With a guaranteed farm loan, the lender is FSA's customer, not the loan applicant. Guaranteed loans are the property and responsibility of the lender. The lender and loan applicant complete the Application for Guarantee and submit it to the FSA Service Center in their lending area. The Service Center works with the commercial lender to process the guarantee. The Farm Loan Officer reviews the application for applicant eligibility, repayment ability, adequacy of collateral, and compliance with other regulations, and if the applicant meets those requirements, the request is approved. The Service Center issues the lender a conditional commitment outlining the terms of the loan guarantee and indicating that the loan may be closed. The lender closes the loan and advances funds to the applicant, after which the Service Center staff issues the guarantee. The lender makes the loan and services it to conclusion. In the event the lender suffers a loss, FSA will reimburse the lender according to the terms and conditions specified in the guarantee.
A direct operating loan is funded directly by the Agency. The money used for direct loans comes from annual Congressional appropriations received as part of the USDA budget. The Agency is responsible for making and servicing the loan.