Farmers and agribusinesses are facing unprecedented economic disruption due to the Coronavirus (COVID-19) outbreak. The Department of Treasury and Small Business Administration (SBA) released an interim final rule on the Paycheck Protection Program (PPP).
Farms and agribusinesses are eligible for Paycheck Protection Program (PPP) loans as long as they have fewer than 500 employees and meet the definition of a “small business.” Financial institutions, including the Farm Credit system, will be responsible for processing loan applications and administering the loan. Loans are subject to SBA’s affiliation rules.
Commissioner of Agriculture and Industries Rick Pate said, “Farmers and agribusinesses feed America and this program can provide some much-needed relief for our producers based on eligibility. I encourage them to get started on the application now. “
Agricultural producers are eligible to participate in the program and should reach out to their bankers and/or agricultural lenders to apply immediately. There are some administrative details SBA needs to confirm but be aware that the loans will be provided on a first-come, first-served basis.
SBA still needs to clarify the definition of “small business concern” but we do not anticipate any undue restrictions. They will also confirm whether H2A workers are counted as “employees” from for the purposes of determining size.
Eligible businesses include limited liability companies (LLC), S corporations, sole proprietorships, contractors and non-profits with 500 or fewer employees. Loans are capped at $10 million but can include up to eight weeks of average monthly payroll costs from last year plus an additional 25% of non-payroll costs. Different calculations apply to seasonal and new businesses.
Loans have an interest rate of 1% and a mature in two years with loan payments being deferred for the first six months. Loan amounts are calculated based on the payroll costs for all employees whose “principal place of residence” is in the U.S. Loans will be fully forgiven if at least 75% of the funds are used for payroll costs, and the remainder is used for interest on mortgages, rent, and utilities. Loan forgiveness is also based on the employer maintaining or quickly rehiring employees at the same salary level.
The PPP will be available through June 30, 2020. For questions on the PPP contact Lender Relations at your local SBA Field Office at https://www.sba.gov/tools/local-assistance/districtoffices.
