Deadline: Applications are accepted year-round and subject to available funding.

Purpose:

The Texas Agricultural Finance Authority (TAFA) Interest Rate Reduction program is based upon a linked-deposit structure for pricing enhancement of agricultural and agriculture-related loans.

The program is available for loans up to $500,000 to Texas-based agricultural businesses and is available to any lender who is approved by the Texas Comptroller as a depository for state funds.

The linked deposit programs are NOT intended to enhance the credit quality of loans. They are intended for pricing enhancement only, and the deposit must be released to the state comptroller immediately in the event of a material default or foreclosure.

TAFA offers the Agricultural Loan Guarantee program that may be used independently or in tandem with the IRR program to improve the credit quality of otherwise conforming loans.

Eligible Borrower:

• Any person who proposes to use loan proceeds for the creation or expansion of an agricultural business in Texas.
  	

• Individuals between the ages of 18 and 46 are eligible for the Young Farmer Interest Rate Reduction (YFIRR) Program which potentially provides additional interest rate savings.
  	

 Eligible Lender:

• Any lender who is approved by the Texas Comptroller as a depository for state funds.
• Note- Farm Credit System lenders are not eligible as they are not typically depository institutions.

Application Process: 

The application is a joint application for the Lender and the Borrower and includes terms to which both lender and borrower agree associated with the program requirements.

• The completed (but unsigned) application is submitted to TDA for review.
• Upon initial review for eligibility, TDA staff will distribute the application via DocuSign for electronic signatures by all parties.
• If approved, the Texas Comptroller will deposit funds upon confirmation that the loan has closed and loan proceeds have been made available to the borrower.

Use of Funds:

Loan proceeds may be used for any agriculture-related operating expense, including:

• The purchase of land or other fixed assets and improvements;
• Capital asset acquisition, including equipment used in an agriculture-related operation; and/or
• Any enterprise based on agriculture, as identified in the application.
• A loan under this program may be applied to existing debt only when required by the lender to finance the expansion of an eligible project.
• Operating notes may be subject to certain limitations.  Prospective lenders should contact TDA for additional details.

Loan Details:  

• The total of linked deposit loans to any one borrower cannot exceed $500,000.
• The lender and the borrower determine the repayment, maturity, and collateral for the loan.
• This program does not offer a loan guarantee.

Interest Rate Determination: 

• The interest rate payable on the time deposit (Program Rate) for each period is based upon the yield of US Treasury Notes maturing at the end of the respective period.
• For the IRR version, interest payable is equal to the Index Rate minus 200 bps or 1.5%, whichever is greater. 
• For the YFIRR version, it is equal to the Index Rate minus 300 bps or a minimum rate payable of 0.5%, whichever is greater. 
  
  There are currently no fees or other charges assessed for this program.

Reporting: 
	

The Lender is responsible for submitting a quarterly report confirming outstanding loan details.