An assessment by the Office of the Inspector General of the Small Business Administration regarding loans to poultry farmers and producers concluded that most do not meet the regulatory requirements and requirements of the SBA.

Poultry farms are not small businesses?

In arriving at this conclusion, the Office of the Inspector General stated in his evaluation (PDF) that large chicken companies or integrators exercised complete control of such magnitude over the producers who They were affiliated with the regulations of the SBA.

Control was so prevalent that the report indicates that it overcame almost all of the producer’s ability to operate its businesses independently of established integrator mandates. The SBA also concluded that nearly $ 1.8 billion in loans made between Fiscal 2012 and Fiscal 2016 may not be eligible.

As part of its recommendations, the Office of the Inspector General suggested improved supervision by the SBA of the 7 (a) Loan Program, which was responsible for the distribution funds. This includes reviewing the loans cited in the assessment, as well as the current arrangement between integrators and producers to determine their affiliations.

What is a loan SBA 7 (a)?

The SBA 7 (a) Loan Guarantee Program is designed to help small businesses facing qualification problems in their traditional loan applications to obtain financing. The program essentially encourages lenders to extend loans to this segment by guaranteeing the loan against default.

The key point to remember here is that 7 (a) was designed for small businesses and that an organization must be defined as such by the SBA to be eligible.

So what’s a small business?

According to the SBA and its small business size standards, there are many exceptions as to what is technically classified as a small business. The two widely used standards indicate that a small business must have 500 or fewer employees in most manufacturing and mining industries and $ 7.5 million in average annual revenues for many non-manufacturing industries. But the number of employees and annual revenues can reach respectively 1,500 and 38,5 million dollars.

The takeaway dish

If you are looking for a loan from the SBA and its 7 (a) program, make sure you are not affiliated with a company that has overwhelming control over your small business.

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