Farm-SM

Next Generation Farmer Loans are provided through EDC Finance Corporation in conjunction with the Penn Industrial Development Authority (Penn IDA) to allow beginning or first-time farm owner projects to obtain a low tax-exempt interest rate from their bank. Interest earned by the bank is exempt from Federal and State Income taxes.

Key Benefits

  • Below market interest rates for first time farm owners

Funding Uses & Purposes

  • Agricultural land
  • Agricultural improvements
  • Depreciable agricultural property, such as farm machinery

Eligibility

Beginning or first-time farm owners who are purchasing farmland and meet the following criteria:

  • No prior direct or indirect ownership interest in a substantial amount of farmland. A substantial amount of land is a parcel, which exceeds 30% of the median farm size in the county in which the land is located.
  • Must be the sole owner and user of the project
  • Must be a permanent resident of Pennsylvania and at least 18 years of age
  • Sole proprietor net worth of < $544,000
  • Partnership net worth < $1.089 million.
  • Must meet bank’s credit standards

Loan Structure

The borrower will work with their bank to receive credit approval terms for their loan. Simultaneously, EDC Finance will determine eligibility and receive tax exempt status approval through Penn IDA. The borrower will close with the bank when all approvals are in place.

Amounts

  • $524,200 maximum loan amount per person/couple/partnership for land and related assets
  • $62,500 maximum loan amount for used equipment
  • Borrowers can combine other loans with the Next Generation Farmer Loan to complete the project financing package

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Terms

  • Tax-exempt interest rate set by bank
  • Usually the rate is established at 70-80% of the bank’s agricultural loan rate. The term is normally 15-25 years for real estate loans and 5-7 years for equipment and machinery.
  • Value of residence is ineligible

Job Requirements

Not Applicable

Related Party Transactions

  • Funds can be used to purchase property from related persons.  The IRS states that the following, among others, are “related persons:”  grandfather, grandmother, father, mother, brother, sister, child, grandchild or spouse.  In addition, a partnership and each of its partners (and their spouses and minor children) are related persons, as are an S corporation and each of its shareholders (and their spouses and minor children.) The following are not considered as related persons: aunt, uncle, nephew, niece, brother-in-law or sister-in-law.
  • If loan proceeds are used to purchase property from a related person, the applicant must certify and provide supporting documentation that the purchase price of the property is at least equal to the market value of the project.  The applicant must also certify that the seller will have no continuing financial interest in the project and will not be a principal user of the project, and will have no other direct or indirect ownership of the project.

Closing Costs

  • $500 application fee
  • 0.5% closing fee based on the loan amount
  • $2,000 legal fee (includes Bond Counsel and Penn IDA Counsel review)
  • Advertising fees: Varies (based on actual costs)
where To Apply