The recently enacted Coronavirus Aid, Relief, and Economic Security (CARES) Act funds several new financial assistance programs that are available to farmers and ranchers who have been affected by the pandemic.
One such program is the Small Business Administration (SBA) Paycheck Protection Program
(PPP), which provides forgivable loans to help "businesses keep their workforce employed." PPP loans have a maturity of 2 years and an interest rate of 1 percent. Loan payments are deferred for the first six months, and loans will be fully forgiven if at least 75 percent of the funds are used for payroll or income costs, and the remainder is used for interest on mortgages, rent, and utilities. For businesses with employees, forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.
While some farmers have successfully applied for PPP loans, National Farmers Union (NFU) has also received reports from farmers who have been incorrectly told that farm and ranch businesses are not eligible for the program. According to the U.S. Department of Agriculture (USDA), farming operations either with 500 or fewer employees or within certain revenue thresholds are eligible for PPP loans. Additionally, small agricultural cooperatives that meet eligibility criteria can apply.
Though the term "paycheck" is used in the program name, businesses are not required to have traditional employees to access the program, and applicants do not necessarily need to draw a traditional paycheck. Sole proprietors, independent contractors, and some other self-employed individuals are eligible to apply.
The program is available on a first-come, first-served basis and program funding is likely to run out. According to SBA, 1.4 million loans valued at more than $324 billion had been approved as of Wednesday evening. The CARES Act earmarked $350 billion for the program, though more money may be allocated in the future. Many legislators are pushing for additional funding, particularly because many agricultural banks haven't yet been approved to lend through the program.
Farmers aren't the only ones who have had difficulty accessing PPP loans - many rural hospitals have encountered obstacles as well. Due to an unintentional provision in the CARES Act, government-owned hospitals are not eligible for SBA loans, disqualifying
one third of all rural hospitals. Because the rural health care system is already stretched thin, without adequate funding, medical professionals, or supplies, not being able to access support through PPP loans is especially devastating.
For more information about PPP loans:
- A concise explanation from a borrower's perspective can be found here.
- More detailed information can be found here.
- Visit the SBA PPP page to find a lender.