[Code of Federal Regulations]
[Title 7, Volume 7, Parts 700 to 899]
[Revised as of January 1, 2001]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR762.121]

[Page 418-419]
 
                          TITLE 7--AGRICULTURE
 
                            CHAPTER VII--FARM
                SERVICE AGENCY, DEPARTMENT OF AGRICULTURE
 
PART 762--GUARANTEED FARM LOANS--Table of Contents
 
Sec. 762.121  Loan purposes.

    (a) Operating Loan purposes. (1) Loan funds disbursed under an OL 
guarantee may only be used for the following purposes:
    (i) Payment of costs associated with reorganizing a farm or ranch to 
improve its profitability;
    (ii) Purchase of livestock, including poultry, and farm or ranch 
equipment or fixtures, quotas and bases, and cooperative stock for 
credit, production, processing or marketing purposes;
    (iii) Payment of annual farm or ranch operating expenses, examples 
of which include feed, seed, fertilizer, pesticides, farm or ranch 
supplies, repairs and improvements which are to be expensed, cash rent 
and family subsistence;
    (iv) Payment of scheduled principal and interest payments on term 
debt provided the debt is for authorized FO or OL purposes;
    (v) Other farm and ranch needs;
    (vi) Payment of costs associated with land and water development for 
conservation or use purposes;
    (vii) Refinancing indebtedness incurred for any authorized OL 
purpose, when the lender and loan applicant can demonstrate the need to 
refinance;
    (viii) Payment of loan closing costs;
    (ix) Payment of costs associated with complying with Federal or 
State-approved standards under the Occupational Safety and Health Act of 
1970 (29 U.S.C. 655, 667). This purpose is limited to applicants who 
demonstrate that compliance with the standards will cause them 
substantial economic injury; and
    (x) Payment of training costs required or recommended by the Agency.
    (2) Loan funds under a line of credit may be advanced only for the 
following purposes:
    (i) Payment of annual operating expenses, family subsistence, and 
purchase of feeder animals;
    (ii) Payment of current annual operating debts advanced for the 
current operating cycle; (Under no circumstances can carry-over 
operating debts from a previous operating cycle be refinanced);
    (iii) Purchase of routine capital assets, such as replacement of 
livestock, that will be repaid within the operating cycle;
    (iv) Payment of scheduled, non-delinquent, term debt payments 
provided the debt is for authorized FO or OL purposes.
    (v) Purchase of cooperative stock for credit, production, processing 
or marketing purposes; and
    (vi) Payment of loan closing costs.
    (b) Farm ownership loan purposes. Guaranteed FO are authorized only 
to:
    (1) Acquire or enlarge a farm or ranch; examples include, but are 
not limited to, providing down payments, purchasing easements for the 
loan applicant's portion of land being subdivided, and participating in 
the beginning farmer downpayment FO program under part 1943, subpart A, 
of this title;
    (2) Make capital improvements; examples include, but are not limited 
to, the construction, purchase, and improvement of a farm dwelling, 
service buildings and facilities that can be

[[Page 419]]

made fixtures to the real estate, (Capital improvements to leased land 
may be financed subject to the limitations in Sec. 762.122);
    (3) Promote soil and water conservation and protection; examples 
include the correction of hazardous environmental conditions, and the 
construction or installation of tiles, terraces and waterways;
    (4) Pay closing costs, including but not limited to, purchasing 
stock in a cooperative and appraisal and survey fees; and
    (5) Refinancing indebtedness incurred for authorized FO and OL 
purposes, provided the lender and loan applicant demonstrate the need to 
refinance the debt.
    (c) Highly erodible land or wetlands conservation. Loans may not be 
made for any purpose which contributes to excessive erosion of highly 
erodible land or to the conversion of wetlands to produce an 
agricultural commodity. A decision by the Agency to reject an 
application for this reason may be appealable. An appeal questioning 
whether the presence of a wetland, converted wetland, or highly erodible 
land on a particular property must be filed directly with the USDA 
agency making the determination in accordance with the agency's appeal 
procedures.
    (d) Judgment debts. Loans may not be used to satisfy judgments 
obtained in the United States District courts. However, Internal Revenue 
Service judgment liens may be paid with loan funds.