Value-Added Stock Loan Participation Program

Summary

The Value-Added Stock Loan Participation Program was created in 1994 and is designed to help farmers finance the purchase of stock in certain types of cooperative, limited liability company, or limited liability partnership that will produce a "value-added agricultural product." This may include wind energy and anaerobic-digestion cooperatives if they meet the eligibility requirements (see Statute and Rules for details).

Like Minnesota's Agricultural Improvement Loan Program, this is a "participation loan" program, where loans are made by individual financial institutions working with the Rural Finance Authority (RFA). The RFA purchases up to 45% of the loan principal up to $40,000. The interest rate offered by the RFA is then set at a fixed rate of 2.0% or half the lender's effective rate at closing. Loans are for a maximum of 8 years, and interest-only payments are permitted for the first 2 years. Interest and loan principal repayments are deposited back into a revolving loan account. The RFA is not permitted to make stock loans cumulatively totaling more than $2 million for the financing of stock purchases in any one cooperative.

The program will not finance more than 95% of the price of the stock purchased by the participant. To qualify, an applicant must have a total net worth of less than $450,000 (indexed for inflation), including the assets and liabilities of the applicant's spouse and dependents.