SBA Program Expands Credit Access and Flexibility in Farm and Land Markets

New loan opportunities are available for landowners and the food supply chain through a source that farmers don’t typically consider. And they include borrowing limits more than double USDA options.

In March, the Small Business Administration (SBA) announced the “Grocery Guarantee,” aimed at reducing grocery costs by expanding access for its SBA International Trade Loan (ITL) Program. On May 1st, the agency said at least 22 new categories of farm and agribusinesses in the North American Industry Classification System and National Industry Codes will become eligible for the expanded ITL Program.

SBA Administrator Kelly Loeffler said this is another action from the Trump Administration to help with food prices. “[It] will drive even more investment in our nation’s food supply chain – infusing farmers, ranchers, and logistics providers with expanded access to capital that will increase production, processing, and distribution,” Loeffler said in a statement.

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Small Business Administration loans for farmers

Traditionally, the SBA was not an area where farmers looked for loans according to Iowa State University economist Chad Hart. “But that really started to change, especially during COVID, where we recognized that, when it does come to certain crunch times, whether it be from a disease outbreak like COVID or financially hard times like we're finding now, it helps to have multiple ways to access financial capital during hard times,” Hart told American Farmland Owner.

The ITL Program comes with a 90% federal guarantee, which the SBA said is more flexible than the 75% guarantee from its 7(a) Loan Program. Allowing for what it calls, “long-term, affordable financing to support American producers.”

The loan can go up to $5 million, a little over twice the amount you can get for a similar loan from the Farm Service Agency (FSA).

“You're probably going to end up paying a little bit higher interest rate or maybe paying a little bit more on the lender fees for these SBA loans than we would typically see with the FSA loans,” Hart speculated. “But other than that, a fairly similar process.”

Beyond offering more capital than the FSA, the SBA has some similarities. This is a guaranteed loan, which according to Hart, means a farmer or landowner would not just be borrowing from a bank. They would be working with a bank as well as the SBA.

“What the SBA is doing right now is looking to expand their reach as far as providing this financial loan support to broad swaths of the U.S. economy,” said Hart. “The Grocery Guarantee is the piece that fits for agriculture, but they're also doing this in other sectors of the economy as well.”

In a press release, the SBA said, “By reducing barriers to capital and empowering lenders to invest in American agriculture, SBA is ensuring that small businesses remain at the center of our nation’s food security and economic strength.”

Grocery Guarantee provides resources

Valuable government loans in agriculture are normally only accessible by beginning or young farmers, Hart pointed out. In this case, he said the Grocery Guarantee was set up to open capital to existing producers.

The SBA said the Grocery Guarantee gives local lenders confidence to get money into the food supply chain as well as invest in production capacity, processing, and distribution. The purpose is to increase the supply of domestic food products and lower grocery prices.

“It just provides another avenue for accessing financial credit at a time when we know financing is tight across agriculture,” said Hart.

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