Senate Acts Quickly to Pass Rural Finance Authority Funding

On Thursday, the Senate unanimously approved $50 million in bonding for the Rural Finance Authority (RFA).

The RFA is Minnesota’s main agricultural lending arm and partners with community banks to provide farmers with lower interest rates. House File 2959 requires priority be given first to beginning farmer loans, second to seller-sponsored loans, and third to agricultural improvement loans.

RFA is a vital financing tool for farmers, especially as the agriculture sector faces continued hardships.

The funds are responsibly loaned, and the default rate is very low. Losses have been less than 1% since the program began in 1986. RFA is nearly depleted, so quick legislative action was needed. RFA is designed to be user financed. Principal and interest repaid by farmers is used to fund the redemption of the issued bonds, covering the cost of principal, interest and a reserve for potential losses; repayments may not be reissued for new projects.

The repayment rate for the loans is extremely high. Since the creation of RFA in 1986 through December 31, 2019, a total of 3,094 loans worth $289.7 million have been issued; there have been loan losses on 21 loans totaling $555,707 over that period.

RFA currently loans approximately $24 million per year. Click here for more information on the RFA loan program.