Source: Lisa M. Keefe, MEATINGPLACE, 3/8/18


The federal Small Business Administration's Office of the Inspector General reviewed its loan guarantees for SBA 7(a) loans made to poultry growers and determined that the growers do not meet the standards of a small business, but rather are "affiliates" of the large integrators.

The 7(a) loan program is the agency's primary vehicle for helping start-up and existing small businesses with loan guarantees of up to $5 million for start-up costs, expansions, equipment purchases, repairs and other requirements. Participating lenders enter into an agreement with SBA to make the loans to small businesses in accordance with the SBA's rules and regulations, according to the report's executive summary.

In reviewing SBA-guaranteed loans to growers from fiscal 2012 to fiscal 2016, the OIG determined that the loans "did not meet regulatory and SBA requirements for eligibility."

Specifically the report said, "large chicken companies .... exercised such comprehensive control over the growers that the [growers] appear affiliative under SBA regulations. ... [W]e found integrator control exercised through a series of contractual restrictions, management agreements, oversight inspections and market controls. This control overcame practically all of a grower's ability to operate their business independent of integrator mandates."

National Chicken Council spokesman Tom Super said poultry loans are a very small part of the 7(a) portfolio. "Ultimately, the issue here is whether a federal government employee should have approved a loan or not," he added.

“We would, however, disagree with the report’s characterization of the relationship between chicken farmers and processors. The situation is no different than any other small business that voluntarily enters into a contractual relationship to provide services to a larger company.

“These loans, approved by the federal government, go directly to small, independent family farms in rural America, which has allowed people to start their own businesses, expand or diversify their farm operations, create jobs, and stay and work on their farms with their families.  If anything, the government should be doing more, not less, to drive growth and opportunity in the rural economies that feed America and the world.”

The Inspector General's report recommended that the SBA review each poultry grower's loan application more thoroughly, and also review the arrangements between integrators and growers "to ensure SBA loan specialists and lenders make appropriate affiliation determinations."

In response, the SBA said it agreed with the Inspector General's recommendations.

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