Agricultural Loan Guarantee Program

Purpose:

The Texas Agricultural Finance Authority (TAFA) Agricultural Loan Guarantee Program (ALG) provides financial assistance to establish or enhance farming or ranching operations or to establish an agricultural-related business. This program provides assistance in the form of guarantees based on a tiered structure, not to exceed $500,000 or 80% of the loan amount, whichever is less.

TAFA/TDAs Role:

Funds allocated to TAFA/TDA for the use of the ALG program are used to support the lenders capital and add protection against reasonable risk associated with the loan by honoring a percentage of debt. TAFA is not involved with the negotiation of interest rates, maturity or collateral. TAFA/TDA reviews applications to ensure credibility and eligibility. 

• Open to all agricultural enterprises

• The applicant should discuss the program with his/her lender (including any commercial lending bank or Farm Credit System).

• The lender will submit an application to TAFA on the borrower’s behalf.

• The applicant must meet the lender’s underwriting criteria.

• The lender and borrower determine the loan terms, while TAFA retains the right to alter any loan terms as necessary to provide the guarantee.

• The borrower(s) should have a credit score of 650 or greater

• Equity injection of at least 15% of the loan amount

• Debt to equity of 2:1 or less

• Debt service coverage of 1.25 or better

• TAFA’s guarantee shall not exceed a maximum of 10 years or the useful life of the assets being financed.

Guarantee Amounts:

There are two options depending on the terms of the loan:

• $250,000 or 90% of the loan amount, whichever is less 

• $500,000 or 80% of the loan amount, whichever is less.

The duration of a loan guarantee approved by TAFA must not exceed the useful life of the assets being financed or 10 years, whichever is less.

Use of Funds:

A loan guarantee recipient may use loan proceeds for any agricultural related purpose, including:

• Working capital for operating a farm or ranch;

• Lease of facilities;

• Purchase of machinery and equipment; and/or

• Purchase of real estate, as identified in recipient’s documentation submitted in support of the application.

Fees and Application Costs:

A nonrefundable application fee of $100 is due upon filing the application. An origination fee of no less than 1% of the loan guarantee amount will be due within 10 days of the initial funding of each loan. This money is returned to the Texas Agricultural Fund to finance additional guarantees.

Interest Rebate:

Borrowers under the ALG program may be eligible for a rebate of a portion of the interest they pay on the loan. Agricultural Loan Guarantees approved by the Department may be eligible for a rebate of no more than $500 annually, not to exceed the 1% origination fee over the term of the guarantee. The board may adjust the interest rebate within statutory limits. 

Borrower should visit with a lender to see if they are willing to participate in the program. A lender will need to submit the application to the Department on the Borrower's behalf. _TDA does not issue any loans. _

• Loan Guarantee Application

• ALG Overview and FAQ

• Master Lender Agreement

• Publications 

• Online Submission Link