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Paycheck Protection Program

Friday, April 3, 2020   (0 Comments)
Posted by: Aaron Stauffacher
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Your farm may be eligible for a new short-term federal loan program.

The CARES Act, passed last week, authorized $349 billion for a newly created Paycheck Protection Program (PPP) to be administered by the Small Business Administration. Clarifying guidance was released on Thursday and enrollment starts today. It is reported that farms will be eligible for the program, however, it is still unclear whether farms will be subject to the SBA size standards.

Contact your lender soon to determine eligibility.

Under the PPP, small businesses will be eligible for short-term, low-interest loans to cover payroll costs, mortgage interest, rent and utilities. Loan funds used for those specific items are eligible to be forgiven if employee count and compensation are not reduced. However, not more than 25 percent of the forgiveness amount may be attributable to non-payroll costs.

Loan terms will be 1 percent interest and mature in two years with payments being deferred for six months. Interest will be accrued during that time. Amounts forgiven will not be counted as income by the lender.

Individual loan amounts are calculated according to the following steps:

  1. Aggregate payroll costs from the past 12 months for employees whose principal place of residence is the U.S.*
  2. Subtract any compensation paid to an employee who is compensated more than $100,000 a year.
  3. Divide aggregate payroll costs from Step 1 by 12 to determine your average monthly payroll costs.
  4. Multiply the average payroll costs by 2.5.

*Whose principal place of residence is the U.S. – We are seeking further clarification on what this means for the non-citizen employees that you may have as some have reported that employees must be citizens or permanent residents.

What applicants need to certify:

  • Applicant was in operation on 2/15/20 and had employees for whom it paid salaries and payroll taxes.
  • Current economic uncertainty makes the loan request necessary to support the ongoing operations.
  • The funds will be used to retain workers and maintain payroll or make mortgage interest payments, lease payments or utility payments. If the funds are knowingly used for unauthorized purposes, the federal government may hold you legally liable such as for charges of fraud. Not more than 25 percent of loan proceeds may be used for non-payroll costs.
  • Documentation verifying the number of full-time equivalent employees on payroll as well as the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight-week period following this loan will be provided to the lender.
  • Loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments and covered utilities. Not more than 25 percent of the forgiven amount may be for non-payroll costs.

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