USDA rules for hemp loans revealed

Published May 18, 2020 09:00 a.m. ET
iStock / panida wijitpanya

Hemp is a very much needed plant, as it has so many different uses, like the fibre, hemp seed oil, and hemp hearts, which are used in several different recipes. Health enthusiasts have made hemp hearts extremely popular in recent years. Those that grow hemp deserve the same rights and freedoms as any other farmer. Recently there have been some revised rules for hemp farmers. This might be an excellent time to have a look at some money-making hemp stock.

Hemp has remained federally permitted since 2018 under the farm bill. It has since been deemed a commodity just like any other agricultural crop. The USDA has taken steps to join the market with its many different programs and services. The department has a new memo to state and county offices, which provides some clarity on how to process the guaranteed loan applications for the hemp producers.

A seven-page document was released last month and described the many requirements that a hemp business must fulfill to be allowed to access the USDA lending services. Amidst those requirements is for a potential borrower to be licensed under the USDA approved tribal hemp program.

At the same time, knowing the new product will likely have some challenges along the way because of federal regulations, it needs to be treated in the same manner as any other agricultural produce. The memo states that hemp shall be taken into account like any other loan produced substance, as long as the hemp has been created under the 2014-2018 authorized farm bill providing the crop has not been abandoned or destroyed.

Loans, which have not been allowed to produce hemp, will not be considered in non-monetary default, and any will not be covered. The document does highlight that hemp will have to be treated like any other crop. Moreover, there is some recognition that there is those in the marketplace are going to have to face.

Challenges

Hemp that has more than 0.3% THC will also have to be eliminated from the crop under the department's rules. The USDA, Farm Service Agency, will not pay for any of these services for direct loans. The FSA will not cover the lenders advanced to the loanee to cover any cost of any part of a guaranteed loss claim.

The applicant needs to be sure that there is a banking institution authorizing these transactions to ensure the availability of revenue will support the payment of the expenses and debts. Producers will also be required to assign sale proceeds to the Farm Service Agency in an amount that does not override the annual income of the producer.

A hemp business must have a contract with the FSA that lays out its ability to pay back the loan and termination policies. The agreement must also state the reason for growing hemp, whether its for CBD oil fibre or seed or hemp seed oil.

The farm bill does not allow for a hemp license to be passed on. That means that if the borrower abandons operation dies of defaults on loan, no one can take over the said business under no circumstance. That is the updated evaluation of the direct loan applications or requests for credits for industrial hemp growers.

Last year the USDA announced that hemp producers operating under the farm bill of 2014 would be able to access individual federal loans. But regulations need to be developed for hemp growers that are under the latest agriculture legislation. The department has been methodically approving state and tribal hemp plans on an ongoing basis and, at the same time, trying to make hemp farming normalized. For example, they are allowing hemp businesses to assess federal crop insurance.

Recently congress passed legislation that allows hemp farmers to gain assess to the federal Coronavirus Relief Program. It's exciting news that will help hemp farmers to stay buoyant if necessary. This is going to generate the breathing room necessary for the hemp industry. Now that is a definite step in the right direction.

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