The Cooperative Extension Service Should Provide Farmers With More Information on Farm Credit Sources

Farmers are finding more than ever that borrowing is a necessity. However, information on sources of credit, interest rates and terms, and how to apply for farm credit is available only on a piecemeal basis from lenders, the Cooperative Extension Service, and other sources. While the supply of credit from the numerous farm lenders has generally been adequate to meet the needs of qualified borrowers, beginning and marginal operators have had problems getting credit and repaying outstanding loans. Lenders may determine that a farmer lacks sufficient repayment ability or collateral or, in other instances, local credit conditions or lending practices may restrict the number of credit sources available. However, several potential sources of credit often exist for a given situation, with different effects on the borrower. Further, the time required to process and approve an application, loan servicing, availability of funds during periods of tight credit, and the amount of downpayment required can significantly affect a borrower's ability to repay a loan, make a profit, and succeed in business. In an effort to meet the farmer's need for increased availability of credit information, GAO randomly sampled 419 farmers nationwide who have applied for farm credit in the past 5 years and are able to make the financial decisions for the farm they own or operate. Over one-third of the responding farmers had not heard of 10 or more of the 16 basic types of farm lenders. In addition, a large number of the sampled farmers were unaware of the types of loans available from each of the five largest lenders. A range of from 14 to 92 percent of the farmers who applied only for short-term loans were not aware of which of the five major lenders make this type of loan. Similar results were obtained for those farmers who applied for long-term loans.