Loan Interest Share Program
Missouri offers a unique program that refunds the indirect costs of interest on loans used for soil conservation. This loan interest-share program addresses more types of soil-conservation practices than traditional cost-share programs. The program also can be used to prevent soil loss on lands that currently do not have erosion problems.
The program, developed by the state’s Soil and Water districts Commission in the Missouri Department of Natural Resources, refunds a portion of the interest expense on loans used either to reduce erosion or to reduce the potential for erosion.
The loan interest-share program requires the participation of local lending institutions. The program does not, however, dictate credit terms nor interfere in agreements between borrowers and lenders. The program, moreover, does not involve government-sponsored or government-guaranteed loans. Funds for the program come from the one-tenth-of-one-percent parks and soils sales tax.
HOW DOES IT WORK?
Landowners who are able to secure loans through traditional lending institutions may apply for program assistance. The program application, signed by the landowner and lender, is forwarded to the district board for approval. If approved, the application is sent to the commission for further approval. Then the loan can be finalized by the lender. Once the loan is finalized, the landowner can use the loan to establish those conservation practices listed in the program application.
The state refunds a portion of the landowner’s interest expense a the end of each year of program participation. The refunds are issued every 12 months following program enrollment. This refund, however, may not exceed the interest earned by the state in its general investment program. Since the landowner’s principal and interest levels decline over the term of the loan, the annual state refund of interest to the landowner in the latter years of the loan will be 100 percent.
Each year, the lender must certify that interest was paid. The soil and water conservation district technician also must certify that specified practices are being maintained and that management requirements have been met.
WHO MAY PARTICIPATE?
Landowners or their legal representatives may participate. In addition, operators who are not landowners may use the program to purchase no-till equipment. Eligible participants must have developed a conservation plan for the land they control.
WHAT ARE MAXIMUM LOAN LEVELS?
To qualify, a landowner must have a minimum loan of $2,500. The maximum is $25,000. The maximum length of time that a loan may be scheduled in the program is 10 years (five (5) years for equipment purchases). The actual length may be less, however, depending upon the loan agreement between the lender and the borrower.
WHAT WILL VARIABLE INTEREST RATES DO TO THE AVERAGE ANNUAL INTEREST RATE?
Variable interest rates will change the loan interest rate each year. The program must assume a simple-interest, straight-line payback of the loan. However, this assumption and the sample schedule below should not in any way affect the credit terms of the actual loan. If a landowner does not reduce the principal as scheduled, then his annual interest payments will be greater; at the end of interest-share program participation, there will be no state rebate on interest payments.SAMPLE LOAN SCHEDULE
LANDOWNER
NET
INTEREST INTEREST STATE INTEREST LANDOWNER YEAR PRINCIPAL RATE PAID INTEREST REFUND INTEREST 1 $10,000 12.5% $1,250.00 5.88% $588.00 $662.00 2 9,000 11.5% 1,035.00 6.40% 640.00 395.00 3 8,000 14.0% 1,120.00 6.70% 670.00 450.00 4 7,000 13.5% 945.00 6.22% 622.00 323.00 5 6,000 12.5% 750.00 7.02% 702.00 48.00 6 5,000 13.0% 650.00 7.44% 650.00 0.00 7 4,000 11.0% 440.00 6.14% 440.00 0.00 8 3,000 10.5% 315.00 5.78% 315.00 0.00 9 2,000 11.5% 230.00 5.99% 230.00 0.00 10 1,000 12.0% 120.00 6.06% 120.00 0.00 These figures are examples, not the actual rates.
WHAT PRACTICES ARE ELIGIBLE?
Any standard erosion-control practices qualify. Interest-sharing, however, is not allowed on a loan for the landowner’s share of a practice cost-shared under any other government program. Examples of other eligible practices include: construction of pasture-management facilities, such as cross-fencing and water distribution; noxious-weed control and pasture conversions; construction of waste-management facilities such as animal-waste facilities; and the purchase of new or used no-till drills, no-till planters, and small scrapers, or attachments that convert conventional machinery to no-till equipment.
WHAT SPECIFIC ITEMS ARE NOT ELIGIBLE?
The landowner’s share of a cost-shared practice is not eligible. Other ineligible practices include landowner labor charges; maintenance, operation, or repair costs; farm equipment other than no-till drills, no-till planters, and small scrapers; irrigation wells, pumps, or systems; recreational uses; land purchases; and costs associated with converting forest land to more intensive care.
Livingston County Soil and Water Conservation District
1100 Morton Parkway, Chillicothe, MO 64601
PHONE: 660-646-5687 *** FAX: 660-646-4894