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This week the U.S. Senate and House passed a $484 billion relief package that includes an additional $321 billion appropriated for the Payroll Protection Program. An additional $60 billion was also allocated to the Economic Injury Disaster Loan (EIDL) program.
With additional funding coming and clarification on farmer eligibility for EIDL program, applications for both programs will again be accepted. Funds are not expected to last long due to high demand, so those interested in applying for relief through PPP are advised to apply as soon as possible. EIDL applicants will work directly with the SBA once the funds are available, which you can manage here.
Payroll Protection Program
The U.S. Small Business Administration (SBA) PPP guidelines remain consistent with 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. 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 would use the 12-week period beginning either February 15 or March 1 to determine an average monthly payroll cost.
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. SBA anticipates allowing no more than 25 percent of the forgiven amount be used for non-payroll costs
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.
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.