Pennsylvania Department of Agriculture
PAgrows quarterly e-newsletter
June 2008

The Next Generation Farmer Loan Program is Pennsylvania’s enactment of a national Agricultural or “Aggie” Bond Program developed to assist beginning, first-time farmers to purchase land, farm equipment, farm buildings and breeding livestock through reduced interest rate loans.

Through an Aggie Bond program, the state coordinates the creation of a bond that allows lenders to earn federally-tax exempt interest income on loans to eligible beginning farmers and ranchers. The tax-savings allows the lenders to provide the loans at a reduced interest rate to the first time farmer, while the credit decisions and financial risk remain with the local lending institutions. Aggie bond programs are federal-state, public-private partnership programs that provide a cost effective way for states to assist beginning farmers.

Pennsylvania, one of 17 states with an Aggie Bond program, has seen increasing activity in the last three years with the number of approved new farmer transactions increasing from 5 in 2006 to 10 in 2007 and more than 15 underway already in 2008.

Lenders have utilized the Next Generation Farmer Loan Program in conjunction with other state and federal financing programs to make farms more affordable for new farmers.  For example, a Lancaster County bank recently put together a package for a farm family that included a Next Generation tax-exempt mortgage from the bank, a First Industries Agriculture – Small Business First loan of $200,000 from the EDC Finance Corporation of Lancaster County and a $200,000 Farm Ownership Loan from the USDA’s Farm Service Agency.  The financing package maximized available lower-interest financing programs which was crucial to making this farm transition feasible for this for this family.