Beginning Farmer Bond Program

The South Dakota Beginning Farmer Bond Program (SDBFBP) is a tax-exempt bond program designed to assist Beginning Farmers in the state of South Dakota to acquire agricultural property at lower interest rates. It enables lenders, individuals, partnerships, corporations, and other entities (the "Bond Purchaser") to receive federally tax-exempt interest on a loan or contract sale made to Beginning Farmers. After arranging the loan or sales contract, the Bond Purchaser obtains from the South Dakota Economic Development Finance Authority a federally tax-exempt Private Activity Bond in the amount of the loan or unpaid balance. The program enables lenders and qualified beginning farmers to save on interest by using federally tax-exempt bonds on loan amounts up to $600,000. Use of funds: real estate, depreciable property, and breeding livestock. The bond purchaser, usually the lender, sets rates and terms.

Beginning Farmers in the state of South Dakota. Use of funds is limited to real estate, depreciable property, and breeding livestock, on loan amounts up to $600,000.

Loan size: "The program enables lenders and qualified beginning farmers to save on interest by using federally tax-exempt bonds on loan amounts up to $600,000." Eligible uses: "Real Estate, depreciable property and breeding livestock."

Rates and repayment are NOT set by the state. "Bond purchaser, usually the lender, sets rates and terms; can also work with contract sellers that aren't parents/grandparents." The benefit reaching the farmer is a lower interest rate, because the lender's interest income on the loan is federally tax-exempt.

Fee: the current (January 2025) Beginning Farmer Bond Application states "A Bond issuance fee of 1.5 percent of the total bond amount will be due at closing."

The "Beginning Farmer Bond Summary" still linked from the page is the 2019 edition, and its figures are dated — treat them as indicative only and confirm with SDGOED. It states: "No more than an aggregate amount of $543,800 (for calendar year 2019) may be used for Agricultural Land, Agricultural Improvements and Depreciable Agricultural Property"; "Of the possible $543,800, no more than $250,000 can be for Depreciable Agricultural Property, of which no more than $62,500 can be for 'used' property"; "There is no minimum loan amount for the Program"; "The Beginning Farmer must have a net worth under $400,000"; and on fees, "a non-refundable $100 application fee (submitted with the Application). A loan fee equal to 1.5 percent of the amount of the bond, but not less than $500, must be submitted by the Beginning Farmer or Bond Purchaser at loan closing. The loan fee may be financed with bond proceeds." A $100 fee applies to any later modification of the bond's rate or terms. Other published limits: "No more than 5 percent of the bond proceeds can be used toward the purchase of the house," and "20-25% of the bond proceeds may be used to purchase CRP acres." Maturity is bounded by federal law — "the weighted average maturity of an Authority bond can be no more than 120% of the average reasonably expected economic life of the project being financed with the proceeds of the bond (except land)."

Complete the Beginning Farmer Bond Application (available from SDGOED); see the Beginning Farmer Bond Summary for details. Contact the South Dakota Governor's Office of Economic Development.