New farmers and ranchers in Colorado who are interested in purchasing land, breeding stock or buying equipment now have financial assistance available.
The Colorado Agricultural Development (CADA) Beginning Farmer Program, which has been in existence since 1981, provides tax-exempt bonds to lenders who provide low-interest financing for approved purchases.
Jim Rubingh, director of the marketing division for the Colorado Department of Agriculture, said the program is a tool to help those trying to get a start in the agriculture profession.
"There's no age limit, but people tend to be younger," he said. "Basically it is for a person who wants to buy their first piece of land."
Individuals who don't own a substantial amount of land, or own no land, can qualify for the program.
A substantial amount of farmland is defined as the amount of farmland equal to or greater than 30 percent of the median county farm size or with a market value greater than $125,000.
The program involves a three-way transaction between the lender, borrower and CADA.
Because the interest paid to the lender is tax-exempt, the lender, whether it be a bank, insurance company or private individual, should be willing to charge interest rates substantially below commercial rates, according to the Beginning Farmer Program brochure.
After a borrower and lender reach an agreement, a loan application is submitted to CADA.
The following three steps are then followed:
CADA issues a tax-exempt bond to the lender
The lender's payment for the bond will pass through CADA to the borrower to fund his or her project
The borrower's payments on the loan are assigned by CADA to the lender, thereby becoming the payments on the bond
The program has seen substantial use over the past 20 years and continues to be utilized by beginning farmers.
Last year, 35 loans were approved by CADA, and eight have already been approved this year, Rubingh said
"Basically the program helps lower interest rates for the life of a loan," he said. "Saving a couple of points over a 20-year span can add up after awhile."
The program also recently offered more flexibility by allowing people to borrow and buy from family members.
"A son can use it to buy land from his father and some people use it to buy from a neighbor," he said. "The plan has good flexibility."
To learn more about the Beginning Farmer Program, call CADA at (303) 239-4114.