Rocky Boy-based group helps Indians obtain ag loans

At age 19, Clayton Jon Houle has grown his herd to 160 cattle. Four years ago, he had none. The Rocky Boy resident, who runs a ranch with his father a few miles north of the agency, financed the herd with two loans - totaling about $126,000 - from the Farm Service Agency of the U.S. Department of Agriculture. A national loan outreach project run from Rocky Boy helped him do it.

Houle is one of about 300 American Indians across 10 Western and Midwestern states that were assisted last year by the National FSA American Indian Credit Outreach Initiative. The project, which is administered by the National Tribal Development Association at Rocky Boy, helps American Indians apply for federal agricultural loans, and is servicing 21 new states this month that will stretch its service area to the Atlantic Ocean.

"The northern half of the United States is now covered by our project," association chief of staff Daryl Wright said. "Next year we want to be in all (lower) 48 states."

Different types of FSA direct loans help people who have been denied by other loan sources to buy their own farms or ranches, pay operating expenses, and in some cases start their own small businesses. Youth loans of up to $5,000 are available to young entrepreneurs between the ages of 10 and 20. Most of the loans are geared toward farmers and ranchers.

FSA sets aside funds specifically to loan to "socially disadvantaged" farmers - a group that includes Native Americans.

The other half of the equation is making sure those individuals can successfully apply for the loans. That's where the credit outreach initiative comes in.

"We kind of take out some of the mystery about borrowing from FSA programs," association project administrator Neal Rosette said. "We're specifically geared to Native American borrowing, which historically has been one of the underserved communities."

They do that, Wright said, by advertising to attract potential borrowers, explaining the different kinds of loans available, assisting with paperwork - or, for the last six months, online applications - and even accompanying the applicants to the USDA offices.

"We help them throughout the process," Wright said.

Houle said the association provided him valuable help, making sure his application was complete and that he had enough land to support the cattle, and joining him at several meetings with FSA.

"They really helped me out quite a bit," said Houle, who had to juggle the application process with his job working for the Bear Paw Hot Shots. "They made sure everything was right on to get the loan. They were really hands-on."

Houle successfully applied for a $5,000 youth loan on his own when he was 15, and bought his first 20 cattle. After he finished paying it off last year, he applied for a larger loan in October, this time with the development association's help. By January he knew he was approved, and bought about 140 more cattle. On Thursday the final processing was finished.

Rosette said Houle is not an isolated success story.

"Actually we've been quite successful," he said. "What we've seen was a remarkable increase in socially disadvantaged loans from the start of the project."

Last year the project helped 268 people in the 10-state area begin the loan application process, about half of whom ended up completing the application, Rosette said. Applications are complex, he said, and usually take between one and three months to complete. Many other people who get FSA loans apply on their own, but first learn about the loans from the project's outreach efforts, Rosette said.

The project has come a long way since it began at Stone Child College in 1997 as a pilot program for the seven Montana Indian reservations.

Elinor Nault-Wright, the association's program development officer, said that in 1996, the year before the project started, FSA loaned about $2.8 million to socially disadvantaged farmers in Montana. In 1998, before the drought started and the economic downturn hit, that number peaked at $9.8 million.

Roger Meredith, the farm loan director at the state FSA office in Bozeman, said there is no way of knowing how much of that increase was a result of the program, but he believes it played a large role.

"We have seen some increase and I think it's a direct result of their being out there," Meredith said. "The word is being spread."

Not only did the number of loans awarded increase, but the number of Montanans defaulting on their FSA loans decreased.

Socially disadvantaged farmers in Montana had a 35 percent loan delinquency rate in 1996, at a time when the national average was 15 percent, Rosette said. By 2000 the Montana rate had dropped to 14 percent.

Mike Hill, the FSA coordinator who manages the project in Washington, said that's because there was not much pre-loan education and counseling for under-served populations before the outreach initiative began. "We do that free," he said, adding that the project also teaches people how to keep financial records of their farms.

Meredith said the statewide loan delinquency rate has crept back up as a result of hard times for agriculture, so now it is about 20 percent.

When funding for many programs was drying up, this one managed not only to survive, but to grow.

The tribal development association took over the administration of the project two years ago after Stone Child College officials determined it had outgrown its initial scope, Nault-Wright said.

Last year the project expanded outside of Montana to include 10 states, from Iowa to Washington. It will serve the entire lower 48 states next year if all goes according to plan.

The program is "probably the biggest success we've ever had," Hill said. "It's had tremendous impact in Indian country." Hill said the initiative has been the model for similar USDA projects for blacks and Hispanics.

It has drawn praise outside of USDA as well.

"It has gained support under this current administration," Wright said. "It's a highly thought of project even by Republicans."

This year the association's funding has nearly doubled, from $862,000 to $1.59 million. That has made possible the expansion that is now taking place across the country.

Success did not happen all at once.

"One of the biggest challenges is people figuring out what we're there for," said Anita Matt, a regional coordinator who has worked with the Flathead Indian Reservation since the program started. "We're here for education and assistance. We're not a loan officer." That understanding, she said, came with time.

Matt said about 30 percent of the people she assists with loal applications are approved.

"The problem, like any other federally funded program," she said, "is that if it comes to the end of the program and there isn't the funding, they'll have to wait."

Indeed, Rosette said that in the 10-state area last year, the project helped 116 American Indians complete loan applications. So far, 14 of them have been approved for a total of about $324,000, but many are still waiting to be approved because the federal budget was signed so late, he said.

"We're expecting next year's numbers to be a little more favorable," Nault-Wright said.

Rosette said that at first, many people either didn't know about the project or didn't trust it.

"The biggest problem has been getting the word out to Indian folks and getting them to trust us," he said.

But they have made progress, he said, thanks in part to USDA. "The reason this program is a success in Montana is the level of cooperation we've received from the state USDA offices. If there are obstacles or barriers, they're willing to work together to identify those and work for solutions."

Now, he said, many American Indian communities are scrambling to get on board.

"We've got people all over the country asking for this service," Rosette said, especially in tribes in the Southwest.

One thing that helps, he said, is to hire local people. For the expansion this year, Rosette said, the seven new full-time positions were all filled from the local populations in the areas they will serve, bringing the association - which began eight years ago with two employees - to a 23-employee roster and a $1 million payroll.

Despite the extra help, the work load will be heavy. "All of the people are handling multiple reservations, multiple areas, even some of them multiple states," Rosette said.

"We hired individuals and placed them strategically around the country," said Rosette, who returned from a weeklong program in Las Vegas to train the new hires earlier this month. Two weeks ago they were busy setting up their offices.

Now the new offices in Minnesota, Wisconsin, Missouri, New York and New Hampshire have opened their doors to applicants, he said.

One more employee will be hired to service North and South Carolina, Georgia, and Tennessee in about a month.