Last week, the Small Business Administration (SBA) and the U.S. Treasury Department initiated a mobilization effort of banks and other lenders to provide small businesses, including farms, with the capital they may need in the wake of the coronavirus (COVID-19) pandemic.
What is the relief?
The Coronavirus Aid, Relief, and Economic Security (CARES) Act established a $349 billion Paycheck Protection Program (PPP) to enable business owners, including farmers, to sustain operations and maintain their workforce.
PPP provides businesses funds for payroll costs, including benefits, with limited use for capital expenses such as rent, utilities and mortgage interest. There are some limitations such as wages must be equal to or less than $100,000.
The value of the loan may be up to eight weeks of average payroll plus 25% and is capped at $10 million.
Who is qualified?
Small businesses, including farms, with fewer than 500 employees are eligible for the PPP program.
What are the terms?
The covered loan period is for Feb. 15 – June 30, 2020, with repayment due within two years. Interest and principal payments are deferrable for the first 6 months but must begin within one year.
It’s important to note that participating in PPP disqualifies use of employee retention tax credit and social security tax deferral programs.
Is there loan forgiveness?
Small businesses, including farms, may have loan forgiveness if they do not reduce workforce or wages paid. There is prorated forgiveness available for businesses that do reduce their workforce or wages.
Where do businesses get the PPP loan?
SBA 7(a) approved lenders, as well as participating federally insured depository institutions, credit unions, and Farm Credit System institutions are eligible to service these loans. However, not all institutions have chosen to go through the process required to participate. Farm owners will need to contact their individual lenders to determine if they are participating.
When do businesses apply for PPP?
Small business and sole proprietorship enrollments opened April 3, 2020. Independent contractors and self-employed individuals may start applying April 10, 2020. There is a funding cap, so it is encouraged to apply as soon as possible.
Details & Resources
As this effort was rolled out quickly, Texas Corn Producers encourages farmers to review the SBA and U.S. Treasury Department resources below and reach out to their lenders directly for complete, up-to-date details.