Credit crunch.
May 7, 2020

Why PPP Loans Left Some Farm Owners High and Dry

 |  By: Jim Dickrell

Only 1.3% of the $349 billion allocated to the Small Business Administration’s Paycheck Protection Program (PPP) went to the agriculture, forestry, hunting and fishing subsector.

The primary reason: Many farm owners likely reported net losses on line 34 of their Schedule F filed with their tax returns, says Megan Nelson, an economic analyst with the American Farm Bureau Federation. Payment eligibility is based on 2018 returns. Based on data from 2017 returns (the latest available), net income losses would preclude 37% of farmers from participating in the PPP, she says.

As a consequence, a substantial number of self-employed farm operators will likely not be able to access the program to pay themselves, says Nelson. Note: They still would be eligible for PPP wage benefits for their employees. For a more detailed explanation, click here.

The SBA also recently began accepting advance applications for the Economic Injury Disaster Loan (EIDL) program on a limited basis exclusively for agricultural operations with 500 or fewer employees. The amount of the loan will be based on the working capital needs of the applicant.

These loans can be used for working capital, paying fixed debt, payroll, accounts payable and other bills. The loans are for 30 years at 3.75% interest, with payment deferred for one year. Some portion of the loan may be forgiven depending on your financial situation. Loans over $25,000 require collateral, if available, but SBA will not decline a loan for lack of collateral.

The EIDL program also offers an advance of up to $10,000 ($1,000 per employee up to 10 employees) that will not have to be repaid.

For more information on the Economic Injury Disaster Loan program and to apply, go to: https://covid19relief.sba.gov/#/