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Farm Service Agency, guaranteed loans, loss rates, farm loans


The Farm Service Agency (FSA) guaranteed loan programs are an important source of credit to production agriculture. The two major guaranteed loan programs are the operating loan (OL) program and the farm ownership (FO) loan program. Guaranteed loans insure payment to the lender of up to 95% of the losses in the event of borrower default. FSA has historically been involved in lending to farm operators via direct loans, but emphasis has changed over the last two decades to making guaranteed loans the primary source of FSA associated lending to production agriculture. This study seeks to determine what characteristics of banks and the lending environment from 1990-1995 motivated Arkansas banks to use guaranteed loans and how the level of participation is related to such factors. In addition, factors are identified that indicate the likelihood of banks paying loss claims. Regression methods are used to identify these factors and the data base uses observations on individual Arkansas commercial banks for up to six years.

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