80-002 Code Vt. R. 80-160-002-X - FAMILY FARM ASSISTANCE LOAN PROGRAM

Section A Family Farm Assistance Loan Program Introduction

1. The Farm Family Assistance Loan Program is hereby established. It is the purpose of this program to provide a limited source of direct loan funds to family farmers under terms and conditions which will reduce their investment costs to an extent that offers them a reasonable chance to succeed. This program is separate and distinct from the Vermont Rehabilitation Corporation's already existing loan program.

2. Funding for the program shall not exceed $ 400,000.00. $ 20,000.00 of the money may be used for administrative expenses.

3. All applications will be reviewed by the Vermont Rehabilitation Corporation Board of Directors. The Board will determine whether to approve or deny the loan. All loans granted under this program will be in the name of the Vermont Industrial Development Authority and that body will service the loans as provided for in the Act, these rules and the Authority's procedures.

4. Interested persons are encouraged to obtain applications, to fill them out fully and to return them to the Program Manager. Since loan funds are limited, applicants are further encouraged to complete their applications promptly and to supply the Program Manager with any additional information as quickly as is possible.

Section B Definitions

1. "Act" means the Family Farm Assistance Act found in 10 V.S.A., chapter 12, subchapter 6;

2. "Agricultural land" means land capable of supporting commercial farming;

3. "Applicant" means a person applying for a family farm assistance loan;

4. "Authority" means the Vermont Industrial Development Authority;

5. "Beginning Farmer" means a person who wishes to become a full-time farmer on his or her own behalf;

6. "Board" means the Board of Directors for the Vermont Rehabilitation Corporation;

7. "Borrower" means any person who has received a loan under the program;

8. "Commissioner" or "President" means the Vermont Commissioner of Agriculture and President of the Vermont Rehabilitation Corporation, or his/her designee:

9. "Department" means the Vermont Department of Agriculture;

10. "Family farmer" means a person who is a resident of this state and who is, or will become, engaged in farming on his or her own behalf managing and operating the farm on a full-time basis and whose net worth (including his or her spouse) does not exceed $ 150,000.00;

11. "Farming" shall mean the cultivation of land or other uses of land for the production of food, fiber, horticultural, orchard or forest crops, or the raising of livestock, poultry, equines, fish or bees. Farming also includes the storage, preparation, retail sale, and transportation of agricultural commodities accessory to the cultivation or use of such land;

12. "Full-time basis" as used in sub sections 5 and 10 of this section means 40 or more hours per week;

13. "Loan" means any agreement under the Act and these rules by which the Board agrees to provide funds to a borrower;

14. "Net worth" of the applicant means the total value of his or her equity (including the equity of his or her spouse) in all real and personal property excluding such items as the Board may approve;

15. "Note" means any instrument which is the recognized legal evidence of a debt;

16. "Program" means the family farm assistance program established under 10 V.S.A. Chapter 12, Subchapter 6;

17. "Program Manager" means that person appointed by the Commissioner with the consent of the Board to manage the program under guidelines set by the Board, to review loan applications, to make recommendations to the Board about the applications, to assist in loan closings and to assist in servicing loans as funds are available to do so, or his/her designee;

18. "Resident" means a person who is domiciled in this state as evidenced by an intent to maintain a principal dwelling place in the state indefinitely and to return there if temporarily absent, coupled with an act or acts consistent with that intent. A married person may have a domicile independent of the domicile of his spouse;

19. "Vermont Rehabilitation Corporation" or "corporation" means the nonprofit quasi-state corporation for which articles of association have been filed with the secretary of state on April 26, 1935.

Section C Qualified Loan Purposes

Loans may be issued to accomplish the following purposes:

1. To strengthen existing farms;

2. To encourage diversification, and innovative farming techniques;

3. To increase energy efficiency and reduce energy consumption on the farm; and

4. To assist beginning farmers to start new farms, provided that such beginning farmers will not produce commodities which are already in surplus.

Section D Eligibilty standards

In order for a person to be eligible for a family farm assistance loan, the applicant must seek the loan for a qualified purpose and must be:

1. a family farmer, as defined in the Act and these Rules, who is a resident of this state;

2. an owner or prospective purchaser of agricultural land in the state or depreciable farm machinery, equipment, or livestock to be used in the state;

3. a person of sufficient education, training or experience in the type of farming for which the applicant requests the loan;

4. an operator or proposed operator of a farm for whom the loan reduces investment costs to an extent that offers him or her a reasonable chance to succeed;

5. a credit-worthy person;

6. able to produce project plans which are in compliance with all applicable environmental, zoning, planning and sanitary laws and regulations of the municipality where any project for which the program loan funds are to be used is located, and of the State of Vermont;

7. able to demonstrate that the making of the loan will be of public use and benefit;

8. able to provide and maintain adequate security for the loan by a mortgage on real property and/or a security agreement and perfected financing statement on personal property with a maturity date of not longer than twenty years;

9. able to demonstrate that the applicant is responsible and able to manage his/her responsibilities as mortgagor and owner of the project;

10. able to demonstrate that the applicant is unable to finance the project upon reasonable terms without the assistance of the requested loan, or in the alternative, demonstrate that the granting of the loan will serve as a substantial inducement for the strengthening of farming within this state;

11. able to demonstrate that the applicant has made adequate provision for insurance protection of the secured property while the loan is outstanding;

12. able to demonstrate that the loan will be without unreasonable risk of loss to the Authority; and

13. a person who possesses the legal capacity to incur loan obligations.

Section E Loan Terms

1. For the following types of collateral, the term of the loan may not exceed the term specified:

Collateral	Term
Real Estate	20 years
Machinery,
Equipment and
livestock	5 years

The term of each loan, within the above limits, will be established as agreed upon by the Board and applicant; in no event shall the loan term exceed the expected useful life of the collateral. Loans may be amortized over a period longer than the term of the loan, at the discretion of the Board.

2. Interest rates on individual loans will be established by the Board in its discretion.

3. In no event shall the total principal obligation of all loans granted under the Act and these rules to any family farmer exceed $ 50,000.00 at any one time.

4. All other terms of each loan shall be established by the Board on a case by case basis, and may include the conditions set forth in Section J.

Section F Application Content and Accompanying Documents

Applications and forms for financial information will be provided by the Program Manager along with instructions for completion for use by the applicant. In addition, the Program Manager and/or the Board may request additional information and documents which they believe are necessary for a full evaluation of the application under the Act and these rules. Because proposed projects and applicants will be different, information required will likely vary from applicant to applicant.

Section G Application Procedure

1. An applicant shall submit an application which complies with the requirements of this rule on such forms and in such numbers as may be specified by the Board with such supporting information as shall be required by this rule and such additional information as may be requested by the Program Manager;

2. The Commissioner and Program Manager shall be responsible for making application forms available;

3. No application will be considered complete unless all questions are answered and all supporting information is provided, as required by the Program Manager;

4. A completed application ordinarily must be received by the Program Manager well before any action by the Board is desired by the applicant.

Section H Loan Criteria

1. An application will not be approved unless the Board determines that there is a reasonable prospect that the loan will be repaid according to its terms.

2. The following shall be considered in approving or denying an application for a loan:

a) Whether the application is complete;

b) Whether the loan will reduce the applicant's investment costs to the point that it will give him or her a reasonable chance for success as a family farmer;

c) Whether the applicant is seeking the loan to accomplish a qualified purpose within the meaning of Section C of these Rules;

d) Whether the applicant is eligible to participate in the program under the terms of Section D of these Rules;

e) Whether there are sufficient funds remaining in the program to cover the applicant's loan request; and

f) Whether the application is in compliance with local, State and Federal law.

3. The following may be considered in approving or denying an application for a loan:

a) The existence of or provision for financing related operational expenses;

b) The economic feasibility of the business as evidenced by the applicant's present, past and projected financial situation;

c) The applicant's credit rating;

d) An analysis of the applicant's net worth and other factors related to risk and profit potential;

e) The amount, percentage and term of the loan;

f) The extent to which risk of financial loss is shared by others;

g) The likelihood for success of the project for which the loan is to be made and the contribution of the project to the public welfare;

h) The extent to which the annual gross income of the project contributes to the total income of the applicant;

i) Whether the collateral used to secure the loan has any other security interests against it which would be superior to that of the Authority;

j) An evaluation of the applicant's present and projected cash flow statements; and

k) Any other criteria the Board believes should be considered on a particular loan request.

Section I Loan Review Procedures

1. All completed applications shall be submitted to the Program Manager for review. The Manager will examine each application and may request any additional information from the applicant which he/she feels is necessary to make a decision about the application.

2. When the Program Manager has received all information requested from the applicant the Program Manager shall make a recommendation to the Board about the applicant's request for loan funds. Action on applications may be taken in the order of their filing and completion; however, the Board reserves the right to review applications out of order when it believes that doing so will further the intent and spirit of the Act. The President, or Clerk, may then set a meeting date for the Board and notify all members of the Board and the applicant of that meeting.

3. The Board may consider the application and the recommendations of the Program Manager in determining whether the applicant's loan request complies with the requirements of these rules and of the Act. Where the Board deems additional information on an application to be necessary, it may request that information from the applicant before making a decision on the loan request. The Board may also, in its discretion, hold meetings at the site of the applicant's proposed project. If the loan request does comply, the Board may then exercise its discretion to grant or deny the loan, subject to such conditions as it deems necessary.

4. The applicant shall be notified in writing of the Board's decision.

5. If at any time the program loan funds are fully expended, the loan review procedures may be suspended by the Board until such time as additional funds become available. All persons with pending loan applications will be notified of this action, if it is taken by the Board.

Section J Loan Conditions

The Board may require that the following conditions be added to the loan documents, as well as, such other conditions as the Board deems necessary on a case by case basis:

1. Loan funds shall be used only for the farming purposes approved by the Board;

2. The borrower's project plans must be in compliance with applicable zoning, sanitary and building laws of the Federal government, the State and the locality in which the project is located;

3. The borrower shall agree not to convey, lease or transfer any loan collateral without the prior written consent of the Authority;

4. The borrower shall keep and maintain proper books, records, and accounts, and operate the enterprise in a businesslike manner acceptable to the Authority and shall submit to the Authority such financial statements as may be required by the Authority.

5. The borrower shall pay, when due, all taxes or charges assessed against the collateral;

6. The borrower shall keep insured to the satisfaction of the Authority all insurable property covered by either a mortgage or financing statement;

7. The borrower shall maintain and repair the collateral;

8. The borrower shall permit the Authority and Program Manager, or other agent of the Board, to inspect the collateral and to inspect and copy the borrower's books and records at any reasonable time;

9. The borrower shall repay any advances necessary to protect the collateral or enforce the rights of the Authority;

10. The borrower shall keep the collateral free from liens and encumbrances except those accepted in advance in writing by the Board;

11. The borrower shall not alter or relocate the collateral or the business of the borrower without prior written consent of the Authority;

12. The borrower may be required to make payment to reserves for repairs, taxes, insurance and other obligations;

13. The borrower shall submit annually to the Authority and Program Manager a year-end balance sheet of the business, personal balance sheet, and tax return. The Authority may require a financial statement prepared by an independent certified public accountant and other financial reports at other times.

14. The borrower shall pay principal and interest in the amounts and at the times required by the loan documents;

15. The borrower may be required to obtain and maintain life insurance on key personnel the proceeds of which would be used to pay off the loan;

16. Where appropriate, the borrower shall make payments by assignment of farm commodity revenues; and

17. The borrower shall comply with such other conditions and covenants as the Board or Program Manager may establish.

Section K Closing

1. Upon receiving notice of approval of a loan, the applicant shall proceed in accordance with instructions provided by the Program Manager.

2. All actions required of the applicant by the Board or Program Manager including: preparation of all paperwork required of the applicant to close the loan, submission of a title opinion and execution of all relevant statements or declarations required for loan transactions by federal or state law, regulation, or rule, must be completed within 120 days of receipt of the notice unless an extension is granted;

3. The Program Manager may request and examine copies of other security agreements or loan documents or other records which relate to the applicant's project in order to determine all liens and encumbrances on the property;

4. The applicant shall be responsible for preparing any mortgage deed, security agreement, financing statement, and other documents as required by the Program Manager. Copies of these documents shall be delivered to the Program Manager at least five working days prior to the closing date set by the Manager. The Program Manager shall be responsible for preparing the note and loan agreement in advance of the closing. All such documents shall be consistent with the terms and conditions established by these Rules and by the Board;

5. All documents concerning the loan transaction shall list the Authority as being the State entity in interest (Mortgagee). All loan payments shall be made directly to the Authority.

6. The applicant shall be responsible for all costs of closing including attorney fees.

7. After the loan is closed, the appropriate instruments shall be recorded in the appropriate offices. The borrower is responsible for the costs of recording;

8. After the appropriate instruments are recorded, the borrower shall furnish the Program Manager with a final title opinion which recognized the interests of all parties, if so requested; and

9. When the loan transaction is completed, the Program Manager shall turn over the original instruments to the Authority. Copies will be maintained for the Department.

Section L Post Loan Servicing; Default

1. Servicing of loans made under the program will be done by the Authority pursuant to its own rules and procedures. Servicing may include, but shall not be limited to: perfection and maintenance of security; maintenance of insurance; handling money; notifying the Corporation of the technical default of any borrower; and after receiving a recommendation for action from the Board, determining what action should be taken against the defaulting borrower. The Authority shall be responsible for handling all collection, foreclosure, or other legal actions under this program.

2. The Corporation will be available to the Authority for advice and, when possible, assistance in servicing the loans. Where program resources permit, the Corporation may receive and evaluate any borrower's financial statements. Upon notice of any borrower's default, the Board shall examine the borrower's circumstances as program resources permit and shall provide the Authority with a recommendation for action. Such recommendation shall not be binding on the Authority.

3. Any violation of the loan terms and conditions by the borrower may constitute a default, as determined by the Authority.

Section M Waiver of Rules

The Board may waive any provision of these rules, except to the extent that the requirement is mandated by the Act, in cases where deviation from the rules will be insubstantial and of benefit to Vermont agriculture.

Notes

80-002 Code Vt. R. 80-160-002-X