SBA offers relief due to COVID-19

Farmers and ranchers are eligible for a payroll relief program the Small Business Administration (SBA) has developed as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

The Paycheck Protection Program (PPP) is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll. SBA may forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities. The SBA provides $349 billion in forgivable loans to small businesses to pay employees and keep them on the payroll. This includes the self-employed, start-ups, and cooperatives.

READ MORE: What farmers need to know about COVID-19

Farmers – even those who are self-employed and don't draw a regular "paycheck," are eligible for PPP. However, the SBA has not yet determined the rules for self-employed businesses.

"Agricultural producers are eligible to participate in the program and should reach out to their bankers and/or agricultural lenders to apply immediately," according to a statement from the National State Departments of Agriculture. "While SBA still needs to confirm some administrative details, loans will be provided on a first-come, first-served basis and producers can get started on the application now."

Entities affected by (COVID-19) may be eligible for the forgiveness program, provided they:

• Are a small business that meets SBA's size standards (either the industry-based size standard or the alternative-size standard), and has less than 500 employees, or meets the SBA industry size standard if more than 500
• Are sole proprietors, independent contractors, or a self-employed person
• Have been in business prior to Feb. 15, 2020
• Are based in the U.S.

As long as the entities meet these qualifications, they can apply through any existing SBA 7(a) lender or through any federally insured bank, credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. Current eligible lenders can be found by searching the SBA website here, or contact your local lender to see if it is eligible.

Applications are accepted beginning:

• April 3 for small businesses and sole proprietorships through existing SBA 7(a) lenders
• April 10 for independent contractors and self-employed individuals through existing SBA 7(a) lenders

The PPP continues through June 30, 2020.

Loan details and forgiveness

The loan may be fully forgiven if at least 75% of the funds are used for payroll costs. Other expenses including interest on mortgages, rent, and utilities can also be paid with funds. Loan payments will be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.

READ MORE:Tracking COVID-19 coverage, April 3-10

Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.

Veronica Nigh, economist with American Farm Bureau Federation, says the PPPL will provide to eligible businesses loans of up to $10 million to cover 2.5 times the average monthly payroll costs, measured over the 12 months preceding the loan origination date, plus an additional 25% for non-payroll costs. Payroll costs include salaries, commissions, and tips; employee benefits (including health insurance premiums and retirement benefits); state and local taxes; and compensation to sole proprietors or independent contractors. Non-payroll costs include interest on mortgage obligations incurred before Feb. 15, 2020, rent under lease agreements in force before Feb. 15, 2020, and utilities for which service began before Feb. 15, 2020.

"The real highlight of the PPPL however, is that the portion of the loan that covers eligible expenses within an eight-week period from Feb. 15, 2020–June 30, 2020, is forgivable, as long as the company maintains staff and payroll. Any loan proceeds in excess of this amount are subject to repayment at a rate of 1%. The maximum duration of the PPPL loans is two years," she says.

Download a copy of the PPP borrower application form to see the information that will be requested from you when you apply with a lender.

Resources you can use