Agricultural lenders see potential to ease growing financial pressures in farm country if Congress is willing to retool a now depleted forgivable loan program.
Todd Van Hoose, CEO of the Farm Credit Council, said the Small Business Administration worked diligently to get financial institutions that are part of the Farm Credit System approved to participate in the Paycheck Protection Program. The program is designed to help small businesses meet payroll expenses while workers are idled in the effort to fight the COVID-19 pandemic.
Van Hoose said the Farm Credit System, encompassing four banks and 69 associations, generally doesn’t participate in SBA programs. The council represents the national system of lending institutions that are owned by their farmer-rancher customers and overseen by the Farm Credit Administration, an independent federal agency.
“Fundamentally, the SBA system is built for a much smaller universe and they had to add thousands of new lenders, including Farm Credit,” he said in a phone interview with CQ Roll Call. "We feel like the rules were set up in a way, not intentionally by anybody, that disadvantaged agriculture.”
Agricultural-related loans accounted for just over 1 percent of all loans in the program, according to SBA records.
Van Hoose said hiccups in the program included unanswered questions for farmers who are sole proprietors with occasional hired workers about how to calculate eligible income based on the Schedule F tax form they file for their operations. SBA was able to issue guidelines for sole proprietors who file Schedule C for corporate income.
"The net result was agriculture was put at the back of the line," he said.
Congressional Republicans and Democrats are publicly sparring over how to replenish funds for the program, which issued all of the $349 billion Congress provided for loans through approved financial institutions by Thursday. Talks between Democrats and Treasury Secretary Steven Mnuchin to reach a compromise are underway. Congress created the program in legislation (PL 116-136) that President Donald Trump signed on March 27.
Senate Majority Leader Mitch McConnell, R-Ky., is pushing for a quick infusion of funding to boost the total for the Paycheck Protection Program to about $600 billion. Senate Minority Leader Charles E. Schumer, D-N.Y., and House Speaker Nancy Pelosi, D-Calif., support more money for the program, but also want additional funding for states and localities facing steep budget shortfalls and for hospitals hit by a surge in COVID-19 patients.
Van Hoose and Howard J. Olson, spokesman for AgCountry Farm Credit Services in Fargo, N.D., said their institutions want the program to continue, but added that lenders would welcome changes to make it more workable for agricultural lenders, including community banks.
Each said the economic prospects for a wide swath of farmers and livestock producers is bleaker after COVID-19 public health restrictions led to closing or limiting sales by restaurants and other food service markets that have become major customers as Americans ate out or relied on prepared meals. The loss of those sales are another blow after nearly six years of overall low market prices and two years of retaliatory tariffs by other countries in response to U.S. duties on imported steel, aluminum and Chinese products.
Agriculture Secretary Sonny Perdue told Farm Journal Live on Thursday that he will present Trump with a farm aid plan that includes $16 billion in direct payments to a cross section of agriculture and $2 billion to $3 billion in USDA purchases of surplus farm products. Perdue said the money is a first tranche of aid.
Olson told CQ Roll Call that the Paycheck Protection Program will give farmers who were able to get a loan some breathing room. However, he said it took 10 days for AgCountry to navigate the SBA system, leaving it only with time to process 500 loans valued at $16.2 million on April 14 and 15. Another 50 loans await processing if new funding is provided, he said. The bank has 37 locations in eastern North Dakota, western Minnesota and central Wisconsin.
More farmers in the area may have had loan requests processed through other banks in which they have deposit accounts and a relationship with the institution. As a Farm Credit institution, AgCounty cannot take deposits.
Olson said Congress could tweak the Paycheck Protection Program for agriculture to let the USDA’s Farm Service Agency stand in for the SBA. The agency handles a variety of agricultural loans.