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Ag PACE - (Agriculture Partnership in Assisting Community Expansion)
The Ag PACE program provides interest buydown on loans to farmers which
are investing in nontraditional agriculture activities to supplement farm
income. The program funds are used to reduce the interest rate on loans
which have been approved by a local lender and BND. The farmer shall have
as his principal occupation, prior to applying for the program, the production
of agricultural commodities or livestock.
Qualified businesses include any activity which is conducted by the farmer
or the farmer's family and which is integrated into the farm operation.
These businesses include nontraditional agriculture, manufacturing, processing,
value-added processing, and targeted services industries. Eligible uses
also include the purchase of equity shares in a new or expanding value
added ag processing facility, the purchase of irrigation equipment on new
irrigated acreage, the purchase of capital improvements for retention of
livestock, purchase of capital improvements for dairy operations or for
the purchase of equity shares in a condominium grain storage entity. It
is desirable that the value added processing business be located in North
Dakota; however, exceptions may be based on the overall economic benefits
to the state. Traditional production agriculture will not qualify for this
program.
Program Parameters
The Ag PACE program is an interest rate buy down program. Monies in the
fund are used to reduce the borrower's interest rate on loans made by a
local lender and BND.
The loan is handled through a local lending institution - bank, savings
and loan, credit union, or farm credit services - which will request the
participation of BND. Together with the borrower, the lenders establish
the terms and conditions of the loan, including the interest rate. The
lead lender then requests that the Ag PACE fund be used to buy down the
interest rate.
Application Process - Application by a lead lender is required for BND's participation. See application for additional documentation required when submitting a request to BND. Lead lender is responsible for servicing the loan.
Interest Rate
If the project qualifies as an Ag PACE project, the borrower receives an
interest rate reduction of a maximum of 5% below the yield rate with a
minimum rate of 1%. The total buy down amount per borrower from the Ag
PACE Fund may not exceed $20,000 per biennium with a lifetime cap of $60,000.
In order to receive buydown funds in excess of $20,000, the applicant must
have a net worth of less than $1,000,000. State Water Commission Funds,
not exceeding $20,000 per borrower, may be used to supplement Ag PACE funds
for the purchase of irrigation equipment on new irrigated acreage. The
lead financial institution and BND set the interest rate to be yielded
by the lenders. The difference between the interest charged by the lenders
(yield rate) and that paid by the borrower is provided to the lenders by
one of the funds.
Qualified Projects
The program may be used to reduce the interest rate on loans for the purchase of real property or equipment, equity shares, working capital and the purchase of inventory. The program will not reduce the interest rate on loans that are a refinancing of existing debt.
Lending Criteria
Once a project has been determined to qualify, BND will use its normal credit standards in reviewing the loan. These standards are a factor of the loan size and the type of project. BND is required to take at least 50 percent, and not more than 80 percent, of the loan.
Default by the Borrower
If the borrower goes into default under the loan agreements, the Ag PACE
fund will no longer buy down the interest rate. The borrower will then
have to pay the full amount of interest due to the lenders. If the farmers
wishes to reinstate the Ag PACE buy down, he must first bring the loan
current or cure the default. Unless otherwise approved by BND, the Ag PACE
program will also consider the relocation of the business from the on-farm
location as a possible event of default.
For more information about this program or other Bank of North Dakota programs,
contact:
Bank of North Dakota
1200 Memorial Hwy
PO Box 5509
Bismarck, ND 58506-5509
(701) 328-5624
1-800-472-2166 ext. 5624
TDD (Telephone Device for the Deaf) 1-800-643-3916
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