The second meeting of the U.S. Department of Agriculture Interagency Working Group on Cooperative Development will convene February 16, 2016, at the U.S. Small Business Administration (SBA) in Washington, D.C. to address access to capital for cooperatives, specifically inconsistencies in debt financing eligibility.
NCBA CLUSA, which worked diligently on behalf of its members and co-ops nationwide to establish a working group of federal partners to tackle issues facing the cooperative sector, is looking to the group to help clarify the regulations that currently govern a co-op’s eligibility to access debt financing through the SBA’s lending programs.
The SBA currently recognizes four different types of cooperatives: producer, purchasing, worker and consumer. However, only certain types of these co-ops under certain circumstances are eligible for SBA guaranty loans. While one SBA regulation indicates that all co-ops are eligible businesses, another excludes some types of co-ops and includes others.
Adopted in the 1960s, the language of these regulations is “outdated and does not reflect the evolving nature of cooperatives,” said Alan Knapp, NCBA CLUSA vice president for Advocacy.
Furthermore, the regulations have caused confusion and led many lenders to interpret the regulations broadly, denying access to most—if not all—types of cooperatives, Knapp added.
Regulatory clarity and consistency is needed from the SBA to grow and develop the cooperative sector going forward, Knapp said. “While some co-ops reach Fortune 500 status, the majority are small businesses [that] tend to rely on debt financing more than investor-owned businesses that can more easily access outside investment capital.”
The first meeting of the Interagency Working Group on Cooperative Development took place in October 2015, with representatives from more than 15 federal agencies, including the White House Rural Council, the Federal Emergency Management Administration, Health and Human Services, Internal Revenue Service, Small Business Administration and the departments of Interior, Justice, Labor, Education and Commerce.
The working group was created as part of the Agriculture Act of 2014 and included an NCBA CLUSA-requested provision that authorized, “the Secretary of Agriculture to coordinate and chair an interagency working group to foster cooperative development and ensure coordination with Federal agencies and national and local cooperative organizations that have cooperative programs and interests.”
NCBA CLUSA, in partnership with USDA and others, began working on this initiative more than two years ago. As a permanent vice-chair of the Interagency Working Group on Cooperative Development, NCBA CLUSA’s role is to convene and facilitate. Through its Cooperative Leadership Coalition—comprised of organizations including the National Farmers Union, National Cooperative Bank, National Rural Electric Cooperative Association and National Council of Farmer Cooperatives—NCBA CLUSA works to ensure the cooperative voice is cross sector and united in its engagement with U.S. federal agencies.
The Interagency Working Group on Cooperative Development is hosted on a quarterly basis by various federal agencies, with each meeting focused on a specific issue facing the cooperative sector in the U.S.