Farms of all types, sizes and production methods are re-evaluating their financial stability in a changing world, fluctuating market, and evolving consumer outlet, and the pressure to adapt has increased under the strain of COVID-19.
The Paycheck Protection Program (PPP) was released as part of the CARES Act to offer some relief to small businesses in Wisconsin, but what can that program actually do for farmers?
As the chief lending operations officer for Compeer Financial, Paul Kohls did not hesitate to dive into how dollars released from coronavirus legislation can help the agriculture industry.
“The Paycheck Protection Program significantly brought in the scope of traditional small business administration lending to include farmers and agribusinesses and the ability to get some short-term financial assistance, a lifeline if you will,” Kohls said.
Those lifelines are short-term loans that are forgivable if a borrower uses them to keep employees or cover certain expenses.
“We’ve been working really hard to make sure we fully understand who is eligible and how we can help,” Kohls said.
Applications are likely to start being accepted by lenders, including Compeer Financial, as early as April 3.
Breaking down the information, Compeer Financial said Farmers are eligible for PPP loans through the Small Business Administration (SBA). Farmers must have fewer than 500 employees and less than $1 million in net revenue. If farmers already have a relationship with the USDA Farm Service Agency, the SBA is encouraging those farmers to work with FSA first.
The costs covered include payroll and/or benefits, interest on mortgage obligations (incurred before Feb.15, 2020), rent (under lease agreements in force before February 15, 2020), and utilities for which service began before Feb. 15, 2020)
Loans will be forgiven as long as employee and compensation levels are maintained, and the loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8-week period after the loan is made.
Loans can be up to two months of your average monthly payroll costs from the last year plus an additional 25 percent of that amount, capped at $10 million.
The PPP loan cannot cover pay for those employees whose principal address is not within the United States, nor can it cover their costs of paying independent contractors (those who get 1099s instead of W2s). Independent contractors and other self-employed individuals can apply for their own PPP loans starting on April 10, 2020.
Kohls said private lenders will be administering PPP on behalf of the Small Business Administration (SBA) and encouraged those interested in exploring their eligibility to speak with their lenders, accountant, financial advisor or attorney. Loan applicants have to have an already established relationship with SBA.
Those interested need to provide lenders with payroll documentation like payroll processor records or payroll tax filings, according to Compeer Financial. Independent contractors will have to provide their 1099-MISC forms. Self-employed individuals will have to provide their income and expenses from their sole proprietorship.
Kohls noted Compeer Financial and other advisors are still waiting for final rules and guidance from the SBA.
“The eligibility is very broad and includes all types of business entities,” Kohls said. “We want to do the very best we can to help the borrower understand what may be forgiven by the program. This is another example of how we are bringing our entire team together. We really see PPP as an opportunity for us to assist farmers and agribusinesses throughout the state of Wisconsin to deal with the struggling times we are in.”
Information for clients can be found on Compeer Financial’s website, but Kohl’s added anyone is welcome to visit that site to get more information.
Other information can be found online from the U.S. Treasury such as general information about the Paycheck Protection Program, a Paycheck Protection Program borrowers information sheet, and a Paycheck Protection Program borrower application form.