There is an old saying that no two farms are exactly alike. Over the past several years, that has certainly been true regarding how farms have been affected financially. Some farms have experienced pandemic-driven disruptions and market volatility and found chances for profit. Other farms felt those same changes and endured financial distress. USDA is offering borrowers going through financial distress an opportunity for much needed assistance through the Inflation Reduction Act (IRA).
Cash Flow-Based Assistance is an ongoing program offered to USDA direct loan borrowers. It provides help with a recently missed or upcoming loan payment. The amount of aid is equal to the next loan payment due. Payments past due since Aug. 1, 2022, or upcoming through Jan. 15, 2024, can receive financial relief. As part of the Inflation Reduction Act, program aid is considered a one-time credit offered to help farms in their financial recovery.
Eligibility for cash flow-based assistance involves the following:
• Farms must be able to show they lack enough farm operating income to make their loan payment.
• Analysis of a farm’s financial status is based on the current production cycle.
• Cash flow analysis is only required to show farm-related income, to determine financial distress.
• Assistance is only available if prior aid was not received through other IRA programs.
• The focus on only farm-related income is a significant change in how USDA typically looks at cash flow analysis. Traditionally, USDA considers both farm and non-farm income in repayment plans. For purposes of this program, only farm related income is required. USDA hopes that this will swiftly provide aid to farms where their income is unable to cover loan payments.
All USDA direct loan borrowers were mailed a letter on Feb. 16 announcing the program. A follow-up letter was mailed on Aug. 30 clarifying assistance criteria. Similar assistance was also announced in August for borrowers who have guaranteed loans.
Similar to other USDA programs, any payment aid is reported as taxable income. Borrowers are encouraged to speak with their tax advisers. USDA has tax-related resources available at farmers.gov/taxes.
Cash-Flow Based Assistance requests are due by Dec. 31. Borrowers can submit their application in person at a local Farm Service Agency (FSA) office. They can also send requests through USDA’s assistance request portal. To access the portal, visit: farmers.gov/ira22006cashflow. — Michigan State University Extension
