The Missouri Agricultural and Small Business Development Authority (MASBDA) supports the backbone of Missouri’s agricultural sector by offering a unique program focused on Family Breeding. This initiative provides Missouri lenders with tax credits for offering breeding livestock loans to small farmers, fostering growth and sustainability within family-run agricultural businesses.
How the Family Farm Breeding Livestock Loan Program Works
For small farmers eager to expand or enhance their breeding stock, the process begins by securing a family farm breeding livestock loan from a participating lender. A significant benefit of this program is that farmers will not accrue interest during the loan’s first year, easing the initial financial burden of investing in breeding livestock.
Once a lender approves a family breeding livestock loan, a comprehensive set of documents must be prepared and submitted to MASBDA for final approval. These documents include:
- Missouri Form F
- The lender’s loan application, promissory note, amortization schedule, and security filings
- The small farmer’s current financial statements (dated within the last 6 months)
- Projected post-loan closing cash flow
- A detailed description of the livestock being purchased, including purchase prices
- Payment of a Review Fee, calculated at 1.0% of the total loan amount
MASBDA’s approval process is thorough, ensuring responsible lending and program effectiveness. Key factors considered by MASBDA include:
- The small farmer’s demonstrated ability to repay the family farm breeding livestock loan.
- Verification that the livestock purchase price aligns with the type and quality of animals being acquired.
- The broader economic conditions within the small farmer’s operating area.
- An assessment of the potential for financial returns for the small farmer from the livestock investment.
- Other relevant criteria MASBDA may establish based on the specific characteristics of each loan application.
Eligibility for Family Breeding Livestock Loans
The program defines specific eligibility criteria for both farmers and lenders to ensure that resources are directed effectively.
Who is a “Small Farmer”? To qualify as a small farmer under this program, applicants must be Missouri residents with gross agricultural product sales of less than $500,000 per year. This definition targets support towards smaller, family-operated farms.
Who is an Eligible “Lender”? Eligible lenders encompass a range of financial institutions critical to agricultural lending, including state or national banks, farm credit systems, cooperative banks, federal or state chartered savings and loan associations, federal or state building and loan associations, and small business investment companies. Crucially, all participating lenders must be subject to credit examination by a state or federal government agency, ensuring financial stability and responsible lending practices.
Loan Amounts and Terms for Breeding Livestock
The program sets limits on loan amounts to manage risk and distribute funds effectively. The “maximum eligible loan” cannot exceed 90% of the total cost of purchasing family breeding livestock. Specific maximum loan amounts are set for different types of livestock:
- Beef cattle: $150,000
- Dairy cattle: $150,000
- Sheep: $60,000
- Goats: $60,000
- Swine: $70,000
These limits ensure that the program supports a diverse range of family breeding operations across different livestock categories.
Understanding the Tax Credit for Lenders
To incentivize lender participation, MASBDA offers a significant tax credit. The maximum total tax credits issued to all eligible lenders in any fiscal year is capped at $300,000.
The tax credit amount is substantial: it equals 100% of the interest waived by the lender during the first year of a qualified eligible loan. This mechanism directly rewards lenders for providing interest-free initial financing to small farmers investing in family breeding livestock.
Important Program Restrictions
Applicants should be aware of certain restrictions to ensure compliance and program integrity. Small farmers must provide proof of citizenship, identity, and Missouri residency. Furthermore, if the farmer employs laborers, they must provide proof of enrollment and participation in the federal work authorization program, ensuring adherence to legal labor practices.
Program Fees
A Review Fee of 1.0% of the loan amount is applicable to each loan application, covering administrative costs associated with program oversight and management.
Additional Key Information
For lenders and farmers, it’s crucial to note that the tax credit application must be submitted within 60 days of the loan note’s date. MASBDA issues the tax credit certificate after receiving lender certification of the actual interest waived during the loan’s first year. This interest due certification must be submitted no later than 30 days after the first loan anniversary.
This family breeding livestock loan program represents a valuable opportunity for Missouri’s small farmers to strengthen their operations and contribute to the state’s agricultural economy. By providing access to crucial financing with favorable terms, MASBDA is investing in the future of family farming and sustainable agricultural practices within Missouri.
