Farmers Should Apply for the Paycheck Protection Program
The US Government Small Business Association (SBA) just launched a third round of its Paycheck Protection Program (PPP) funding, and farmers can apply. This is a cheap and forgivable loan, and many farmers don’t realize that they are eligible for this COVID relief.
Read on to learn more about the program, eligibility, and how to access the funding.
So, what’s the PPP?
PPP loans are designed to help small businesses, including farms, stay afloat during the COVID pandemic. These are forgivable loans that can cover up to two months of payroll costs. The loans can be used to fund company payroll, mortgage interest, rent, utilities, worker protection costs related to Covid-19, and some supplier costs and expenses for operations.
Who is eligible?
If you haven’t applied for the PPP before, you can apply this time if your business was in operation on February 15, 2020 and:
- You run a small business with fewer than 500 employees, or
- You run a sole proprietorship, or
- You run an NGO with fewer than 500 employees, or
- You are an independent contractor, or are a self-employed person.
If you have applied for the PPP before, you can apply this time if:
- You suffered at least a 25% reduction in revenues in at least one quarter in 2020 compared to prior quarters
- You run a small business with fewer than 300 employees, or
- You run a sole proprietorship, or
- You run an NGO with fewer than 300 employees, or
- You are an independent contractor, or are a self-employed person
How much do I get?
Loan amounts are calculated by taking average monthly payroll from 2019 and multiplying that by 2.5. For example, if your average monthly payroll was $10,000 you could be eligible for a loan of $25,000 multiplied by two months = $50,000.
What are the loan terms?
The interest rate is 1%, about as cheap as it gets! The PPP loan payback period is 5 years, there’s no collateral or personal guarantee requirement, it doesn’t appear that lenders are running a credit check (although check with your lender to be sure), and no fees are charged.
How do I get the loan forgiven?
Note: you must apply directly to your lending institution to have your loan forgiven. The U.S. government should forgive your loan (you don’t have to pay it back), if, during the first 8–24 week period of the loan:
- You continue paying your employees at their prior compensation levels
- You spend at least 60 percent of the funding on payroll costs
How do I apply?
Reach out to your local lender, bank or farm credit institution to get started on applying. FarmRaise also partners with farmers to streamline paperwork and make the application process easy. You can sign up for FarmRaise Premium to get started on an application.
Applications are due before March 31, 2021. If you have questions or need help, just email info@farmraise.us and we will be in touch.
Please know that this information is constantly changing and the insights we’ve shared here reflect our current understanding of the landscape. We’ll be tracking these programs as they evolve, but please do not depend on this document as your only source of information. Be sure to talk with your accountant or advisor when making financial decisions!
DIY application instructions:
- Find your local approved SBA lender: https://www.sba.gov/paycheckprotection/find
Call that bank, ask to speak to the PPP loan officer, and ask them their process to apply for PPP. Different banks have different processes.
Be prepared to fill out this form if you’ve not applied to the PPP First Draw:
If you applied for the First Draw, you now need to apply for the Second Draw, with this form:
3. You will need your NAICS code for the form — agriculture codes begin with 11 and the right code for your business can be downloaded at the bottom of this page: https://www.sba.gov/document/support--table-size-standards
