past year,” he said.
Humann and Anheluk said the BND staff have worked with each of the financial institutions in Emmons County and look forward to continue assisting lenders and producers in promoting agriculture and industry in the rural areas. They encourage farmers to visit with their local lender if they are interested in obtaining more information on BND’s loan programs. They can also visit their website at www.banknd.nd.gov for a complete listing of programs and loan eligibility requirements.