Farmers and Ranchers Are Eligible For Participation In The SBA Paycheck Protection Program

The ink hadn’t dried on the approval of the $2-plus trillion Coronavirus Aid Relief and Economic Security (CARES) Act and the process of convincing the Small Business Administration (SBA) that farmers and ranchers were intended to be eligible to participate in the authorized loan programs began. There have been numerous appeals by members of both the U.S. House and the U.S. Senate to encourage and attempt to clarify that their explicit intentions were to have agricultural producers included as being eligible.

Over the past several days, staff representatives of Nevada’s two U.S. Senators have been in contact with Nevada Farm Bureau and others, explaining their activities of being involved with fellow Senate members in making it clear to SBA that farmers and ranchers are to be included.

The launch of the several SBA programs that were included in the CARES Act has appeared to be somewhat confusing for local lending institutions to get rolling. Reports are that applications are being submitted, but there might still be details of how money gets through the process to end users is still a struggle.

Nevada Farm Bureau has been encouraged to pass along information on the SBA programs to farmer/rancher members and also to seek feedback from members who might be attempting to participate. This feedback should include experiences of what’s working and what’s not.

As part of the communications associated with the overall effort, the following “Frequently Asked Questions” has been prepared in an attempt to provide clarification for farmers and ranchers who are considering participation…

Details Of SBA Paycheck Protection Program – (PPP):

On March 27th, Congress passed the Corona Aid, Relief, and Economic Security (CARES) Act. This package appropriated $349 billion for the Paycheck Protection Program (PPP). The PPP is a guaranteed loan program administered by the Small Business Administration (SBA). The purpose of the program is to support small businesses and help support their payroll during the coronavirus situation.

Q: Are agricultural producers, farmers, and ranchers eligible for the Small Business Administration’s Paycheck Protection Program (PPP)?

A: Agricultural producers, farmers, and ranchers with 500 or fewer employees whose principal place of residence is in the United States are eligible.

Farms are eligible if: (i) the farm has 500 or less employees, OR (ii) it fit within the revenue-based sized standard, which is an average annual receipts of $1M.

Additionally, farms can qualify for PPP if it meets SBA’s “alternative size standard.” The “alternative size standard” is currently: (1) a maximum net worth of the business not more than $15 million, AND (2) the average net income Federal income taxes of the business for the two full fiscal years before the date of the application be not more than $5 million.

Q: Are agricultural, and other forms of cooperatives eligible for PPP?

A: As long as other eligibility requirements are met, small agricultural cooperatives may receive PPP loans. Other forms of cooperatives may be eligible provided they comply with all other Loan Program Requirements (as defined in 13 CFR 120.10).

Q: Do H-2A or H-2B workers on my payroll count towards my eligibility and total possible loan amount?

A: Only employees with a principal place of residence in the U.S. count toward eligibility and calculation of the PPP loan amount.

Q: How do sole proprietor farmers provide accurate documentation regarding payroll, when they may not take a traditional salary?

A: SBA requires sole proprietors, independent contractors, and other eligible self-employed individuals to provide documentation to its lender that the business was in operation as of February 15, 2020. This documentation may include payroll processor records, payroll tax filings, or Form 1099-MISC, or income and expenses from a sole proprietorship. For borrowers that do not have any such documentation, the borrower must provide other supporting documentation to its lender, such as bank records, sufficient to demonstrate the qualifying payroll amount.

Documentation options for payroll tax filings include the following:

IRS Form 941 (quarterly wages); IRS Form 944 (calendar year wages); State income, payroll and unemployment insurance filings; QuickBooks; bank repository accounts; and/or internally generated profit and loss statements. However:

o Nonprofit organizations must include IRS Form 990;

o Sole proprietors must include IRS Form 1040 Schedule C;

o Any entity that filed IRS Form 1099-MISC must include this form;

o Seasonal employers must document the period beginning February 15, 2019 through June 30, 2019

More extensive FAQs can be found at the Treasury Department’s CARES Act website (PDF, 50 KB).