Paycheck Protection, Economic Injury Disaster Loan programs reopen with new funding
UPDATE: The Paycheck Protection Program deadline has been extended to Aug. 8. The below has been updated with new details and qualifications for the program, which have been updated since the first round of funding.
The U.S. Senate and House passed a $484 billion relief package that includes an additional $321 billion appropriated for the Paycheck Protection Program (PPP), replenishing vital funds for small businesses and farmers. An additional $60 billion was also allocated to the Economic Injury Disaster Loan (EIDL) program.
There is currently still over $100 billion left in funding for PPP loans that are available to small businesses and farmers. Applications will be accepted until August 8th.
With the EIDL reopen, additional funding coming, and clarification on farmer eligibility for EIDL program, applications for both programs are being accepted. Those interested in applying for relief through PPP are advised to talk to their lender as soon as possible. EIDL applicants will work directly with the SBA.
Paycheck Protection Program
The U.S. Small Business Administration (SBA) PPP guidelines have been modified since the first round of funding. Eligible recipients can receive a PPP loan for up to two months of average payroll plus an additional 25 percent of that amount, capped at $10 million.
For sole proprietors, including most corn farmers, net profit amount on a farm will be used as the payroll. This number can be found on IRS Form 1040 Schedule C line 31 or for most farmers on schedule F line 34. That amount will be divided by 12 and then multiplied by 2.5 to get the maximum loan eligibility. Self-employed individuals with employees are also able to include wages for those employees. The amount will be limited to $100,000 per individual.
For seasonal employees, payroll costs will be calculated from the payroll costs incurred during the 2019 tax year. Seasonal employers can use the 12-week period beginning either February 15 or March 1 to determine an average monthly payroll cost. Borrowers can also choose to use any 12-week period between May 1, 2019, and Sept. 15, 2019 with the additional PPP rules.
The loan will be forgiven if the funds are used for payroll costs, including salaries, wages, commissions, or similar compensation; cash tips or equivalents; vacation, parental, family, medical, or sick leave; payment required for providing group health care benefits (including insurance premiums); payment of retirement benefits; and payroll taxes. One of the major changes to the PPP forgiveness rules is that borrowers are only required to spend 60 percent of the loan on payroll compared to the original 75 percent.
For sole proprietors, eligible amounts for forgiveness include owner compensation replacement (calculated using the above formula) capped at eight weeks, as well as the following if in force before 2/15: payments of interest on mortgage obligations, rent payments or lease obligations, and utility payments.
A partner in a partnership without employees will not be able to submit a separate PPP application, but the income of all general active partners may be reported as a payroll cost in the original application. This is once again limited to $100,000 per individual.
Some of the other major changes to the PPP loans and forgiveness include; time period to use loans is now 24 weeks instead of 8 weeks, June 30 deadline to rehire workers is extended until December 31, 2020, rehire requirements relaxed, and repayment term is extended from 2 years to 5 years.
Additional information from SBA on the Payroll Protection Program is available here. The U.S. Department of Agriculture also released FAQs specific to agriculture here.
Economic Injury Disaster Loan Program
For farmer cooperatives up to 500 employees in size, the CARES Act also included Economic Injury Disaster Loan and Loans Advance. The latest relief package clarifies that agricultural related business with fewer than 500 employees are eligible for EIDL. The program provides eligible small businesses with working capital loans of up to $2 million, with a loan advance up to $10,000. Helping businesses experiencing a temporary loss of revenue, funds will be made available within three days of a successful application, and this loan advance will not have to be repaid. Cooperatives will apply directly with the SBA for assistance once funds are available.
SBA released a guide to the CARES Act featuring helpful FAQs, which is available here.
Loan information from the Minnesota Department of Employment and Economic Development is available here.
To help farmers manage COVID-19, the Minnesota Corn Growers Association launched a website with information and resources from state and national partners: info.mncorn.org/covid19
