Reform Needed: Loggers' Access to Credit

Impact: The economic downturn and regulatory reforms of the financial industries have severely constricted small businesses’, and especially logging contractors’, access to credit.

Status: On March 2, 2015, The Credit Union Small Business Jobs Creation Act was reintroduced in the House as HR 1188, obtaining 87 co-sponsors as of April 7, 2016. On September 10, 2015, The Small Business Lending Enhancement Act (S 2028), with similar provisions, was introduced in the Senate, obtaining 7 co-sponsors as of January 18, 2015. Both proposals would increase the 12.25% cap on credit union assets available to small businesses to 27.5%, for credit unions meeting stipulated requirements.

In addition, Rep. Sean Duffy (R-Wisconsin) is advocating that the Farm Service Agency’s Farm Credit System “explore opportunities” to make Rural Development Business and Industry guarantees more available to underwrite loans to the logging sector, thus augmenting credit sources for “viable logging operations that otherwise are unable to meet lenders’ underwriting criteria.” FRA supports this course and is urging House Agriculture Committee members to raise the issue with FSA.

The Issue: Before the recession, and currently, a large segment of the banking industry consolidated and restructured, and banks have implemented more stringent lending policies. Small businesses of all kinds have found it difficult to obtain loans to maintain or grow their businesses, due to tighter lending restrictions, but conditions imposed upon logging businesses appear to be exceptionally severe, both because of these businesses’ structures (particularly the prevalence of short-term contracts) and their rural locations. Don Taylor’s one-page Financial Institutions and Logging Business Financing outlines the characteristics and scope of the situation, and his two-page The Logging Industry and Lending Institutions provides a region-by-region profile of difficulties logging businesses face in obtaining credit.