Kentucky Dairy Development Council

The Kentucky Agricultural Finance Corporation (KAFC) is working with lenders across Kentucky through a program that offers dis­counted financing opportunities to farmers constructing new facilities on their farms. The Agricultural Infrastructure Loan Program (AILP) provides up to $250,000 of financing at a 2% interest rate for up to a 10 year term for eligible projects. Eleven projects ranging from swine and poultry barns to grain facilities to dairy structures have been approved since the program began in May 2005.

The AILP works in the following manner. An interested producer who receives at least 20% of their gross income from farming and can document recent tobacco income * contacts their preferred lender. *Tobacco involvement includes evidence of receipt of a phase II check, a Tobacco Transition Payment Program (TTPP) contract, or a current executed contract for tobacco production. The lender assists the producer in completing the financial institution's standard credit application along with a KAFC application and submits the packet to KAFC forboard review. Contingent on KAFC board approval, the lender and the applicant will receive a commitment letter from KAFC. The KAFC board normally meets the first Friday of each month and must receive a completed application two weeks prior for consideration.

The lender will supervise the construction process and make all necessary advances at the lender's normal rate. Upon completion of the project, the primary lender sets up a term note reflecting a blended KAFC/primary lender interest rate and sells the appropriate portion of the loan to KAFC. The borrower will make all interest and principal payments to their lender. The lender will forward the KAFC portion as received to KAFC.

The effective rate to the borrower will be calculated by averaging the portion financed by the primary lender at their normal market rate and the KAFC portion at 2% with the addition of up to a .75% servicing fee to be retained by the lender. The primary lender has the op­tion of extending their terms past 10 years and offering a fixed or variable rate. All payments made will be shared pro-rata by the lender and. KAFC. The KAFC can provide financing up to 50% of the project's cost and is limited to $250,000 per applicant.

Eligible projects include permanent agricultural structures and associated attached equipment that improve the farm's profitability. Projects carT not include operating expenses, livestock, or portable farm equipment and loan funds can not be used to refinance existing debt. For more information, please contact Bill McCloskey at the Kentucky Agricultural Finance Corporation; 404 Ann Street; Frankfort, KY 40601; (502) 564-4627 Ext. 232; or visit the KAFC website at www.kafc.ky.gov. Funding for this program originated from the Kentucky Agricultural Development Fund.