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Congress considers legislation to extend loan forgiveness to rural businesses


Congress is considering legislation to include loan forgiveness for rural businesses and communities as part of the Rural Equal Aid Act, a bipartisan measure sponsored by U.S. Rep. Cindy Axne, D-Iowa. It will provide needed relief to entities with loans through the U.S. Department of Agriculture Rural Development program.

Currently, only businesses with loans through the Small Business Administration are eligible to have the principal, interest and any associated fees owed on the covered loans for a six-month period forgiven. That was included in the Coronavirus Aid, Relief and Economic Security Act, known as the CARES Act. Axne said this leaves rural businesses out.

Under the new proposal, payment relief would extend to businesses with loans through the Rural Microentrepreneur Assistance Program and the Intermediary Relending Program, as well as loans made to public and non-profit organizations for community facilities, and to businesses, cooperatives and non-profits expanding in rural areas.

Johnathan Hladik, the policy director for the Center for Rural Affairs, said that passage of the REA Act is crucial not only for the business and community entities involved but also rural America more broadly.

“Expanding support to rural businesses will provide parity for rural communities that have been hit hard by the economic impacts of the coronavirus pandemic,” Hladik said. “These are the loans that keep Main Street vibrant, making it possible for small community financial institutions to grow local economies with local dollars.”

Under the REA Act, the USDA would be required to issue loans similar to the SBA’s PPP program. These loans go through small community financial institutions and support local governments, Tribes, educational institutions and small businesses to grow local economies with local dollars.

Sponsors say providing these small businesses and community organizations with the same support given to SBA borrowers is critical to ensuring their survival going forward — and the health of rural communities.

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The REA Act expands subsidies to the following USDA RD loan programs:

  • Community Facilities: These loans are provided to public and nonprofit organizations for essential community facilities like hospitals, libraries, child care and community centers, and public facilities like fire stations or town halls.
  • Business and Industry: These loans are provided to businesses, cooperatives, and nonprofits to develop and expand businesses in rural areas.
  • Intermediary Relending Program: These are loans of no more than $250,000 made through small local intermediaries to borrowers who are unable to get credit elsewhere, but need capital to get started or expand their business. These loans average less than $100,000 and support small local businesses.
  • Rural Microentrepreneur Assistance Program: These are loans of no more than $50,000 made through local nonprofits. These loans are available to businesses with no more than 10 employees, making them a frequent choice for entrepreneurs looking for capital to start up a new business. In addition, RMAP loans are frequently used by women entrepreneurs.

“Our rural businesses have been under the same burdens and weathering the same storm since the beginning of COVID-19,” Axne said. “It is only fair that we extend them the same provisions to sustain them through challenging economic times. I’m proud to lead this bipartisan group to unveil this legislation in both chambers of Congress this week, and I urge congressional leadership to include this commonsense measure in the discussions of the next round of essential COVID-19 aid.”

Cosponsors of the bill include:

  • Rep. Lisa Blunt Rochester, D-Delaware
  • Rep. Jared Golden, D-Maine
  • Rep. Troy Balderson, R-Ohio
  • Rep. Austin Scott, R-Georgia
  • Rep. Scott Tipton, R-Colorado

Sen. Jon Tester, D-Montana, has introduced the companion bill in the Senate along with independent Maine Sen. Angus King, Republican Utah Sen. Mitt Romney, Democratic New Hampshire Sen. Jeanne Shaheen, Democratic Delaware Sen. Chris Coons and Republican Georgia Sen. David Perdue.

“When Congress passed the CARES Act, we included provisions to reduce loan burdens for small businesses across the country,” King said. “This was the right move, but by excluding USDA Rural Development loans from the program, the effort left out many rural businesses that are feeling the same pain. Now, as Congress considers the next coronavirus relief package, we should extend these protections to ensure that our rural communities can access the same type of support as the rest of the country.”

“We have borrowers in rural Maine communities for whom the Rural Equal Aid Act will be a godsend,” said Laura Buxbaum, the senior vice president for policy and resource development of Coastal Enterprises Inc. “We know that they are struggling and will redirect their payments to cover loss of revenue and new opportunities that can help their businesses survive.”

Brandon Moseley is a former reporter at the Alabama Political Reporter.

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