USDA Releases Guidance On Loan Services For Hemp Producers

Now that the federal government recognizes hemp as a legitimate agricultural commodity, the United States Department of Agriculture (USDA) has released guidance to aid in the servicing of direct and guaranteed loans for industrial hemp producers.

With the signing of the 2018 Farm Bill, the federal government lifted its ban on domestic production of industrial hemp, which it defines as cannabis that contains 0.5 percent or less of delta-9 tetrahydrocannabinol (THC).

The 2020 crop year also marks the first time that the Farm Service Agency (FSA) will be able to review hemp farming applications beyond the scope of the 2014 hemp pilot program.

According to the guidance, anyone who is approved to produce hemp under provisions of the 2014 Farm Bill will still be eligible for FSA loan servicing assistance.

Hemp production under the 2014 Farm Bill is set to expire on October 30, 2020.

“While it’s understood that this new commodity will likely produce some servicing challenges because of State and Federal regulations,” states the guidance. “It should be treated as closely as possible to any other agricultural commodity and serviced in the same manner.”

The new USDA guidance provides helpful information regarding loan servicing, collateral, restructuring, liquidation, loss claims, business plan development, dependable income sources, non-monetary default, and the disposal of hemp that exceeds acceptable THC levels.

For loan eligibility, producers must be licensed under a USDA-approved state or tribal plan or directly by the Department if their locale does not have a functioning industrial hemp program.

FSA must also have a copy of the borrower’s current licensing before it will approve any direct loan servicing action.