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The Small Business Association's Paycheck Protection Program may provide some economic assistance.

Tyler Harris, Editor

April 14, 2020

4 Min Read
LOW-HANGING FRUIT: Some farmers and ranchers may be interested in using the Paycheck Protection Program to offset some of the financial losses associated with COVID-19.

With the announcement of nearly $350 billion in disaster assistance through the Small Business Administration's Paycheck Protection Program as part of the recently signed $2 trillion coronavirus stimulus bill, some farmers and ranchers may be interested in using the program to offset some of the financial losses associated with COVID-19.

In particular, farmers or ranchers with a few full-time or part-time employees may be able to use the program to help retain employees and keep them insured. Farmers and ranchers can apply through their local bank, if the bank is a participating Small Business Administration business outlet.

"I've heard from a few people asking about the program," says Austin Duerfeldt, Nebraska Extension agricultural economics educator. "You've got to have 500 employees or less, which is not going to be a problem for most producers. The bigger challenge is you have to show you are somehow impacted by the virus, whether people can't show up to work or your revenue stream drops."

Related: Complete coronavirus coverage

Reasons for a decrease in revenue can include supply chain disruptions, decreases in sales, labor force issues or other significant detrimental changes because of COVID-19.

"With schools closed, farm employees will be staying at home with their kids, so some farms won't have access to a labor force," Duerfeldt says. "Overall, I don't think we've seen the extent of what COVID-19 is going to do to the ag industry yet."

The Paycheck Protection Program covers payroll (including employee wages and benefits such as the cost of health insurance for employees), utilities, mortgage interest and rent — although Duerfeldt notes that the definition for eligible rent expenses states lease agreements must have been in force before Feb. 15, 2020, to qualify.

The loan total is calculated by taking the business's monthly average payroll cost multiplied by 2.5, for up to $10 million for the entire operation. For the purposes of the equation, annual payroll costs for an individual employee are capped at $100,000.

Payroll, rent, mortgage interest and utility costs accrued over eight weeks beginning with the start of the loan all go toward the total amount of the loan forgiven, and 75% of the expenses must be used for payroll expenses.

If the total amount of the loan is not met, the remainder must be paid back at an interest rate of 1% for two years. For example, if an applicant is approved for a $10,000 loan, but accrues $7,000 worth of expenses over the eight-week period, they would need to pay $3,000 back at 1% interest. Of the $7,000 worth of eligible expenses, 75% or $5,250 must be used for payroll expenses. Borrowers also need to maintain payrolls during the COVID-19 crisis or restore them after.

"If you use the money from the loan within the designated period, which is eight weeks for the intended purposes of payroll and utilities, it's basically free money. You don't have to pay it back," Duerfeldt explains. "If you don't get through it all for the intended purposes, it's got to be paid back, on fairly favorable terms."

That said, it's also necessary for program participants to prove they've used the funds for the intended purposes so the loan is forgiven. This includes pay stubs, utilities billing statements and any tax documents.

"You will have to turn it in to your local bank," Duerfeldt says. "You have to turn in the supporting documents to show what was attributed to the loan. Right now, the loans are handled and operated through your local bank. So, if you aren't comfortable letting your banker see that information, you might not want to participate."

While businesses can apply through June, Duerfeldt notes that because of high demand, the $349 billion available will likely dry up before then. So, it's better to apply sooner than later.

"If you're an S corporation or LLC, if you're paying wages of $35,000 annually, you might be looking at a $6,000 to $8,000 loan you could use to pay off mortgage interest, payroll, utilities, and as long as you're using it for the intended purposes, and meet the 75% payroll rule, it will all be forgiven," Duerfeldt says. "It is a really low-hanging fruit that looks promising, but it's something a lot of people will have to look at and figure out whether or not they qualify."

Learn more and check if your bank is a participating SBA member at

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Covid 19

About the Author(s)

Tyler Harris

Editor, Wallaces Farmer

Tyler Harris is the editor for Wallaces Farmer. He started at Farm Progress as a field editor, covering Missouri, Kansas and Iowa. Before joining Farm Progress, Tyler got his feet wet covering agriculture and rural issues while attending the University of Iowa, taking any chance he could to get outside the city limits and get on to the farm. This included working for Kalona News, south of Iowa City in the town of Kalona, followed by an internship at Wallaces Farmer in Des Moines after graduation.

Coming from a farm family in southwest Iowa, Tyler is largely interested in how issues impact people at the producer level. True to the reason he started reporting, he loves getting out of town and meeting with producers on the farm, which also gives him a firsthand look at how agriculture and urban interact.

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