SBA Rule Targets Poultry Farmers' Ties to Processors

SBA Rule Targets Poultry Farmers' Ties to Processors
Arkansas Poultry Federation President and chief lobbyist Marvin Childers (file) (Karen E. Segrave)

A proposed U.S. Small Business Administration rule could deny many small poultry farms access to financing available through a popular loan program.

The SBA interim final rule could disqualify poultry farmers with ties to chicken processing companies from receiving money through the SBA Express Loan Program, also referred to as the 7(a) Loan Program.

The interim final rule was scheduled to be implemented March 11 with the comment period ending April 20. But industry and political outcry led to the date being pushed to Oct. 1 to allow stakeholders further comment and give the SBA a chance to review the comments before the rule is finalized.

Industry organizations like the National Chicken Council and The Poultry Federation, along with lawmakers, have sent letters of protest and spoken out against the rule.

“It would eliminate the grower’s accessibility to the loans,” said Arkansas Poultry Federation President and chief lobbyist Marvin Childers in response to emailed questions.

The 7(a) loan program is one of the primary federal programs that helps small farmers obtain financing for construction, operations and maintenance. From 2012 to 2016 poultry growers were backed by $1.8 billion in loans.

“The farmers/growers need access to these loans and we agree that the implementation should be delayed,” Childers said.

The IFR establishes a review process of farmer contracts in order to make an affiliation determination. The affiliation determination is based on criteria in the IFR that stems from a 2018 Office of Inspector General (OIG) evaluation after allegations the loans were subsidizing major poultry producers. 

The OIG evaluation found that some small poultry producers had little or no independence from the large producers, meaning small farmers who are actually independent registered businesses would be ruled too big to qualify for 7(a) financing.

Criticisms of the IFR say the affiliation determination, among other things, was flawed and did not review enough farms to provide a clear picture.

“The loans have not been subsidizing the companies but rather giving the growers an opportunity to build and update their poultry houses/farms,” Childers said.

Nationally, lawmakers have been somewhat divided over the new rules. Some, like Republican Sen. Chuck Grassley of Texas and Democratic Sen. Jon Tester of Montana have said the IFR closes a major loophole.

But others, especially from southern states, came out in opposition and asked for the delay to Oct. 1.

A letter to SBA administrator Jovita Carranza signed by 54 members of Congress requested delaying the IFR. Arkansas’ Republican Senators Tom Cotton and John Boozman also sought the delay and headed up an effort, supported by 11 senators, with a letter sent to Carranza.

In the letter, Cotton and Boozman wrote:

“Access to capital is one of the most significant barriers to entry for farming, which is why Congress specifically included agriculture in the SBA’s mandate. Unfortunately, the interim final rule, as currently written, could adversely affect many independent, small, family farmers that raise broiler chickens and turkeys across the country, Our constituent farmers deserve to have their voices heard prior to the implementation of a rule that will result in a significant impact on their livelihood. With the current state of the farm economy in mind, we urge SBA to take the necessary time to consider the potential significant impacts this rule would have on the sustainability of our family farm operations.”