By MINDY POEHL | Central Texas Edition

The $5 fee accessed when license plates are purchased for farm vehicles is added to the multi-million-dollar TAFA-regulated fund for the loan program. -- Staff photo

July 6, 2006 - Young Texas farmers and ranchers may not be aware of a loan program that can assist them in getting their businesses off the ground. Created in 1987, the Young Farmer Loan Guarantee Program, is offered through a Texas Department of Agriculture agency called Texas Agricultural Finance Authority (TAFA). 

“It’s been around for a while, but it has never really taken off,” said Robert Wood, rural and economic development assistant commissioner with TDA. 

TAFA provides financial assistance through loan guarantees to eligible applicants, ages 18 to 39, who wish to establish or enhance their farm or ranch operation, or to establish an agricultural-related business. The program provides up to a 90-percent guarantee, not to exceed $250,000, to a lender for an eligible applicant. The program also offers a reduced interest rate to eligible borrowers.

“The loan is funded through a $5 fee on farm license plates,” explained Si Cook, youth program coordinator with the Texas Farm Bureau. 

The $5 fee paid when receiving farm license plates is a voluntary fee, “but each person is required to pay that $5 when they get their tags, but they can get a refund,” explained Wood.

The fund is in the State Treasury, drawing in interest each year.

“The fund contains around $10 million and the finance authority can guarantee loans for twice that amount. The applicants must be under 40 years old and have a net worth of less than $400,000,” said Cook.

Applicants may apply for the loan online or contact the TDA. An applicant must go through a bank that is willing to participate in the program and they must have a proposed business plan.

“Applicants fill out an application from their bank first, and then go to TDA to get it guaranteed,” Wood said. 

The funds may be used to provide working capital for operating the farm and/or ranch including the lease of facilities and the purchase of machinery and equipment, or for any agriculture-related business purpose, including the purchase of real estate, as identified in the plan.  

Cook said he doubts TDA looks at 10 applications per year.

“Not many people know about it,” Cook said. “When the fund first started, the maximum loan was $50,000 and the specifics didn’t make it very attractive. People thought it was too much paper work for so little money.”

Wood added, “We do not have enough applicants. On average, I bet we have five or six applicants a year. There are not a lot of young farmers out there and a lot of banks don’t want to go through the paper work.”

But, the Farm Bureau has made a push for notifying farmers and ranchers about the loan over the past several years.

“We have primarily worked closely with the Farm Bureau and have given presentations at their meetings,” to get the word out about the program, said Wood. 

Plus, the loan program has added a provision that “allows us to rebate up to three percentage points back on the loan interest rate,” added Wood. “The rebate goes directly to them (the farmer/rancher).”

That means that if someone had a 10 percent loan of $10,000, the state would rebate $3,000 to the applicant.

“That’s like free money in your pocket,” Wood said. “Now with a $250,000 loan and the ability to rebate, it’s a good program.”