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SBA Hot Topic Tuesday — SBA Mulls Poultry Loan Changes — Senators Take Sides

January 29, 2019

By Bob Coleman
Editor, SBA Hot Topic Tuesday

SBA Hot Topic Tuesday — SBA Mulls Poultry Loan Changes — Senators Take Sides

Senators Chuck Grassley (R-IA) and Jon Tester (D-MT) urge SBA Administrator Linda McMahon to adopt the proposed SBA Regulation that limits financing poultry small business farmers.

“As farmers ourselves, we understand the importance of expanding access to capital to folks to make farming more viable. The SBA 7(a) program enables farmers to get loans when they might otherwise not be able to. We must ensure that small producers are able get the resources they need to keep their farm running, without undue influence from larger poultry companies.

“We support the proposed rule to ensure that SBA loan guarantees are not permitted for poultry operations unless they are truly independent small businesses. In addition, we urge you to make this rule effective across the board for SBA 7(a) lenders. Doing so supports small farms, and brings increased security to rural America. Thank you for your consideration.

“In 2018, SBA Office of Inspector General (OIG) evaluated the integrity of SBA 7(a) loans made to poultry farmers, in response to allegations that the loans were essentially subsidizing large poultry companies. As you know, the investigation found that some small poultry producers have little to no independence from large poultry companies.

“The OIG found that larger companies exercise control over smaller growers through a series of contractual restrictions, management agreements, oversight inspections, and market controls. This control supersedes practically all of a grower’s ability to operate their business independent of the larger company. In short, although small poultry growers are the direct recipients of SBA 7(a) loans, large poultry companies are exploiting these small growers by utilizing those loans to shift risks onto taxpayers that private banks will not finance.

More reporting from Feedstuffs . . . . .

Last fall, Sens. Cindy Hyde-Smith (R., Miss.) and Roger Wicker (R., Miss.) were sharply critical of the OIG report, which they said “inaccurately found that large producers, or integrators, maintain control over independent operators and should, therefore, be considered ‘affiliates’ of the larger companies that buy their chickens. As affiliates, small farmers, who are actually independent registered businesses, would be deemed too big to participate in the SBA loan program,” the two said in a joint statement and letter to McMahon.

Sens. John Boozman and Tom Cotton (R., Ark.), along with Reps. Rick Crawford, French Hill, Steve Womack and Bruce Westerman — all Republicans from Arkansas — sent a letter in November 2018 urging the agency to revise the proposed rule, which, if implemented, would impose unworkable eligibility requirements on poultry farmers who rely on SBA’s 7(a) loan program.

The letter noted that the proposed rule jeopardizes the livelihood of thousands of small family farms. “In reality, poultry growers are independent, registered businesses in their respective states. Poultry integrators establish quality criteria, provide technical support and provide certain production inputs. However, the independent poultry farmer is solely responsible for obtaining financing, supervising, managing and directing day-to-day operations and paying all taxes. The poultry farmer is not a partner, agent or employee of the integrator,” the Arkansas delegation wrote.

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