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Farmers Qualify for Paycheck Protection Program (PPP) loans and Economic Injury Disaster Loans (EIDL)


By Rob Holcomb, EA, Extension Educator, Agricultural Business Management

Last Friday, April 24, 2020, the President signed the Paycheck Protection Program and Health Care Enhancement Act.  For the most part, this law provides additional funding for the Payroll Protection Program (PPP) and Economic Injury Disaster Loans (EIDL).

Both of these relief loan programs were set up by the CARES Act.  However, the funding for the PPP loan program was exhausted in less than two weeks.  The new legislation allocates an additional $310 billion to the PPP program, setting aside $60 billion for loans made to smaller lenders, including Community Development Financial Institutions.  The new law also adds $50 billion to the general EIDL loan fund. 

Additionally, the new law removed a restriction that had prohibited agricultural enterprises from applying for EIDL loans.  Agricultural enterprises now qualify for EIDL loans.

Finally, in the first round of PPP loans, some farmers were being told that agricultural enterprises did not qualify for the PPP loan program.  Last Thursday (April 25, 2020), the U.S. Treasury issues FAQs (see link below) for the PPP loan program.  Question 34 from the Treasury FAQ clearly states that farming operations are eligible for PPP loans.


Text from Treasury FAQs:

34. Question: Are agricultural producers, farmers, and ranchers eligible for PPP loans?

Answer: Yes. Agricultural producers, farmers, and ranchers are eligible for PPP loans if: (i) the business has 500 or fewer employees, or (ii) the business fits within the revenue-based sized standard, which is average annual receipts of $1 million.

Additionally, agricultural producers, farmers, and ranchers can qualify for PPP loans as a small business concern if their business meets SBA’s “alternative size standard.” The “alternative size standard” is currently: (1) maximum net worth of the business is not more than $15 million, and (2) the average net income after Federal income taxes (excluding any carry-over losses) of the business for the two full fiscal years before the date of the application is not more than $5 million

Conclusion:
The general assumption is that the PPP loan funding will not last long in this second round.  If you wish to participate, see your lender soon.  For those that want to apply for an EIDL loan, that application process is done online. 

For additional information on PPP and EIDL loans, please see previous Ag Business Management blog posts on this website.



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