OMAHA (DTN) -- Farmers and other agricultural production businesses will be able to apply for guaranteed loans starting in May through the Small Business Administration that are more than double what farmers could receive for a similar loan through the Farm Service Agency.

The Small Business Administration (SBA) will open a new "Grocery Guarantee" loan for up to $5 million through SBA's International Trade Loan (ITL) program on May 1. The loans will cover a range of agricultural businesses, including nearly every form of crop and livestock production.

SBA announced the new program last Friday as the White House held a celebratory event to end National Ag Week.

In comparison, the current Farm Service Agency (FSA) loan limit is $2.34 million.

Guaranteed loans run through a private lender and are backed by a government guarantee to cover losses. The Grocery Guarantee loans will provide SBA backing for lenders up to 90% of the loan value, SBA stated. That's higher than the standard SBA guarantee of 75% for the agency's 7 (a) loan program.

The purpose of the loans, according to SBA, is to boost "investments in production capacity, processing, and distribution to increase the supply of domestic food products and lower grocery prices."

Along with farmers, other industries that support agricultural production, including farm retailers, wholesalers, trucking companies and grocery stores, are eligible to apply for the loans.

SBA has traditionally declined to offer loans to farmers if they could receive similar assistance from USDA and Farm Credit lenders. That changed during the pandemic in 2020 when farm groups and lawmakers pressed the agency to include farmers in emergency loan programs created in the Coronavirus Aid, Relief and Economic Security (CARES) Act. SBA had provided $1.8 billion in loans from 2012-2016 to contract poultry operations, but the SBA's Office of Inspector General determined in 2018 that the poultry growers did not meet SBA loan requirements and were affiliates of larger poultry integrators, so they should not have qualified for small-business loans.

The details released by SBA on the Grocery Guaranteed loans include poultry and egg production as eligible for the expanded program.

The SBA loan expansion comes as Congress has been trying to pass a farm bill that would boost USDA's Farm Service Agency limits for both direct and guaranteed loans. However, any producer waiting on Congress to pass those higher loan limits might find it more expedient to look at SBA as an option.

Drawing an overall comparison, SBA offers higher lending caps than FSA but also allows lenders to charge higher interest rates, and SBA guaranteed loans also come with higher fees than FSA guaranteed loans.

LOAN LIMITS

The SBA ITL program has a $5 million limit, with 90% guaranteed by SBA.

The FSA guaranteed loan limit is $2.34 million, with 95% guaranteed by USDA.

INTEREST RATE CONSIDERATIONS

Lenders set the interest rates for both SBA and FSA guaranteed loans, but the two agencies have different caps.

-- FSA typical maximum rate: 9.5% to 12%

-- SBA typical maximum rate: 13% to 15%

SBA also allows lenders to charge higher interest rates for smaller loans. A farmer seeking a $50,000 loan could have a 2% higher interest rate than a farmer taking out a $5 million loan.

Smaller borrowers could face higher interest rates with FSA guaranteed loans, but that would be tied to risk and collateral, not as a specific policy.

'LENDER OF LAST RESORT' RULES

Under FSA rules, farmers must show they cannot obtain sufficient credit from commercial lenders "at reasonable rates and terms" to apply for both direct loans and guaranteed loans.

SBA has a similar requirement that the agency cannot provide assistance "if the applicant can obtain credit elsewhere" without facing significantly higher interest rates or excessive collateral requirements. Banks self-certify those conditions for SBA.

LOAN FEES

SBA charges an upfront loan fee for the guaranteed portion of its core loan program that increases with larger loans. For instance, a $2.5 million loan would have a 3.5% fee up to $1 million plus a 3.75% fee for the rest of the loan.

USDA charges a 1.5% fee on the guaranteed portion of its loans.

Both agencies also charge annual fees of 0.55% on the outstanding portion of guaranteed loans.

However, for larger loans with 15-year maturity rates or longer, SBA also charges pre-payment penalties if the loan is paid off in the first three years.

LOAN VOLUME

SBA's 7(a) loan program last year provided $45 billion in loans to 85,000 businesses with the average loan of roughly $529,000.

SBA said it provided more than $7 billion in loans in rural communities in 2025.

USDA's website doesn't have updated information on FSA loans for FY 2025. In FY 2024, USDA provided $2.25 billion in guaranteed loans and $3.1 billion in direct loans. Guaranteed loans are a smaller portion of USDA's loan customers, making up just 4,529 customers out of 24,555 overall. The average FSA guaranteed loan was $497,000 -- combining both farm ownership and operating loans.

LENDING OPTIONS

SBA has a list of lenders eligible to apply for SBA loans. As government-sponsored enterprises, Farm Credit lenders typically have not been eligible for SBA guaranteed loans, but check with your local Farm Credit office in case the rules have changed.

SBA also has finance managers in each state to assist businesses. (https://www.sba.gov/…)

For more information on the SBA loan program, see: https://www.sba.gov/….

Chris Clayton can be reached at Chris.Clayton@dtn.com

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