7 U.S.C. § 1923 — Purposes of loans

(a) Allowed purposes. (1) Direct loans. A farmer^* or rancher may use a direct loan^* only to acquire or enlarge a farm or ranch; make capital improvements; pay related closing costs; pay for soil- and water-conservation activities described in section 1924; or refinance a temporary bridge loan from a commercial or cooperative lender for land acquisition, but only if the Secretary approved the direct farm-ownership application and the direct-loan funds were unavailable when approved. (2) Guaranteed loans. A guaranteed loan may be used only for acquiring or enlarging a farm or ranch; capital improvements; related closing costs; the stated conservation activities; or refinancing indebtedness. (b) For a farm-purchase loan, the Secretary must prefer a person with a dependent family, a person able when practicable to make an initial down payment, or an owner of livestock or necessary farm or ranch equipment. (c) After making the required determination, the Secretary may not make a loan unless the farmer or rancher has or agrees to obtain hazard insurance on real property bought or improved with the loan. The Secretary must determine the required insurance level within 180 days after April 4, 1996.