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.