Farms should apply now for Paycheck Protection Program (PPP) Loans
MSU Extension provides insight into what applying for PPP loans will do for farms and their employees.
The Paycheck Protection Program (PPP) loans are currently open to agricultural operations with under 500 employees. The PPP loans are designed to provide a direct incentive for small businesses to keep their workers on the payroll. The ruling on this loan product has recently been released, and the application process will take some time. You can learn more about PPP loans, including a list of eligible lenders, by visiting the SBA website. The list of eligible lenders includes many local banks and traditional agricultural lenders.
General details of this loan (from the U.S. Small Business Administration website) include:
- Partial or full forgiveness of the loan may be possible if the loan is used during the coverage period for payroll, utilities, rent/lease payments dated before February 15, 2020, or to cover interest on mortgages (loans) that were in place before that date. For the loan to be eligible for forgiveness, expenditures must take place within the 8-weeks following the date of the loan and 75% of the loan amount must be used to cover the cost of payroll for the 8-weeks following the first disbursement of the loan. No more than 25% of the loan can be used toward; rent, utilities or for interest payments towards mortgages. Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge the borrower any fees.
- Loan forgiveness also requires that by June 30, 2020 the employer must maintain its workforce and salary wages and eliminate any reduction in the number of employees or reduction in salary/wages that may have occurred between February 15, 2020 and April 26, 2020. The amount of the loan that will be forgiven will be reduced if the full-time headcount declines, or if salaries and wages have decreased against the comparison period.
- PPP loans have a maturity (term) of 2 years and an interest rate of 1%.
- If you wish to begin preparing your application, you can download a copy of the PPP borrower application form from the SBA website, to see the information that will be requested from you when you apply with a lender.
As the present situation remains very fluid with constant updates and additional guidance being provided by the USDA, SBA, and the Department of Treasury we encourage you to keep up to date by reviewing additional resources at Michigan State University Extension Farm Management and Clemson Extension Agribusiness Team websites as we will continue to update material and links to other resources on these and similar topics.
The IRS has also developed a FAQ document on the PPP program that can be found by searching IRS FAQ PPP, and the U.S. Department of Agriculture’s FAQ page.
Please feel free to contact Stan Moore, MSU Extension at email@example.com, or Aleks Schaefer, MSU Department of Agricultural, Food, and Resource Economics at firstname.lastname@example.org, with specific questions you may have.
Adam Kantrovich, Extension associate professor of agribusiness at Clemson University Extension also contributed to this article.