---
kind: "section"
citation: "7 C.F.R. § 762.121"
title: "7"
number: "762.121"
heading: "Loan purposes."
url: "https://uscodex.org/cfr/7/762.121"
---

# §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 to improve its profitability;
    - (ii) Purchase of livestock, including poultry, and farm equipment or fixtures, quotas and bases, and cooperative stock for credit, production, processing or marketing purposes;
    - (iii) Payment of annual farm operating expenses, examples of which include feed, seed, fertilizer, pesticides, farm 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 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 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](/usc/29/655.md), [667](/usc/29/667.md)). This purpose is limited to applicants who demonstrate that compliance or non-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; examples include, but are not limited to, providing down payments, purchasing easements for the applicant's portion of land being subdivided, and participating in the down payment FO program under [part 764](/cfr/7/part764.md) of this chapter;
  - (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 made fixtures to the real estate, (Capital improvements to leased land may be financed subject to the limitations in [§ 762.122](/cfr/7/762.122.md));
  - (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 applicant demonstrate the need to refinance the debt.
- (c) **CL purposes.** Loan funds disbursed under a CL guarantee may be used for any conservation activities included in a conservation plan or Forestry Stewardship Management Plan including, but not limited to:
  - (1) The installation of conservation structures to address soil, water, and related resources;
  - (2) The establishment of forest cover for sustained yield timber management, erosion control, or shelter belt purposes;
  - (3) The installation of water conservation measures;
  - (4) The installation of waste management systems;
  - (5) The establishment or improvement of permanent pasture;
  - (6) Other purposes including the adoption of any other emerging or existing conservation practices, techniques, or technologies; and
  - (7) Refinancing indebtedness incurred for any authorized CL purpose, when refinancing will result in additional conservation benefits.
- (d) **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.
- (e) **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.

## Notes

### Amendments

[64 FR 7378, Feb. 12, 1999, as amended at 72 FR 63297, Nov. 8, 2007; 73 FR 74345, Dec. 8, 2008; 75 FR 54014, Sept. 3, 2010; 77 FR 15938, Mar. 19, 2012; 78 FR 65529, Nov. 1, 2013; 86 FR 43391, Aug. 9, 2021]

### Authority

Authority: 5 U.S.C. 301 and 7 U.S.C. 1989.

### Source

Source: 64 FR 7378, Feb. 12, 1999, unless otherwise noted.

### Amendments

[64 FR 7378, Feb. 12, 1999, as amended at 72 FR 63297, Nov. 8, 2007; 73 FR 74345, Dec. 8, 2008; 75 FR 54014, Sept. 3, 2010; 77 FR 15938, Mar. 19, 2012; 78 FR 65529, Nov. 1, 2013; 86 FR 43391, Aug. 9, 2021]