Beginning Farmer Bond Program | South Dakota Department of Agriculture

Beginning Farmer Bond Program

FieldThe South Dakota Beginning Farmer Bond Program (SDBFBP), is a tax-exempt bond program designed to assist Beginning Farmers in the State of South Dakota to acquire agricultural property at lower interest rates.

The Program enables lenders, individuals, partnerships, corporations, and other entities (herein referred to as the “Bond Purchaser”) to receive federally tax-exempt interest with respect to a loan or contract sale made to Beginning Farmers. The Bond Purchaser, after arranging the loan or sales contract, will obtain from the Value Added Finance Authority (the “Authority”) a federally tax-exempt Private Activity Bond (PAB) in the amount of the loan or unpaid balance. The loan and its collateral will be assigned to the Bond Purchaser as security for the bond.

In the case of a contract sale, the contract will be entered into by the Authority, and the Bond Purchaser will receive the bond to evidence the Authority’s obligations under the contract. The Authority’s right, title and interest in the contract will then be assigned to the Beginning Farmer who assumes payment obligations of the Authority under the contract.

Basic Qualifications

  • Net worth of $400,000 or less.
  • Program may be used to purchase agricultural land, agricultural improvements, and depreciable property.
  • Property may be purchased from relatives only through third-party lenders.
  • The loan maximums under existing federal laws are:
    • $533,500 for agricultural land and improvements.
      Of the possible $533,500, no more than $250,000 can be for Depreciable Agricultural Property,
      of which no more than $62,500 can be for “used” property.

There is no minimum loan amount for the program. The Bond Purchaser will make a credit evaluation of the Beginning Farmer, may require any collateral deemed necessary and, with the Beginning Farmer, must arrange the terms of the loan or contract. Neither the loan, the contract nor the bond will be the Authority’s obligation, and the bond will be secured solely by the loan or contract and collateral provided by the Beginning Farmer. The Bond Purchaser will be responsible for the creation and perfection of any security interest deemed necessary for the loan or contract.
A loan made under the Program is funded solely from the bond sold to the Bond Purchaser. The Authority has no independent funds to fund a loan. Therefore, a Beginning Farmer must submit an application with the Bond Purchaser (bank, contract seller or individual investor) who is able to purchase the Authority’s bond to fund the Beginning Farmer’s loan. This Authority shall not be liable or responsible for the failure of the Bond Purchaser to purchase a bond or otherwise perform the functions of a Lender. Nor shall the Authority be liable or responsible for the failure of a Beginning Farmer to locate an alternate Bond Purchaser in the event of a failure of performance by the Beginning Farmer’s initial Bond Purchaser.

(Instructions for Exhibit A: Please complete this form online, type, or print legibly. This form will become part of the official Bond Documents provided by the Authority. Once completed, this form, along with the Loan Data Sheet and Appraisal (if applicable) must be mailed to the Authority prior to Closing. Appraisals must have values itemized.)

For information on Financial and Loan Programs contact:

Terri LaBrie, Finance Administrator