Farmers, livestock producers and other small business owners could start applying for the Small Business Administration’s (SBA’s) new Paycheck Protection Program (PPP) loans as of Jan. 11.
Last spring when SBA opened the PPP for loans, the lion’s share of funds was quickly snatched up by companies connected to larger banks. Congress and SBA adjusted the loan program to allow for smaller, underserved businesses to have a better shot at receiving loans this time around.
SBA announced PPP lending started on Jan. 11 for new borrowers with $15 billion set aside for applications coming from small “community financial institutions”—banks or credit unions with under $1 billion in assets. This should give more access to the program for businesses owned by minorities, veterans, women and others considered underserved, SBA stated. Repeat borrowers could apply starting Jan. 13.
Another set-aside of $15 billion under the PPP will become available for customers of banks, credit unions and Farm Credit lenders with $1 billion or less in assets. Businesses apply through their lenders; more than 5,400 lenders nationally are approved to process the loans.
Without announcing a specific date, SBA stated the loans for all participating lenders will open “shortly thereafter.” Congress in the aid package that passed in December authorized $284 billion for another round of PPP loans. The loans are expected to go toward job retention or specific expenses through March 31.
Farms and other businesses are eligible for PPP loans if they employ 500 or fewer people. The 1 percent interest loans, which can be forgiven, can be as much as 2.5 times a company’s average monthly payroll costs—up to $10 million. The loan period can run from eight weeks to up to 24 weeks and has some flexibility built in for farmers who hire seasonal help.
The typical PPP loan is around $101,000, according to SBA, though nearly 70 percent of PPP loans are under $50,000.
Under the new aid package, Congress also streamlined the process for applying for loan forgiveness for loans below $150,000. Businesses seeking forgiveness for those loans will self-certify details on the number employees retained because of the PPP loan and the amounts used for payroll expenses.
While PPP was meant to support payrolls, loans can be used for payroll, payments on a mortgage, rent or utilities. SBA has expanded eligible expenses to included property damage costs not covered by insurance, specific changes in supplier costs and worker protection expenses. Once a company receives a loan, the funds must be used within 24 weeks.
Under PPP loans last year, just under 150,000 businesses in “agriculture, forestry, fishing and hunting” received $8.1 billion in loans. That accounted for about 1.6 percent of the entire lending under PPP, which reached $525 billion.
Farmers and ranchers can also qualify for PPP loans under an “alternative size standard.” The farm or livestock operation must have maximum net worth of $15 million or less and the average net income after federal income taxes for the last two full fiscal years cannot be more than $5 million—excluding any carryover losses.
Businesses with no more than 300 employees that received loans last year are eligible for second round of PPP loans, but the loan cap was dropped to $2 million. Those companies must also show they have suffered at least a 25 percent decline in income compared to the same quarter a year ago.
Receiving a PPP loan does not affect any separate USDA aid a farmer or livestock producers could be qualified to receive. More information on SBA aid can be found at www.sba.gov. — Chris Clayton, DTN ag policy editor