[The statements follow:]

PREPARED STATEMENT OF HON. WRIGHT PATMAN, A REPRESENTATIVE CONGRESS FROM THE STATE OF TEXAS

IN

Mr. Chairman, thank you for this opportunity to comment on my bill, H.R. 3799, to insure that Federal loan assistance is available to small agribusinesses. Efforts have been made to mesh the jurisdiction of the Department of Agriculture and the Small Business Administration, but those of us who represent agricultural areas know that there are jurisdictional gaps which cause enormous frustration and, in the final analysis, leave viable business enterprises with no place to turn for loan assistance.

As the shape of American agriculture changes, there are increasing opportunities for small businessmen to develop new agribusinesses. Despite our antitrust laws and the Robinson-Patman Act, we have witnessed a continuing concentration of economic power in recent years with a diminishing number of opportunities for young people to establish independent businesses of their own. It seems to me that we should be doing our very best to foster the development of new small businesses in all areas of economic activity. The Small Business Administration should be willing and able to assist emerging agribusinesses. This promising field for independent businessmen should not be discriminated against. SBA should not turn down applications for assistance simply because the enterprise in question is related to agriculture.

Again, the purpose of H.R. 3799 is to make it clear to the Small Business Administration, in the form of law, that they are responsible for assisting agribusinesses. Of course, I am very keenly aware of the limitations on SBA resources and of the special qualifications of USDA to work with agricultural enterprises. But I do not believe that applicants should be required to give USDA any right of first-refusal when seeking loan assistance. And I do not believe that applicants should be shuffled back and forth between SBA and USDA for months only to be told in the end that neither agency will assist. Rather, SBA should accept applications from agribusinesses fully prepared to consider them on the same basis as applications from other businesses. It should be a simple matter for SBA and USDA to develop administrative procedures whereby SBA could quickly check to see if the applicant is eligible for assistance as an agricultural enterprise. If so, USDA could then take over the application. But the applicant himself should not be forced to undergo the delay, inconvenience, expense and frustration involved in running back and forth between the two agencies. And most important, there should no longer be any case in which SBA rejects an application because the enterprise is agricultural unless USDA is in agreement and is willing to consider the application on its merits.

Let me cite my experience with two specific cases which demonstrate the problem. In 1971, I was contacted by a young couple who were growing rabbits for sale as meat. They had shown good profits in each of their five years of operation and the business had grown from a part-time to a full-time activity. In addition, the couple had a contract with a processing firm and could readily market as many rabbits as they could produce. Since commercial rabbit production was virtually unknown in East Texas, local financial institutions were reluctant to lend money for expanded operations and the couple was forced to accept shortterm money at high interest rates despite their strong collateral and the clear profitability of their business. They wrote me when it became evident that the local bank would no longer extend the couple's short-term loan.

After determining that the business did not fit in with the Farmers Home Administration concept of a farm operation, we went to SBA and were finally informed by the Deputy Administrator that "the raising of rabbits, whether for food or pelts, is considered an agricultural activity and thus ineligible for assistance from the Small Business Administration." In short, a rabbit raising operation in East Texas was eligible for neither FmHA or SBA assistance. This has all the markings of the classic bureaucratic run-around, but I believe it is an example of a situation where a viable small business enterprise has simply fallen between the cracks.

A second case involved a nursery in East Texas. In this instance, SBA cited Section 18 of the Small Business Act, which enjoins duplication of the work of other departments or agencies, as the basis for SBA policy "not to make loans to enterprises which are clearly agricultural in nature." SBA officials further explained that "When enterprises such as nurseries are engaged in some aspects

of both commercial and agricultural activities, our policy is that they will be considered agricultural—and thus not eligible for SBA financial assistanceif they obtain a greater income from items they grow and sell than they do from items purchased for resale." The nurseryman in this case derived the greater portion of his income from the sale of plants that he grew and was, therefore, ineligible for SBA assistance. Again, a viable small business enterprise fell between the cracks-rejected out of hand.

In both instances cited above, SBA and USDA indicated that the applicant could seek a loan from a local Production Credit Association. Of course, this is not an answer any more than it would be to say that the applicant could seek a loan from a bank. Both SBA and USDA offer services and credit terms that are not available from banks or Production Credit Associations, and I believe that it is the intent of Congress that either SBA or FmHA should be prepared to consider, on their merits, the credit needs of any small agribusiness.

In closing, let me emphasize that my bill is not intended to give agribusiness a position superior to that of any other small business. I would not argue that every agribusiness application must be approved by SBA. But we should make absolutely certain that no small agribusiness is ever again condemned to the no-loan land that now exists in that shadowy zone between SBA and USDA.

Thank you.

PREPARED STATEMENT OF HON. ROBERT A. ROE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY

Mr. Chairman, I, Robert A. Roe, Member of Congress, Eighth District, State of New Jersey, am privileged and honored to have this opportunity to submit this statement in support of the bill that I have sponsored (My Bill No. H.R. 3483) to amend the Small Business Act to expand the definition of small buiness concerns to include agribusiness.

In the national and international marketplaces of the world, it has long been an accepted fact that agribusiness is a business involved in the production, processing and marketing of farm products and agricultural raw materials including food and non-food items. Agribusiness also includes the production and sale of such items as feed and fertilizers, the manufacturing of agriculutral products, meat processing and packaging and the production of textiles from natural fibers. The farmer and his products have always been under the umbrella of the Department of Agriculture but the sophisticated commerce and industry that have mushroomed over the past years in the production, processing and marketing of the farmer's crops and produce have not had the full attention and recognition that their efforts and contributions to the quality of our life warrant in the commerce and industrial activities of the Department of Commerce, and particularly the Small Business Administration.

In view of the past history of the scope of the Department of Agriculture in the farmer's market, the Small Business Administration has developed an indifference to agricultural activities that has carved out a policy that precludes the small agribusinessman from participating in its financial assistance programs.

The Department of Agriculture provides assistance to basically "viable agricultural enterprises," and that is a very fine line but a devastating one to the aspiring, energetic small agribusinessman who needs help to assist him in attaining a "viable enterprise" eligible for USDA support payments and production loans.

Mr. Chairman, the purpose of the legislation before your committee today seeks the inclusion of agribusiness in the small business category eligible for consideration as a business under the Small Business Act not to duplicate any federal assistance that is available to the agribusinessman under the administration of the U.S. Department of Agriculture but to provide him his rightful place in the operation of the Small Business Administration where he can go for federal assistance commensurate with the rules and regulations of S.B.A. for any other businessman. The question before us today is: "Can agribusiness be defined as a business enterprise?" By all means, it can and should be so recognized.

During this period of national economic crisis, agribusiness should be given the opportunity to participate to the fullest measure in the economic development programs of our Nation. There is no greater or vitally necessary commodity to the survival of our people than food staples and with the widespread hunger and poverty that exists in our Nation and developing countries throughout the world, we cannot afford to look the other way. We must encourage and promote the expansion of agribusiness.

The business of feeding our people must be given priority consideration and I most strongly urge your committee's favorable and expeditious action on H.R. 3483 to help the seriously neglected small agribusinessman by providing him the opportunity to participate with other small businessmen in the programs of the Small Business Administration.

Mr. SMITH. The subcommittee will recess until further call.

[Whereupon, at 11:55 a.m., the subcommittee adjourned, to reconvene subject to the call of the Chair.]

SBA ASSISTANCE FOR AGRICULTURAL CONCERNS AND TO MEET POLLUTION STANDARDS

MONDAY, JUNE 16, 1975

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON SMALL BUSINESS ADMINISTRATION

AND SMALL INVESTMENT COMPANY LEGISLATION

OF THE COMMITTEE ON SMALL BUSINESS,

Washington, D.C.

The subcommittee met, pursuant to notice, at 10 a.m., in room 2359, Rayburn House Office Building, Hon. Neal Smith (chairman of the subcommittee) presiding.

Mr. SMITH. The hearing will come to order.

Partly through the urging of our colleague from California, Mr. John Burton, the subcommittee held a hearing some time back concerning problems with financing pollution control equipment, especially in those cases where it has been mandated by the Federal Government.

The hearing proved, I think, to most members, that the problem is much more severe than had generally been anticipated and that, in fact, small business is finding it almost impossible to secure such financing.

So we are glad to have today, as our first witness, the gentleman from California, Mr. Burton, who has done a great deal of work on this.

TESTIMONY OF HON. JOHN L. BURTON, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF CALIFORNIA

Mr. BURTON. Thank you, very much.

Mr. Chairman, and members of the subcommittee, I will submit my statement for the record. I think that most of the members on this subcommittee have been badgered or lobbied by me, one way or the other, concerning this problem.

What I would like to say is that at least for the people I represent, that this problem affects a very small portion of my constituency but a very important part of the economy and environment of the district; and because the key to keeping open space is the number of dairy farms that we have in the western part of Marin County and the southern part of Sonoma. And, it is important to these people, every one of the dairy farmers.

You know, they are family operations, going back-some even to their great grandfathers. They are under a mandate to have their EPA standards met by September of 1976, which means that they

have to commence their construction by September of this year in order to beat the rainy season which, in northern California, hits. around late October and keeps going into the spring.

I really think that the basic assistance should go beyond dairy farmers-I know there are row crop farmers that have the same problem. There are some poultry farmers in Don Clausen's district, that abuts my district, who have these problems, as far as EPA standards are concerned, with water pollution.

And, when they go to SBA, SBA has unilaterally made a determination that people who are covered under Department of Agriculture price supports just should not be eligible for loans.

Now this is really contrary to the provision of the law that deals with duplication; that is, that SBA should not duplicate work or activity of other departments or agencies. But there is a language at the end of that section, which is 15 U.S.C. 647, that states:

If such loans are being denied by such other agencies responsible for such work, due to administrative withholding of obligation or withholding for apportionment or due to administratively declared moratorium, then for the purposes of this section, no duplication shall be deemed to have occurred.

And, the basic problem is these people go to Farmers Home and Farmers Home either does not have the money, or they do not qualify, or the best that Farmers Home can do for them is to guarantee a loan at the bank. Which really means that the only benefit these people have is if they go belly up, and then there will be the Federal Government holding the bank harmless.

But, the individual rancher has to negotiate the length of the loan, the terms of the loan, and the interest rate are at the market rate, which out there—one guy paid, I think, 121⁄2 percent. He just could not wait anymore.

And, fortunately, he did have enough wherewithal to do this on his own. I feel that legislation that would provide some type of directive toward small business which would say that, at a minimum, if the small businesses that happen to be agricultural businesses are mandated by the Government to meet a certain standard of lawbe it EPA-then funds should be made available to help them out. Because the purpose of the Environmental Protection Act was to protect the environment and not to put these people out of business. The dairy farmers I represent are, as I said, really traditional farmers. They are not looking for Government gifts. But they certainly would appreciate some type of loan that they could get that would not break them, and that would allow them to meet the standards.

And I would hope that whatever this committee does in the way of legislation, at least as far as the people that I represent are concerned who have the time deadline of September of this year to commence the construction of their waste control facilities, that it do it expeditiously.

My greatest fear is that we might end up solving this problem, and the people I represent will all go down the tube. I think that the more members I talk to, the more this matter has been brought to their attention, just on its merits. Every member that I have talked to agreed that something has to be done, and that Government should be more responsive: specifically, SBA, which initially said to me that they had entered into a memorandum of agreement with the Depart