January 6, 2014
In an effort to better meet the financing needs of small businesses and agricultural producers in rural areas, the U.S. Department of Agriculture (USDA) published a notice in December providing guidance for increasing collaboration between the U.S. Small Business Administration (SBA) and USDA. The notice included a Memorandum of Understanding (MOU) between the USDA and SBA signed in Fall 2013 which outlines specific areas for collaboration.
The MOU stemmed from a September 2012 report by the U.S. Government Accountability Office (GAO) that recommended that USDA Farm Service Agency (FSA) and SBA develop a strategy to better formalize collaboration between the two agencies following concerns expressed by industry groups and others that some small agricultural producers, especially aquaculture and nursery producers, have difficult obtaining assistance from FSA and SBA disaster assistance programs.
The December notice highlights the importance of collaboration between FSA, SBA, and other USDA offices, such as Rural Development (RD), due to the limited availability of Farm Loan Program funding at FSA and the increased financing needs of many farmers. The notice also highlights the importance of increasing the awareness of farmers to all possible sources of financing, such as SBA and USDA Rural Development (RD) loan funds, in addition to FSA loans. Using examples from a dairy and small fruit producer, the notice demonstrates how collaboration between USDA FSA, USDA RD, and SBA can meet the financing needs of farmers through loans, grants, and loan guarantees.
The notice suggests that increased collaboration between the three entities could include:
The notice also mentions that USDA’s FSA and RD, along with SBA, are reviewing ways to streamline the loan underwriting process for joint participation loans.
According to the MOU, which was included in the notice, both USDA and SBA intend to assist small rural businesses and agricultural producers in rural areas with technical assistance, loans, loan guarantees, and grants.
Of note is the agencies’ agreement to “exchange information and discuss ways to increase lending to small agricultural producers and other borrowers who provide locally grown produce or play a role in the local food supply chain.” With the growing demand for local food and the dwindling resources at FSA and RD over the years, such interagency efforts come at a critical time. Collaborations between USDA and other federal agencies will be important to continue providing access to credit and other assistance to farmers and ranchers, thus helping to preserve and develop farm and other rural businesses.