Deadline: Open Enrollment. Lender must apply on behalf of qualified borrower.
Objective: The Interest Rate Reduction (IRR) Program is intended to facilitate lower interest rates to eligible applicants through a commercial lender. Through this program, lenders are able to receive capital for their loans from the Texas Comptroller of Public Accounts, who is authorized by the Legislature to offer below-market interest rates. These lower rates are then passed along to the borrowers, who may benefit from interest rate reductions of several percentage points.
Program Funding: IRR’s are funded through the Rural Microenterprise Development Fund, which is managed by the Comptroller of Public Accounts. $30 million has been appropriated to this fund and TAFA’s use. The IRR program can be used to lower the interest rate of loans that are $500,000 or less.
TAFA’s Role: TAFA assists eligible lenders in acquiring capital through the Texas Comptroller of Public accounts for loans that will be made to agricultural producers or agri-business owners. TAFA reviews project applications to ensure the projects meet TAFA’s requirements, and recommends them to the Comptroller. Upon approval from the Comptroller, the lender is granted capital at a reduced interest rate and passes savings to the borrower.
- Any person who proposes to use loan proceeds for the creation or expansion of an agricultural business in Texas.
- The applicant should discuss the program with his or her lender and have the lender submit the application.
- Eligible lenders include any financial institution that makes commercial loans and is an approved depository for state funds.
- Farm Credit System lenders are not eligible because they are not able to accept deposits from the Comptroller of Public Accounts.
- The lender and the borrower determine the repayment, maturity and collateral for the loan.
Use of Funds:
Loan proceeds may be used for any agriculture-related operating expense, including:
- The purchase or lease of land;
- A fixed asset acquisition or improvement; and/or
- Any enterprise based on agriculture, as identified in the application.
- A loan under this program may be applied to existing debt only when required by the lender to finance the expansion of an eligible project.
Interest Rate Determination: The Comptroller of Public Accounts places a linked deposit with a participating financial institution. The interest rate on the linked deposit is determined on the date the loan is funded and based on matching the loan maturity date to the closest U.S. Treasury bill or note maturity date, or the end of the state’s fiscal biennium (Aug. 31 of each odd numbered year). Typically, IRR loans offer interest rates lower than current market rates.
Term Requirements: The lender and the borrower determine repayment, maturity and collateral for the loan.