Young Farmers Qualify for Loans by Completing ISU Extension Home Study Course

William Edwards, Extension Economist, Economics

Date Submitted:

Supports Plan of Work Number:
124 Financing agriculture
125 Next generation of agriculturists

Title of Success Story:
Young Farmers Qualify for Loans by Completing ISU Extension Home Study Course

Beginning farmers often lack access to credit at reasonable rates and terms, to use for purchasing operating inputs and financing purchases of land, livestock, and equipment.  The Farm Service Agency (FSA) offers targeted loans to beginning farmers, and makes direct loans or guarantees loans from private lenders, to high-risk producers.  To be eligible for financing from FSA each applicant must show knowledge of financial management principles by completing an approved course in farm financial management.  The Internet-based home study course from ISU Extension, “Financial Decision Making,” has been approved by FSA to meet this requirement.

Each year at least 50 Farm Service Agency borrowers will complete their loan eligibility requirements, increase their understanding of farm financial management, and increase their annual net farm income by completing the Financial Decision Making home study course from ISU Extension.

An Internet-based home study course titled Financial Decision Making (FDM) was created as part of the course catalog for the Ag Management e-School (AMES).  An agreement was reached with Iowa FSA that satisfactory completion of the FDM course would meet borrower requirements for loan eligibility.  The course consists of 11 modules covering topics ranging from developing financial statements to financing long-term assets.  Enrollees must satisfactorily complete 17 on-line quizzes and 8 homework assignments.  As of December 31, 2010, a total of 285 FSA loan applicants had completed the Financial Decision Making (FDM) course, including 55 during 2010.

Outcome Statement:
A follow-up survey was sent to the entire population of course graduates, one to six years after they had completed the course.  Forty-nine surveys were returned (19%).  Twenty of the respondents (41%) had been farming 10 years or less, and would generally be considered “beginning farmers.”  Two-thirds of the respondents purchased land with FSA financing (average of 120 acres), 41% purchased machinery, 12% financed buildings, and 47% bought operating inputs.  Respondents were asked to estimate their annual gross farm income and farm net worth before and after completing the FDM course.  The average change reported was an increase of $247,101 in annual gross income and $381,458 in net worth.  Applying average rates of return to the average increases provides an estimated increase in net income per operator of $38,982 annually based on the increase in gross income, or $37,383 annually based on the increase in net worth.  Averaging these two estimates gives an estimated increase in annual net farm income of $38,182 per family after completing the Financial Decision Making course and becoming eligible for financing from the Farm Service Agency.  FSA borrowers do not qualify for credit from commercial sources, so likely would not have been able to grow their farming operations without FSA assistance or completing the FDM course.

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