Press Releases
Democrats Seek Answers on Potential Misuse of Small Business Lending Program
Washington, DC,
April 19, 2018
Democratic lawmakers on the House Small Business Committee this week delved into how large agriculture firms may be benefiting from government-backed loans meant to flow to small businesses. The hearing today follows a March report from the Small Business Administration’s (SBA) Office of the Inspector General (IOG), which exposed that over one billion dollars in federal SBA-backed loans benefited ineligible large chicken companies.
“When taxpayer-backed small business loans are effectively awarded to Big Agriculture companies, resources are diverted from struggling entrepreneurs,” said Rep. Nydia M. Velázquez (D-NY). “Today’s hearing looked into a practice that I’m afraid is all too common in the poultry industry – namely big producers essentially controlling small growers that benefit from SBA loans.”
The OIG’s report, “Evaluation of SBA 7(a) Loan Made to Poultry Farmers,” found that large-scale chicken companies exercised an amount of control over chicken growers that should have barred the growers from receiving small business loan assistance under the SBA’s 7(a) lending program. Despite this, between Fiscal Year 2012 to Fiscal Year 2016, SBA guaranteed approximately $1.8 billion in loans that the report found may be ineligible.
“The OIG report suggests that the assets of the growers in these affiliation relationships are basically valueless without a contract with one of the large chicken companies,” Velázquez added. “That means these small entities that are qualifying for government funded loans are essentially just a subsidiary of the big poultry producers.”
In an effort to increase transparency in the 7(a) program, the Committee recently passed the bipartisan Small Business 7(a) Lending Oversight Reform Act of 2018, introduced by Velázquez and Chairman Steve Chabot (R-OH). Among other things, the bill would allocate resources towards ensuring that loans are being awarded to eligible small businesses.
“Congress has a responsibility to ensure SBA’s loan programs function as intended, and aren’t a cash cow for Big Chicken,” Velázquez concluded.
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