Agricultural lenders are facing yet another challenge.
A report released last week by the Small Business Administration’s independent Office of the Inspector General questions the independent status of chicken farmers.
The report, in a nutshell, determined that most chicken growers are tied so closely to larger poultry companies—the result of vertical integration efforts—that they operate more like subsidiaries than independent businesses. That could create a problem with lending under the SBA's 7(a) program, which is intended to assist small businesses and startups.
As a result, the SBA may consider barring future loan guarantees to growers who sell their production to a single company. Such a move would harm scores of community banks that count poultry lending as a lucrative line of business.
Poultry makes up the bulk of agricultural loans backed by the agency. The SBA guaranteed more than 1,500 poultry loans totaling about $1.8 billion between fiscal years 2012 and 2016.
Read more in American Banker.