Aid will soon be on the way for a number of businesses affected by the coronavirus pandemic, and livestock producers are included.
Assistance is offered on a first-come, first-serve basis through the Small Business Administration (SBA). The Paycheck Protection Program (PPP) was expanded as a result of the Coronavirus Aid, Relief, and Economic Security (CARES) Act that was signed March 27 by President Donald Trump.
The expanded PPP provides nearly $350 billion for forgivable loans for small businesses. In addition to the beefed-up loan program, the CARES Act allocated an additional $9.4 billion to the USDA and $14 billion to the Commodity Credit Corporation. A total of $49 billion was allocated directly to the food and agriculture sector.
Producer eligibility
Loans under PPP will be 100 percent guaranteed by SBA and the full amount of the loans may qualify for loan forgiveness. SBA is authorized to guarantee loans through June 2020, according to the released interim final rule.
Those eligible for a PPP loan must have 500 or fewer employees who primarily reside in the U.S., or operate in a certain industry and meet the employee-based size standards for that industry. Those operating under a sole proprietorship or as an independent contractor or self-employed individual are also eligible for a loan, but must apply individually.
There has been some speculation about whether small businesses will also be required to meet SBA small business industry specific standards, which are set up by the North American Industry Clarification System (NAICS), and classify businesses based on economic activity.
However, the Texas Cattle Feeders Association noted NAICS codes for agriculture utilize only annual receipts for ranches and feedlots to determine small business eligibility. Since agriculture does not have an employee size standard, all agricultural entities with 500 or fewer employees are eligible.
National Cattlemen’s Beef Association also heard reports from cattle producers whose applications were processed and approved solely on the employee threshold.
Loan details
Eligible borrowers may only receive one PPP loan. Under PPP, the maximum loan amount is the lesser of either $10 million or an amount calculated by using a supplied payroll-based formula. Eligible borrowers must have been in operation as of Feb. 15 and had paid employees.
There is an interest rate of 1 percent on the loan and the maturity date is two years. Loan payments will not need to be made for six months following disbursement, but interest will continue to accrue during this time period. Loan payments may be deferred up to one year.
However, borrowers will not be responsible for any loan payment if all funds are used for approved purposes and employees weren’t terminated or given a reduced salary. Loans must be used for payroll costs, group health care benefits, mortgage interest payments, rent payments, utility payments, interest payments on any debt incurred before Feb.15, or refinancing an SBA Economic Injury Disaster Loan.
At least 75 percent of PPP loan proceeds need to be used for payroll costs in order to qualify for full loan forgiveness. Employers should carefully document expenses in order to avoid loan repayment.
In order to find out if you are eligible for a loan and to submit an application, follow the SBA’s guidance on their website, sba.gov. A list of eligible lenders is also provided on the site. — Anna Miller, WLJ correspondent
