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STRATEGY

Loans for Rural America

Farmers Home Administration (FmHA) provides federal loan guarantees to rural businesses.
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Two years ago, when Gary Skaggs was looking for money to finance plant, property, and equipment, he was delighted to find a little-known source of federal loan guarantees. Through a nearby bank in Weatherford, Tex., Skaggs, president of Antenna Products, an antenna manufacturer in Mineral Wells, Tex., arranged to get a 20-year, $1.2-million loan guaranteed by the Farmers Home Administration (FmHA), an arm of the Department of Agriculture.

In contrast to the Small Business Administration's multibillion-dollar programs, FmHA's version (last year it guaranteed just $101.1 million worth of loans) is modest. But for people like Skaggs who are trying to grow their companies in capital-scarce rural areas, a guarantee can make the difference between getting a loan and not. In the 1994 federal budget FmHA's authorized guarantee level more than doubled.

Almost any type of business can apply, as long it's not located too near a town with 50,000 or more inhabitants; priority goes to communities with populations of 25,000 or fewer. The maximum amount guaranteed is $10 million (versus $750,000 on SBA loans). Subject to its approval, FmHA lets banks set the interest rate. The term can be as long as 30 years on real estate, 15 on equipment, and 7 on working capital. Because the loans are often sold in the secondary market, there may be penalties for prepayment.

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For more information on the program and on which banks are most active in your area, contact a local Farmers Home Administration office, or the FmHA's Business and Industrial Division at 202-690-4100.

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Last updated: Nov 1, 1993




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