South Dakota Beginning Farmer Bond, Part 2

We previously discussed the South Dakota Beginning Farmer Bond Program (SDBFBP) eligibility and qualification requirements.  This post discusses some of the nuances involved with SDBFBP.

Is there a minimum loan amount for the SDBFBP?

No.  There is, however, a maximum amount.  Under federal law, the loan maximums are %501,000 for agricultural land and agricultural improvements and $250,000 for new depreciable agricultural property.  Of the depreciable agricultural property, no more than $62,500 may be used for used property.

Can the beginning farmer purchase a residence with the proceeds from the loan or sales contract which is secured by the bond?

Yes if certain stipulations are met.  If the residence is a minor part of a farm or acreage purchase, it can be included as part of the loan.  No more than 5% of the bond proceeds can be used towards the purchase of a house.

Can I purchase farmland that is enrolled in CRP?

The purchase of farmland that is entirely enrolled in CRP is not permitted.  However, depending upon whether a portion of the bond proceeds are used to purchase a residence (which cannot exceed 5% of the bond proceeds), 20-25% of the bond proceeds may be used to purchase CRP farmland.

Can I purchase “working capital” such as feed, see, fertilizer etc.?

No.  The financing of working capital is not permitted.  This limitation also includes feeder cattle, feeder pigs, and/or feeder lambs.  However, livestock used for breeding or dairy purposes may be purchased.

Is it possible to re-finance existing debt?

No.  Any debt that has been incurred by the beginning farmer prior to 60 days of the approval of the bond may not be re-financed.

These are some of the common questions and answers above.  The SDBFBP may seem complicated but it may be the program for a beginning farmer.   You may have additional questions and we welcome that!   If you have any questions, feel free to contact Legal Aid of Nebraska at 855-660-1391.