Going Online: Inside the FSA Loan System Upgrade
Ag Lender | April 2004 Issue
BY RYAN HANSER | Supporting Photos Available Here...

This month is the beginning of one of the biggest changes the Farm Service Agency (FSA) has undergone since its incorporation in the 1930s. The agency, which administers farm loans for the USDA, will replace its current Farm and Home Plan lending system with the Farm Business Plan, an online system for documenting cash flow, expenses, assets, debts, and other important financial information powered by Web Equity Manager® software from ECI.

FSA employees began training on the new system April 5. Training will take approximately 21 weeks, and FSA employees will start using the system immediately after their training is complete (see sidebar). Producers will have access to the system beginning mid-2005.

The upgrade, announced in October 2003, will replace mainframe and PC-based systems the FSA currently uses. The new Farm Business Plan will be used to administer over $16 billion in loan volume spread across some 100,000 government program participants throughout the United States and in Puerto Rico.

"Web Equity Manager® will make the loan process much more efficient for the FSA," said Gary Kruse, founder and CEO of ECI. "It will make communication between the government agency and other lenders and regulators much easier, and it will simplify the application process for producers."

According to Kruse, the new system will greatly improve the FSA's current lending system. Producers will be able to enter the financial information required for the loans online from any computer with a Web browser and an Internet connection. This information will be stored on a centralized server accessible to FSA loan officers and guaranteed lending partners. Kruse expects this to make loan decisions and the application process simpler and more efficient for everyone involved.

The move towards an online lending system was not easy, however. It was a process that began over three years ago.

The Need for Change

In 2001, the FSA began a series of conversations with lending software providers. The goal: replace the organization's outdated system with software that fulfilled both federal mandates and internal efficiency objectives.

The Government Paperwork Elimination Act required the FSA, and all other government agencies, to provide a process by which business transactions and record keeping could be done electronically. The FSA needed to present a plan showing how it could comply with this act by October 2003. Additionally, the federal Freedom to E-File Act required the FSA to allow organizations and individuals to apply for loans electronically.

Other requirements were driven by internal FSA goals to streamline and improve management of its loan processes and default rate. This would require better sharing of information and the ability to quickly conduct detailed analysis of a producer's financial data.

Information on the existing system was fragmented between different computers and software systems; this made sharing it with other organizations difficult. This fragmentation also meant FSA staff went to their applicants' places of business with laptop computers, or had producers deliver paperwork to an FSA office to complete the loan process.

FSA's existing systems could store five years of financial data, but did not allow detailed analysis of the stored data. And while current financial data was saved on computers at the FSA's county-level offices, it had to be uploaded to a larger FSA mainframe to be accessed by employees outside the office.

The FSA formally requested information on Web-based lending systems in April 2003. After analyzing what was available, it developed a list of needs for software providers in August, asking the companies to offer their best solutions for its lending system.

According to Gary Kruse, many other agricultural lenders were facing the same issues as the FSA.

"The FSA's situation really was not that unusual," said Kruse. "Lending organizations are under increasing pressure to make their lending processes more efficient, it is a very competitive environment and the need to improve processes is constant."

According the Kruse, both the FSA and ECI looked carefully at Web Equity Manager® to see if it could do the job. In September 2003, the FSA signed an agreement with ECI to use Web Equity Manager for the new Farm Business Plan.

Why Web Equity Manager®?

Web Equity Manager® received the nod because it has the flexibility and scalability the FSA needed.

The program meets the requirements of The Government Paperwork Elimination Act, which requires all FSA loan processes to move online, by providing a simple way for the department to keep records and conduct business electronically. The software also complies with the federal Freedom to E-File act by allowing producers to submit their financial information online and legally validate it with an electronic signature.

Since the program is Web-based, it essentially eliminates the need for producers to physically deliver their financial information to FSA offices, or for FSA representatives to bring laptop computers to the producer's place of business. And since data is automatically placed on a central server, it can easily be shared between the FSA and its community lending partners.

Data is kept secure through user names and passwords. This allows the FSA to assign different people permission to view different sets of data. Lenders can access data from their customers, FSA service centers can access data from their regions, and each producer can edit his or her own information. For additional security, communication between the user's computer and the server is encrypted.

"Online lending systems have a number of inherent advantages," said Kruse. "These advantages have led a number of lending companies to pursue online solutions."

What Others Experienced

While the FSA's Farm Business Plan is the largest application of Web Equity Manager® to date, it is not the first. ECI, the creator of Web Equity Manager®, is the market leader in agricultural lending software. The company released the program in the fall of 2001 as a Web-enabled follow-up for the company's popular Equity Manager® software.

MFA Incorporated, an agricultural farm supply and marketing cooperative, switched to the online system shortly after its debut in 2001. The company had been using a DOS-based system.

According to Mary Poland, general manager for Agmo Corporation, the financing subsidiary of MFA, the upgrade was the result of a need for improved navigability and faster loan processing.

"Moving to a Web-based system definitely helped," said Poland. "It is easy to use, and the increased accessibility has allowed our loan officers to decrease the time spent on each application."

AgStar Financial Services, another early adopter, began using Web Equity Manager® in 2002. The company incorporated the software as part of a plan to eliminate many of the 60 different programs they had been using.

"We were working to move to a Microsoft server environment and integrate our software system so we didn't need to enter customer and loan information multiple times," said Tom Resch, credit team leader for AgStar. "We met those goals, and ECI's people were great to work with during the transition and whenever we needed them after."

According to Kruse, previous use of Web Equity Manager® shows that the software can provide many advantages. It also increased ECI's expertise in one of the biggest tasks of any software upgrade: change management.

Making the switch

While the FSA has agreed to use Web Equity Manager® for its new Farm Business Plan, the transition is really just beginning. ECI and the FSA are just beginning to train over 2,000 FSA employees from 47 states and Puerto Rico. A six month process, the training may be the most challenging part of the conversion.

"The FSA has been using the same system for a very long time," said Kevin Britten, vice president of sales for ECI and manager of the training process. "Anytime that happens we know it can be hard for people to adapt to a new system. The trick will be getting everyone to understand the advantages of the product and how it can work for them."

To accomplish this goal, ECI created an interactive training curriculum called the eLearning Center.

"We started developing this training program six months before the FSA became a client because we saw value in using it with our other clients." said Britten. "Good training can make the difference between a bumpy transition or a smooth one, and we hope to make this one as smooth as possible."

The curriculum uses eight modules to teach specific aspects of the system, such as collateral analysis and creating credit action forms. Each module includes a multimedia presentation, self-test and follow-up material.

"We start each module with an hour presentation on the topic, and then turn the trainees loose to use the program themselves," said Britten. "Each person has a networked laptop with access to Web Equity Manager® and can use the software to process sample loans."

After using the program, FSA employees take an online test developed by ECI to analyze their understanding of the module.

"The test isn't so much to see whether the trainees pass or fail," said Britten. "It helps us identify strengths and weaknesses to continually assist the trainees throughout the entire learning process."

Each trainee will also receive a recorded copy of the training presentation on a CD-ROM as a personal reference.

ECI's educational activities will extend beyond FSA employees. The company will also hold a series of Farm Business Plan Awareness Webcasts for the FSA's guaranteed lending partners in the states where the system is being implemented. The presentations will feature each state's FSA Loan Chief and discuss how the FSA is aligning its financial analysis process along mainstream banking standards. The Webcasts will be held approximately one week in advance of each state's FSA training date.

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