Subchapter B. SUSTAINABLE AGRICULTURE LOAN PROGRAM
Sec.
130c.11. Objective.
130c.12. Funding.
130c.13. Amount of loan.
130c.14. General Conditions.
130c.15. Submission of application.
130c.16. Processing of applications.
130c.17. Applicant of eligibility.
130c.18. Review of a loan application.
130c.19. Eligible uses.§ 130c.11. Objective.
This subchapter establishes the requirements and procedures of the Program, under which an applicant may receive a loan to implement farming practices that emphasize sustainable agriculture in this Commonwealth.
§ 130c.12. Funding.
Sustainable agriculture loans shall be made to the extent funds are made available in the revolving loan account. The revolving loan account, created under section 9 of the act (3 P. S. § 2109), shall be used to fund all sustainable agriculture loans. The revolving loan account shall be funded by appropriations made by the General Assembly and interest earned on the account and interest from loan repayment.
§ 130c.13. Amount of loan.
The maximum amount of a loan is $15,000 for farm enterprises which are not corporate farms and $25,000 for corporate farms.
§ 130c.14. General conditions.
(a) Interest rates. The interest rate on any loan will be calculated using simple interest at the percentage rate equal to the Federal Reserve discount rate at the time the loan was made.
(b) Term of loan and rate of payment. The term of the loan may not be greater than the useful life of the project, which shall be defined in the loan agreement. The term of the loan may not exceed 7 years. Payments shall be made monthly, quarterly or semiannually, as determined by the Board.
(c) Security.
(1) Requirement. The Board will secure each loan before distributing the loan proceeds and its lien position may not be less than a second position as to liens on real estate and equipment connected with the farm operation. A loan shall be fully secured and no part of the loan may be unsecured.
(2) Valuation of collateral. Real estate security shall be valued on the basis of resale value, taking into account any liens or encumbrances on the land.
(3) Additional security. The Board may require other and additional security as it deems just and reasonable, including personal liability promissory notes with confessions of judgment, judgment notes, additional collateral, insurance and guarantees.
(d) Sale of real or personal property. If the recipient sells real or personal property connected with the project which is subject to a lien in favor of the Department or Board the principal balance of the loan and interest incurred to date shall immediately become due and payable.
(e) Verification. Within 3 months of the project completion date specified in the loan agreement, the recipient shall submit to the Department a final report which includes written receipts, records and any other pertinent documentation evidencing the total amount of the costs incurred and expenditures associated with the project. At the same time, the recipient shall also submit a narrative report describing the effectiveness of the project, the results obtained, the experience gained and the personal knowledge acquired.
(f) Failure to verify. If the required receipts, records and documentation are not submitted within the 3-month period or a portion of loan proceeds are unaccounted for, the Secretary may demand the recipient repay the entire principal balance of the loan or a lesser amount and interest incurred to date. Payment shall be due within 60 days of the written demand.
(g) Loan agreement. A recipient shall sign a loan agreement setting forth the term and amount of the loan, a repayment schedule and other terms or conditions as the Department may reasonably require.
(h) Previous default. A loan will not be made under this chapter to an applicant who has previously defaulted on a loan made, guaranteed or insured by the Commonwealth, the Federal Government or by the government of another state.
(i) Default. A recipient who fails to abide by the terms of the act, the loan agreement or the rules in this chapter shall be in default. Additionally, a loan will be declared in default if the loan recipient fails to make the required payment within 30 days of the due date. When a loan recipient defaults, the Department may seek recovery of the loan funds as delineated in § 130c.8 (relating to right of recovery). A default may be waived by the Secretary, after consultation with the Board, in the event of a physical disability suffered by the recipient or other extenuating circumstances.
Cross References This section cited in 7 Pa. Code § 130c.2 (relating to definitions).
§ 130c.15. Submission of application.
An applicant desiring to be considered for a loan under this chapter shall submit to the Board, on a form prepared by the Board, an application for a loan. The completed application shall contain the information requested by the Board. Applications shall be postmarked by July 31 of each year. Loan applications may be obtained from:
Pennsylvania Department of Agriculture
Bureau of Plant Industry
2301 North Cameron Street
Harrisburg, PA 17110-9408
Telephone number: (717) 787-4843
§ 130c.16. Processing of applications.
(a) Executive Director. Upon receipt of an application for a sustainable agriculture loan and any required supporting documentation, the Executive Director will review this information for completeness and accuracy and submit it to the Board. As set forth in § 130c.6 (relating to notice of disposition of application) the Board will have 90 days to review and take action on an application. If the Executive Director determines the application is incomplete or inaccurate, final processing of the application may be discontinued and the Board will send a letter of rejection to the applicant or additional data may be requested. If additional data is requested, the Executive Director will notify the applicant of the additional data needed and the 30-day time period for response. Processing of the application will cease and the 90-day review period, in § 130c.6, will be tolled during the 30-day response period until the applicant supplies the requested data. If additional data has been requested, the Executive Director may terminate the processing of the application when the additional data is not supplied within 30 days of a written request.
(b) Board. The Board will review all complete applications and supporting documentation and have the power to accept, accept with special conditions or reject applications and issue loans in accordance with the general considerations and eligibility criteria of the act and this chapter.
Cross References This section cited in 7 Pa. Code § 130c.6 (relating to notice of disposition of application).
§ 130c.17. Applicant eligibility.
(a) Individuals. To be eligible for a loan under this chapter, the applicant, if an individual, shall be:
(1) A resident of this Commonwealth or show sufficient evidence that he intends to become a resident.
(2) An active resident operator or resident manager of the farm.
(3) Sufficiently educated, trained or experienced to carry out the project and shall certify that he will participate in the project for the duration of the loan period.
(4) Able to prove and document that the farmland or farm enterprise for which the loan is acquired is located in this Commonwealth.
(5) Able to demonstrate the proceeds of the loan will be used for eligible sustainable agriculture purposes as defined in the act and this chapter and that all loan proceeds will be used exclusively for sustainable agriculture purposes in Commonwealth farming operations only.
(6) Creditworthy.
(b) Family farm partnership. To be eligible for a loan under this chapter, if a family farm partnership, the applicant’s principal operating or managing partners shall:
(1) Be residents of this Commonwealth or demonstrate they intend to become residents.
(2) Have no more than three unrelated members.
(3) Have at least one member residing on or actively operating or managing the farm.
(4) Demonstrate the applicant or the principal operating or managing partners thereof have sufficient education, training or experience to carry out the sustainable agriculture project proposed in the loan application and shall certify he will participate in the project for the duration of the loan period.
(5) Be able to prove and document that the farmland or farm enterprise for which the loan is acquired is located in this Commonwealth.
(6) Be able to demonstrate the proceeds of the loan will be used for eligible sustainable agriculture purposes as defined in the act and this chapter and that all loan proceeds will be used exclusively for sustainable agriculture purposes in Commonwealth farming operations only.
(7) Be creditworthy.
(c) Family farm corporation. To be eligible for a loan under this chapter, the applicant, if a family farm corporation, shall meet the following requirements:
(1) The family farm corporation shall be incorporated or registered to do business in this Commonwealth.
(2) The principal operating or managing members or shareholders of the family farm corporation shall be residents of this Commonwealth or show sufficient evidence that they intend to become residents.
(3) At least one of the majority stockholders of the family farm corporation shall reside on or actively operate or manage the farm.
(4) None of the shareholders of the family farm corporation may be corporations.
(5) The applicant or the principal operating or managing members or shareholders of the family farm corporation shall have sufficient education, training or experience to carry out the sustainable agriculture project proposed in the loan application and shall guarantee he or they will participate in the project for the duration of the loan period.
(6) The family farm corporation shall demonstrate that the farmland or farm enterprise for which the loan is acquired is located in this Commonwealth.
(7) The family farm corporation shall be able to demonstrate the proceeds of the loan will be used for eligible sustainable agriculture purposes as defined in the act and this chapter and that all loan proceeds will be used exclusively for sustainable agriculture purposes in Commonwealth farming operations only.
(8) The family farm corporation shall be creditworthy.
(d) Corporate farm. To be eligible for a loan under this chapter, the applicant, if a corporate farm, shall meet the following requirements:
(1) The corporate farm shall be incorporated or registered to do business in this Commonwealth.
(2) The principal operating or managing members or shareholders of the corporate farm shall have sufficient education, training or experience to carry out the sustainable agriculture project proposed in the loan application and shall guarantee the corporation will participate in the project for the duration of the loan agreement.
(3) The corporate farm shall demonstrate that the farm enterprise owns or leases farmland in this Commonwealth.
(4) The corporate farm shall be able to demonstrate the proceeds of the loan will be used for eligible sustainable agriculture purposes as defined in the act and this chapter and that all loan proceeds will be used exclusively for sustainable agriculture purposes in Commonwealth farming operations only.
(5) The corporate farm shall be creditworthy.
(e) Nonprofit educational institution. A nonprofit educational institution is not eligible for a loan.
Cross References This section cited in 7 Pa. Code § 130c.18 (relating to review of a loan application).
§ 130c.18. Review of a loan application.
(a) Evaluation. The Board will evaluate the application based on the applicant’s eligibility as set forth in § 130c.17 (relating to applicant eligibility).
(b) Ranking. No single factor will be paramount. In rendering a decision, the Board will rank the application based on the following criteria:
(1) Financial responsibility. Financial responsibility reflecting the ability of the applicant to meet and satisfy all debt service as it becomes due and payable, continue farm operations and protect the Department against undue risk. The applicant’s cash flow history, total assets controlled, equity owned, contingent liabilities and history of earnings to date are significant measures of financial responsibility.
(2) Collateral offered on available security. The requirement of collateral and collateral taken shall reasonably protect the Department, provide the necessary control of equity and repayment and leave the applicant in a position to reasonably manage the farm operation. The applicant’s ability to give the Department a first position in terms of a lien on collateral or to share a first position, will be given great weight.
(3) Repayment capacity. The relevant criminal and credit history and ratings of the applicant as determined from credit reporting services and other sources.
(4) Tax obligations. The payment to date of all tax obligations due and owing by the applicant to the Commonwealth or any political subdivisions thereof.
(5) Projected use. The manner in which loan proceeds will be utilized in furthering sustainable agriculture in this Commonwealth. This encompasses the goals of the project, its impact on agriculture, the environment and society, its ability to increase farm profitability and productivity, and the potential for success of the project.
(6) Capital needs (amount of the loan). The Board will look at the capital needs of the applicant in light of available funds.
(7) Farming practices. The intent to use practices that would improve soil fertility, lower the cost of production, cause the optimum and environmentally compatible use of off-farm inputs, such as chemical or synthetic fertilizers or pesticides, or otherwise promote sustainable agriculture. These practices are further explained and defined in § 130c.19 (relating to eligible uses).
(c) Discretion. The Board may exercise its judgment in reviewing applications and in determining the amount of each loan so that, where possible, the widest audience becomes acquainted with the principles of sustainable agriculture. This discretion may be exercised to assure loan funds are distributed to the maximum number of applicants and dispersed throughout this Commonwealth.
§ 130c.19. Eligible uses.
(a) Loan proceeds. Proceeds from a loan made under this chapter shall be used by the loan recipient solely for eligible sustainable agriculture practices. Sustainable agriculture practices include agricultural practices which:
(1) Are ecologically beneficial.
(2) Improve and ensure the soil and water quality for future generations.
(3) Enhance environmental quality and the natural resource base upon which the agricultural economy depends.
(4) Make the most efficient use of nonrenewable resources.
(5) Integrate natural biological cycles and controls, such as planting cover crops to defend against insects and weeds, using mechanical tillage to control weeds and relying on natural systems, such as biological controls and natural predators.
(6) Ensure the optimum and environmentally compatible use of or eliminate the need for the purchase of off-farm inputs such as chemical or synthetic fertilizers and pesticides.
(7) Make the best use of on-farm labor and resources, such as using animal and plant manure to enrich soil.
(8) Sustain the economic viability of farm operations, by implementing practices which lower production costs.
(9) Enhance the quality of life for farmers and society.
(10) Satisfy human food and fiber needs.
(11) Emphasize planting a diverse array of crops and the production of alternative crops.
(b) Ineligible use of proceeds. Loan proceeds may not be used for any of the following purposes:
(1) To refinance a portion of the total project cost or any other existing loans or debts.
(2) To finance, fund or to use in a project outside the geographic boundaries of this Commonwealth.
(3) To purchase off-farm inputs, such as chemical or synthetic fertilizers and pesticides.
(4) To fund any educational or promotional program.
Cross References This section cited in 7 Pa. Code § 130c.18 (relating to review of a loan application).
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