The Rural Development Act of 1972 authorized the USDA to guarantee loans made by commercial lenders. This guaranteed loan program makes credit available to family farm owners and operators. This enables borrowers to obtain credit at reasonable terms when credit is unavailable from other sources. The U.S. Government guarantees up to 95% of the loan, thereby reducing the risk of exposure of the private lenders who participate in the program.

Under the USDA loan guaranty program, lenders can increase their profitability by attracting high potential farmers, ranchers and business enterprises through the extension of long-term loans than would otherwise be possible.

Like the SBA loan guarantee program, USDA guarantees allow the lender to sell the guaranteed portion of the loan in the secondary market. The lender retains the non-guaranteed portion and continues to service for the life of the loan. The program also allows the lender to use the multi-note system, enabling the lender to split the loan into a maximum of 10 separate notes for sale in the secondary market. 

Loans guaranteed by the U.S. Department of Agriculture (USDA) are traded nationally in an active secondary market and offer investors a unique combination of safety, attractive yields and rate sensitivity. The USDA guarantees loans through many programs, the most common include:

Rural Development

Farm and Foreign Agricultural Services