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Good news for small businesses and farm operations about PPP loans

Update June 15, 2020: If you have not yet applied for a PPP loan, you still can by contacting a participating lender for more information. The loan application deadline is June 30, 2020, but the time frame for using the funds and qualifying for forgiveness has been extended up to 24 weeks. Act now to access this important COVID-19 financial relief program. 

Read more on the ABM blog about the deadline extension.

On May 13, 2020, the United States Treasury and the Small Business Administration (SBA) issued safe harbor guidelines for recipients of Payroll Protection Program (PPP) loans. When an applicant submits a PPP loan application, all borrowers must certify in good faith that "current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant."

Previously, SBA and Treasury had communicated that applicants not meeting the uncertainty provisions of the loan should repay loan proceeds by May 14, 2020. The concern for many taxpayers participating in this program is "what qualifies as uncertainty?"

The PPP loan safe harbor guidelines state: "Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith." This is good news for most small businesses and most farm operations.

A set of FAQs regarding PPP loans are posted online. For more about this new guideline, please see question #46 (page 16).

Applicants with loan amounts in excess of the $2 million threshold are subject to examination by SBA to determine if the level of uncertainty meets minimum standards for the PPP loan program. The threshold for "uncertainty" remains unclear for loan applications exceeding $2 million.

The safe harbor does not automatically qualify an applicant for loan forgiveness.  To acquire loan forgiveness, loan recipients need to complete the loan forgiveness application in coordination with their PPP lending institution. The Treasury and SBA released the application on May 15, 2020.

PPP recipients, including farmers, must apply for loan forgiveness and meet specific qualifications in accordance with the law.

  • For forgiveness, at least 75% of the loan must be used to pay for eligible payroll costs and up to 25% of the loan used to pay an eligible mortgage, rent or utility payment.
  • For sole proprietors without employees, eligible payroll costs for loan forgiveness include income or net earnings from self-employment or similar compensation. 

Detailed information about this program is on the ABM blog.

Find more information about financial help for farmers.

Rob Holcomb and Megan Roberts, Extension educators, agricultural business management

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