§ 1941. — Persons eligible for loans.
[Laws in effect as of January 7, 2003]
[Document not affected by Public Laws enacted between
January 7, 2003 and December 19, 2003]
[CITE: 7USC1941]
TITLE 7--AGRICULTURE
CHAPTER 50--AGRICULTURAL CREDIT
SUBCHAPTER II--OPERATING LOANS
Sec. 1941. Persons eligible for loans
(a) Requirements
The Secretary is authorized to make and insure loans under this
subchapter to farmers and ranchers in the United States, and to farm
cooperatives and private domestic corporations, partnerships, joint
operations, trusts, and limited liability companies that are controlled
by farmers and ranchers and engaged primarily and directly in farming or
ranching in the United States, subject to the conditions specified in
this section. To be eligible for such loans, applicants who are
individuals, or, in the case of cooperatives, corporations,
partnerships, joint operations, trusts, and limited liability companies,
individuals holding a majority interest in such entity, must (1) be
citizens of the United States, (2) for direct loans only, have either
training or farming experience that the Secretary determines is
sufficient to assure reasonable prospects of success in the proposed
farming operations, (3) be or will become operators of not larger than
family farms (or in the case of cooperatives, corporations,
partnerships, joint operations, trusts, and limited liability companies
in which a majority interest is held by individuals who are related by
blood or marriage, as defined by the Secretary, such individuals must be
or will become either owners or operators of not larger than a family
farm and at least one such individual must be or will become an operator
of not larger than a family farm or, in the case of holders of the
entire interest who are related by blood or marriage and all of whom are
or will become farm operators, the ownership interest of each such
holder separately constitutes not larger than a family farm, even if
their interests collectively constitute larger than a family farm, as
defined by the Secretary), and (4) be unable to obtain sufficient credit
elsewhere to finance their actual needs at reasonable rates and terms,
taking into consideration prevailing private and cooperative rates and
terms in the community in or near which the applicant resides for loans
for similar purposes and periods of time. In addition to the foregoing
requirements of this subsection, in the case of corporations,
partnerships, joint operations, trusts, and limited liability companies,
the family farm requirement of clause (3) of the preceding sentence
shall apply as well to the farm or farms in which the entity has an
operator interest and the requirement of clause (4) of the preceding
sentence shall apply as well to the entity in the case of cooperatives,
corporations, partnerships, joint operations, trusts, and limited
liability companies.
(b) Rural youths in 4-H Clubs, Future Farmers of America, etc.
(1) Loans may also be made under this subchapter without regard to
the requirements of clauses (2) and (3) of subsection (a) of this
section to youths who are rural residents to enable them to operate
enterprises in connection with their participation in 4-H Clubs, Future
Farmers of America, and similar organizations.
(2) A person receiving a loan under this subsection who executes a
promissory note therefor shall thereby incur full personal liability for
the indebtedness evidenced by such note in accordance with its terms
free of any disability of minority.
(3) For loans under this subsection the Secretary may accept the
personal liability of a cosigner of the promissory note in addition to
the borrowers' personal liability.
(4) Youth enterprises not farming or ranching.--The operation of an
enterprise by a youth under this subsection shall not be considered the
operation of a farm or ranch under this chapter.
(c) Direct loans
(1) In general
Subject to paragraphs (3) and (4), the Secretary may make a
direct loan under this subchapter only to a farmer or rancher who--
(A) is a qualified beginning farmer or rancher;
(B) has not received a previous direct operating loan made
under this subchapter; or
(C) has received a previous direct operating loan made under
this subchapter during 6 or fewer years.
(2) Youth loans
In this subsection, the term ``direct operating loan'' shall not
include a loan made to a youth under subsection (b) of this section.
(3) Transition rule
If, as of April 4, 1996, a farmer or rancher has received a
direct operating loan under this subchapter during each of 4 or more
previous years, the borrower shall be eligible to receive a direct
operating loan under this subchapter during 3 additional years after
April 4, 1996.
(4) Waivers
(A) Farm and ranch operations on tribal lands
The Secretary shall waive the limitation under paragraph
(1)(C) or (3) for a direct loan made under this subchapter to a
farmer or rancher whose farm or ranch land is subject to the
jurisdiction of an Indian tribe and whose loan is secured by 1
or more security instruments that are subject to the
jurisdiction of an Indian tribe if the Secretary determines that
commercial credit is not generally available for such farm or
ranch operations.
(B) Other farm and ranch operations
On a case-by-case determination not subject to
administrative appeal, the Secretary may grant a borrower a
waiver, 1 time only for a period of 2 years, of the limitation
under paragraph (1)(C) or (3) for a direct operating loan if the
borrower demonstrates to the satisfaction of the Secretary
that--
(i) the borrower has a viable farm or ranch operation;
(ii) the borrower applied for commercial credit from at
least 2 commercial lenders;
(iii) the borrower was unable to obtain a commercial
loan (including a loan guaranteed by the Secretary); and
(iv) the borrower successfully has completed, or will
complete within 1 year, borrower training under section
2006a of this title (from which requirement the Secretary
shall not grant a waiver under section 2006a(f) of this
title).
(Pub. L. 87-128, title III, Sec. 311, Aug. 8, 1961, 75 Stat. 310; Pub.
L. 92-419, title I, Sec. 120(a), Aug. 30, 1972, 86 Stat. 665; Pub. L.
95-334, title I, Sec. 114, Aug. 4, 1978, 92 Stat. 425; Pub. L. 97-98,
title XVI, Sec. 1601(b), Dec. 22, 1981, 95 Stat. 1346; Pub. L. 99-198,
title XIII, Secs. 1301(a), 1302(b), 1303, Dec. 23, 1985, 99 Stat. 1518,
1519; Pub. L. 104-127, title VI, Secs. 611, 661(f), Apr. 4, 1996, 110
Stat. 1087, 1107; Pub. L. 105-277, div. A, Sec. 101(a) [title VIII,
Sec. 805(2)], Oct. 21, 1998, 112 Stat. 2681, 2681-39; Pub. L. 107-171,
title V, Secs. 5101, 5302(a), May 13, 2002, 116 Stat. 343, 344.)
References in Text
For definition of ``this chapter'', referred to in subsec. (b)(4),
see note set out under section 1921 of this title.
Amendments
2002--Subsec. (a). Pub. L. 107-171, Sec. 5302(a), substituted
``joint operations, trusts, and limited liability companies'' for ``and
joint operations'' wherever appearing.
Subsec. (c)(1). Pub. L. 107-171, Sec. 5101(1)(A), substituted
``paragraphs (3) and (4)'' for ``paragraph (3)'' in introductory
provisions.
Subsec. (c)(1)(A). Pub. L. 107-171, Sec. 5101(1)(B), struck out
``who has not operated a farm or ranch, or who has operated a farm or
ranch for not more than 5 years'' before semicolon.
Subsec. (c)(4). Pub. L. 107-171, Sec. 5101(2), added par. (4).
1998--Subsec. (a). Pub. L. 105-277 inserted ``for direct loans
only,'' before ``have either'' in cl. (2).
1996--Subsec. (b)(1). Pub. L. 104-127, Sec. 661(f), struck out ``and
for the purposes specified in section 1942 of this title'' before period
at end.
Subsec. (b)(4). Pub. L. 104-127, Sec. 611(b), added par. (4).
Subsec. (c). Pub. L. 104-127, Sec. 611(a), added subsec. (c) and
struck out former subsec. (c) which read as follows: ``The Secretary may
not restrict eligibility for loans made or insured under this subchapter
for purposes set forth in section 1942 of this title solely to borrowers
of loans that are outstanding on December 23, 1985.''
1985--Subsec. (a). Pub. L. 99-198, Sec. 1301(a), substituted--
(1) ``, partnerships, and joint operations'' for ``and
partnerships'' wherever appearing after ``corporations'';
(2) ``, partnerships, and joint operations'' for ``, and
partnerships'' wherever appearing after ``corporations''; and
(3) ``individuals'' for ``members, stockholders, or partners, as
applicable,'' wherever appearing.
Pub. L. 99-198, Sec. 1303, in cl. (3) parenthetical, inserted
provision treating blood or marriage related owner-operators of the
entire farm interest as separate interest holders of not larger than
family farms though collective ownership constitutes a larger than a
family farm.
Subsec. (c). Pub. L. 99-198, Sec. 1302(b), added subsec. (c).
1981--Subsec. (a). Pub. L. 97-98 substituted ``corporations and
partnerships, the family farm'' for ``cooperatives, corporations, and
partnerships, the family farm'' and ``as well to the entity in the case
of cooperatives, corporations, and partnerships'' for ``as well to the
entity''.
1978--Pub. L. 95-334 substituted provisions setting forth
eligibility criteria for loans to farmers and ranchers in the United
States, and to farm cooperatives and private domestic corporations and
partnerships controlled by farmers and ranchers and engaged primarily
and directly in farming or ranching in the United States, for provisions
setting forth eligibility criteria for loans to farmers and ranchers in
the United States, Puerto Rico, and the Virgin Islands.
1972--Pub. L. 92-419 designated existing provisions as subsec. (a)
and added subsec. (b).
Effective Date of 1996 Amendment
Amendment by section 611 of Pub. L. 104-127 effective 90 days after
Apr. 4, 1996, and amendment by section 661(f) of Pub. L. 104-127
effective Apr. 4, 1996, see section 663(a), (b) of Pub. L. 104-127, set
out as a note under section 1922 of this title.
Effective Date of 1981 Amendment
Amendment by Pub. L. 97-98 effective Dec. 22, 1981, see section 1801
of Pub. L. 97-98, set out as an Effective Date note under section 4301
of this title.
Farm Operating Loan Eligibility
Pub. L. 106-224, title II, Sec. 255, June 20, 2000, 114 Stat. 424,
provided that: ``During the period beginning on the date of the
enactment of this Act [June 20, 2000] and ending on December 31, 2002--
``(1) sections 311(c) and 319 of the Consolidated Farm and Rural
Development Act (7 U.S.C. 1941(c), 1949) shall have no force or
effect; and
``(2) in making direct loans under subtitle B of that Act (7
U.S.C. 1941 et seq.), the Secretary shall give priority to a
qualified beginning farmer or rancher who has not operated a farm or
ranch, or who has operated a farm or ranch for not more than 5
years.''
Authority of Secretary To Make or Guarantee Certain Loans
Pub. L. 104-134, title II, Sec. 2002, Apr. 26, 1996, 110 Stat. 1321-
313, provided that: ``Notwithstanding any other provision of law, the
Secretary of Agriculture is hereby authorized to make or guarantee an
operating loan under Subtitle B [7 U.S.C. 1941 et seq.] or an emergency
loan under Subtitle C [7 U.S.C. 1961 et seq.] of the Consolidated Farm
and Rural Development Act (7 U.S.C. 1922 et. seq.), as in effect prior
to April 4, 1996, to a loan applicant who was less than 90 days
delinquent on April 4, 1996, if the loan applicant had submitted an
application for the loan prior to April 5, 1996.''
1989 Farm Operating Loans
Pub. L. 101-82, title III, Sec. 302, Aug. 14, 1989, 103 Stat. 582,
provided that:
``(a) Direct Credit.--To the maximum extent practicable, the
Secretary of Agriculture shall ensure that direct operating loans made
or insured under subtitle B of the Consolidated Farm and Rural
Development Act (7 U.S.C. 1941 et seq.) for 1990 crop production are
made available to farmers and ranchers suffering major losses due to
excess moisture, freeze, storm, or related condition occurring in 1989
or drought or related condition occurring in 1988 or 1989, as authorized
under existing law and under regulations of the Secretary that implement
the objective of enabling farmers and ranchers to stay in business.
``(b) Loan Guarantees.--
``(1) In general.--Notwithstanding any other provision of law,
the Secretary shall make available in fiscal year 1990 guarantees to
commercial or cooperative lenders for loans under subtitle B of the
Consolidated Farm and Rural Development Act [7 U.S.C. 1941 et seq.],
to refinance and reamortize 1989 operating loans, or 1989 or 1990
installments due and payable on real estate debt, farm equipment or
building (including storage facilities) debt, livestock loans, or
other operating debt, of farmers and ranchers that otherwise cannot
be repaid due to major losses incurred by such farmers or ranchers
as a result of excess moisture, freeze, storm, or related condition
occurring in 1989 or drought or related condition occurring in 1988
or 1989.
``(2) Reamortization.--Each fiscal year 1990 guaranteed loan for
1988 or 1989 natural disaster purposes, as described in paragraph
(1), shall contain terms and conditions governing the reamortization
of the debt of the farmer or rancher that will provide the farmer or
rancher a reasonable opportunity to continue to receive new
operating credit while repaying the guaranteed loan, as determined
by the Secretary.
``(3) Eligibility.--Notwithstanding any other provision of law,
any person eligible to receive payments under subtitle A of title I
[7 U.S.C. 1421 note] shall be deemed eligible to have guaranteed, in
accordance with this subsection, loans made to such person by a
commercial or cooperative lender to refinance installment payments
that are or become due and payable during 1989 or 1990, as described
in paragraph (1), except that, to be deemed eligible to have such
loan guaranteed, the person must otherwise--
``(A) be current in the person's obligation to the
commercial or cooperative lender that agrees to accept the
guarantee in consideration of allowing the person to make the
1989 or 1990 payment or installment over a period of time not to
exceed 6 years from the original due date of such payment or
installment; and
``(B) meet the criteria for guaranteed loan borrowers under
subtitle B of the Consolidated Farm and Rural Development Act
established by the Secretary.
``(c) Use of Agricultural Credit Insurance Fund.--For purposes of
providing guaranteed loans in accordance with subsection (b), in
addition to funds otherwise available, the Secretary may use any funds
available from the Agricultural Credit Insurance Fund during fiscal
years [sic] 1989 or 1990 for emergency insured and guaranteed loans
under subtitle C of the Consolidated Farm and Rural Development Act (7
U.S.C. 1961 et seq.) to meet the needs resulting from natural disasters,
except that funds available from such Fund first shall be used to
satisfy the level of assistance estimated by the Secretary to meet the
needs of persons eligible for emergency disaster loans.''
Similar provisions were contained in the following prior act:
Pub. L. 100-387, title III, Sec. 312, Aug. 11, 1988, 102 Stat. 948.
Section Referred to in Other Sections
This section is referred to in sections 1922, 1994, 2006a of this
title.
