Agricultural Businesses Need Credit Union Funding Now
By Gina Ragusa Credit Unions Online
As the drought continues to ravage a good portion of America’s produce, farmers and agricultural businesses need funding and financial assistance now more than ever.
As a result the White House is taking several emergency steps which includes USDA assistance for livestock and crop producers, allowing the National Credit Union Administration (NCUA) to boost lending capacity to credit unions within drought ridden areas and the U.S. Department of Transportation’s issuance of emergency federal truck weight regulation and hours of operation waivers in drought affected areas.
“President Obama and I continue to work across the federal government to provide relief for those farmers and ranchers who are affected by the severe drought conditions impacting many states across our nation," said Agriculture Secretary Tom Vilsack. "This additional assistance builds on a number of steps USDA has taken over the past few weeks to provide resources and flexibility in our existing programs to help producers endure these serious hardships. As this drought persists, the Obama Administration is committed to using existing authorities wherever possible to help the farmers, ranchers, small businesses, and communities being impacted."
A bevy of credit unions located in some of the hardest hit areas are designated as “low-income (LICU),” which means that that they have more power to provide much needed member business loans to small businesses, especially those whose business has been impacted by the drought.
In early August, the NCUA sent letters to more than 1,000 credit unions and, according to an August 7 press release, “Of the LICU-eligible institutions, 470 federal credit unions--representing 47% of potential new LICUs, 52% of potential new assets, and 54% of potential new members--are headquartered in states identified by the National Oceanic and Atmospheric Administration as having ‘extreme’ drought conditions.”
According to a recent estimate, the NCUA approximates that between $250 million and half a billion dollars in new, near-term business loans could be made if all qualified federal credit unions participate. In fact, the NCUA says that the step, “Could double the number of LICUs and increase their member business lending by nearly 75%.”
NCUA Describes LICU Designation Advantages
During an emergency like the national drought, government assistance and low-income designated credit unions can be instrumental to keeping farmers and agricultural businesses afloat.
However, some credit unions and members may still be confused about why being designated as a LICU is advantageous. NCUA created a FAQ sheet that describes the benefits and eligibility requirements to assist both the credit union and member through the process.
A few noteworthy benefits include providing the credit union with the ability to accept nonmember deposits from any source and exemption from the 12.25% member business loan cap. Designation also positions the credit union to accept government assistance and grants that would not be available otherwise.
Despite the scenario’s critical nature, banks are crying foul to NCUA’s notice. "NCUA has taken advantage of a natural disaster to sidestep and leapfrog Congress again, by being a cheerleader for credit unions rather than a strong regulator," Don Childears, president of the Colorado Bankers Association told The Denver Post. "NCUA used a temporary drought to make a permanent change that skirts a congressional limit by allowing unlimited tax-subsidized lending."
However, farmers and agricultural business owners may not care about politics. Charles Bassett, a Missouri cattle rancher told the St. Louis Post-Dispatch, “As I travel around, I can see desperation in faces – faces that have been in this business a long time. They're asking: How much longer do I try to hold on?”
A credit union that jumped into the game early is North Coast Credit Union ($122 million, Bellingham, WA). The credit union has partnered with community action groups, benefactors and investors to provide loans to small, emerging farmers in the area. The loans allow farmers to purchase necessary equipment with supplies.
"This was absolutely perfect for us,” Terry Belcoe, president of NCCU told Washington State University News. "We’ve got all the systems and expertise in place to do the lending. What we lacked was the knowledge of and connections with this new market of potential borrowing members. Slow Money NW and Viva Farms had all the pieces that we were lacking.” Slow Money NW is a local non profit organization that is working closely with the credit union and Viva Farms, a project of GrowFood.org, provides a variety of resources including education, support and start-up loans to farmers.
Brian Dostal, Senior Business/Agriculture Loan Officer at Community 1st Credit Union ($397 million, Ottumwa IA ) said that his credit union is located in the heart of the drought and that his team of loan officers are ready to help.
"The 2012 drought will be felt by our local farmers,” he says. “Community 1st Credit Union serves 13 communities where agriculture is predominant. As we've seen the crops wither during this summer in Iowa, we recognize that this is an opportunity for us to develop a stronger relationship with our agricultural members. The economic effects in the Midwest will be felt by nearly everyone over the next year. We are excited about the opportunity to partner with our Ag members to position them for future success. Those farmers fortunate enough to produce a limited crop should have favorable pricing and will be dependent upon successful marketing of their product. Communication will be essential over the next couple months as we prepare for the harvest and preparation for the 2013 growing season."
Whether you are a farmer looking for assistance or need a loan, find a credit union and inquire about both retail and commercial loan programs.