Farm groups, House lawmakers raise questions about SBA loans and agriculture

April 5, 2020
In The News

Farm groups and House lawmakers have charged this week that the Small Business Administration is not following congressional intent when it has excluded farmers from the Economic Injury Disaster Loan program as modified by Congress in the Coronavirus Aid, Relief, Economic Security (CARES) Act.

On Tuesday, National Farmers Union President Rob Larew wrote Small Business Administrator Jovita Carranza, “We are deeply concerned that SBA is not currently considering farms, ranches, and most agricultural enterprises as eligible enterprises for the Economic Injury Disaster Loan (EIDL) program.”

“Section 1110 of the CARES Act expands eligibility for the Economic Injury Disaster Loan program and creates an emergency grant program,” Larew said.

“NFU believes it was congressional intent to include in that expanded eligibility farms, ranches, and other agricultural enterprises. It is our understanding that most ‘agricultural enterprises’ are typically excluded from this program in order to avoid duplication of programs from other federal departments or agencies; in this case, to avoid duplication of disaster assistance from the U.S. Department of Agriculture (USDA). However, the disaster relief programs offered by USDA are typically related to natural disasters, especially those related to weather events. There are not currently any disaster programs available to farmers and ranchers from USDA made available in response to the COVID-19 pandemic.”

On Wednesday, a coalition of farm groups including the American Farm Bureau Federation wrote Carranza, “Earlier this week, the SBA posted a new EIDL website that states applicants must certify that they are ‘not an agricultural enterprise (e.g., farm), other than an aquaculture enterprise, agricultural cooperative, or nursery.’”

The Hagstrom Report tested the site and found that the loan application process contains the exact language that the coalition cited.

The coalition added, “We believe that the clear statutory language of the CARES Act indicates that agricultural businesses can participate in the emergency EIDL program as was the intent of Congress.”

“We are helping clients access funding and loan programs under the stimulus bills,” said Brian Kuehl, director of federal affairs for KCoe Isom, a national agricultural accounting and consulting firm told The Hagstrom Report.

“We think Congress clearly intended to include ag businesses in the emergency Economic Injury Disaster Loan Program. The Small Business Administration should make that clear as soon as possible. For heavily impacted ag businesses, the ability to secure this type of financing will decide whether they can stay in business.”

Today a coalition of 86 House members led by Rep. Antonio Delgado, D-N.Y., wrote Carranza that they were “shocked and disappointed that, contrary to congressional intent, the Small Business Administration singles out farmers and agricultural businesses as ineligible for this program.”

“We ask that you share the Small Business Administration (SBA)’s rationale for excluding farms from this program, including any statutory limitations on aiding farmers. We urge you to ensure that agricultural businesses and farmers are eligible to access the EIDL program, and the other small business provisions in the CARES act. Farmers need our help to make it through this pandemic while continuing to feed American families, fuel our economy, and sustain other resources which are essential to our survival.”

Separately, the American Farm Bureau Federation’s Market Intel service said that the Paycheck Protection Program Loan, another program run by SBA, may be of limited use to farmers.

Veronica Nigh, a Farm Bureau economist, noted that the rules say the payroll expenses cannot include salaries for foreign workers or independent contractors, which will be particularly limiting to fruit, vegetable and nut producers and the dairy sector, all heavily reliant on foreign labor.

“In addition, many farm business owners rely heavily on independent contractors, also sometimes referred to as 1099 workers,” she said.

The other provision of concern relates to size limitations, she said.

“If the SBA interpretation of the CARES Act is that the industry-specific number of employees and annual receipts, without any expansion, are both applicable in determining eligibility, most of production agriculture will be on the outside looking in on the benefits of this particular program,” Nigh concluded.

The SBA press office did not respond to a request for comment.