Beginning Farmer Loan Program

The Iowa Beginning Farmer Loan Program (BFLP) was established in 1981 to assist new farmers in acquiring agricultural property. Beginning Farmer Loans are financed by participating lenders or contract sellers with the issuance of federal tax-exempt bonds offered by the IADD. Interest received on contract sales or direct loans by individuals is also exempt from state income taxes. The tax-exempt interest income earned by lenders and contract sellers enables them to charge the beginning farmers a lower interest rate.

The tax-exempt interest income earned by lenders and contract sellers enables them to charge borrowers a lower interest rate. Beginning farmer loans typically carry interest rates from one to four percentage points below prevailing market rates.

Under a federal law that became effective in August 1996, beginning farmer loans can be used for transactions between parents, grandparents and siblings. Such transactions must be financed through third-party lenders; Internal Revenue Service (IRS) rules prohibit contract sales between close relatives.

Application/Approval Procedures

• Obtain a copy of the Beginning Farmer Loan Program Application
• Complete application with lender or seller
• Negotiate loan terms, including interest rate, length of loan, prepayment options, service fees and repayment schedule with lender or seller
• Submit application, financial statement, background letter, other required materials and non-refundable application fee to IADD by the 1st of the month
• A public hearing will be conducted during the board meeting on beginning farmer loan projects, at which time, the IADD Board may approve the bond resolution
• After adoption of the final bond resolution, all parties may close the loans