Action Alert -4/2/2020
Federal Financial Assistance for Small Businesses
As you may know, the Phase 3 stimulus bill, also known as the CARES Act, was signed into law last Friday. In addition to providing direct assistance to individuals and families, the CARES Act established and funded several important programs for which farmers may be eligible. We wanted to highlight a few of those for our members in an effort to ensure Georgia farming operations in need of assistance will know what resources are available to them. Below you will find information complied by American Farm Bureau Federation and several federal agencies regarding tax incentives, low interest loans, and grant programs—many of which will become available to small business as soon as this week.
There is some confusion right now about whether or not farms are eligible to participate in the programs mentioned below. It’s possible that federal agencies will exclude some farms or agriculture enterprises from participation as the programs are implemented. Please pay close attention to the red text below for more information about these issues as they pertain to each program. Though we may not know for sure which farms will be deemed eligible for these programs for a few more days, GFB staff felt it best to provide this information to you as soon as possible—so that Georgia farmers are not at the end of the line should favorable determinations be made by the respective federal agencies in the coming days.
If, after reviewing the information below, you are interested in participating in any of these programs, we encourage you to contact your lender or the appropriate federal agency. As always, you are also free to reach out to Georgia Farm Bureau’s Public Policy Department with any questions you may have. And GFB staff will continue to provide periodic updates as more information about these programs is released.
Small Business Administration: Paycheck Protection Program
As of today, most farmers should be eligible for the Paycheck Protection Program (PPP). There are ongoing conversations between Congress, the Small Business Administration (SBA), and the U.S. Treasury Department about the possibility that some farmers—including those with gross receipts in excess of $1,000,000—may not be eligible under current SBA rules. For more information about this issue, you are encouraged to review a Market Intel produced by the American Farm Bureau Federation by clicking here. GFB staff will provide updates on this issue as they are made available.
The Paycheck Protection Program (PPP) is a new guaranteed loan program, which includes $349 billion, for small businesses to keep their employees on the payroll. Eligible businesses include nonprofits, veterans organizations, Tribal business concerns, sole proprietorships, self-employed individuals, and independent contractors – with 500 or fewer employees.
Loans are capped at $10 million but can include up to eight weeks of the businesses average monthly payroll costs from the last year plus an additional 25 percent for non-payroll costs. Seasonal and new businesses will use different calculations. The PPP will be available through June 30, 2020.
The loan will be forgiven if:
- All employees are kept or quickly rehired and compensation levels are maintained for eight weeks (payroll costs are capped at $100,000 on an annualized basis for each employee)
- The funds are used for:
- Payroll and benefits
- Mortgage interest incurred before February 15, 2020
- Rent, under lease agreements in force before February 15, 2020
- Utilities, for which service began before February 15, 2020.
Borrowers will still owe money if:
- The loan amount is used for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 8 weeks after getting the loan.
- Due to likely high subscription, it is anticipated that not more than 25 percent of the forgiven amount may be for non-payroll costs.
- You will also owe money if you do not maintain your staff and payroll.
Farmers can apply for the PPP through any existing SBA 7(a) lenders or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating.
Applications can begin on:
- April 3, 2020, for small businesses and sole proprietorships through existing SBA 7(a) lenders
- April 10, 2020, for independent contractors and self-employed individuals through existing SBA 7(a) lenders
All federally insured depository institutions, federally insured credit unions, and Farm Credit System institutions that are not existing SBA lenders can begin making loans once they are approved and enrolled in the SBA program.
Small Business Administration: Economic Injury Disaster Loans
According to guidance recently released by SBA, agricultural enterprises (e.g. farms), other than aquaculture enterprises, agricultural cooperatives, or nurseries are not eligible for Economic Injury Disaster Loans (EIDL) or the advance EIDL grant included in the CARES Act. There are conversations happening now between Congress and federal officials regarding Congress’ intent that farming operations be eligible for EIDL and PPP (as mentioned above). GFB staff will provide updates on this issue in the coming days.
The SBA’s Economic Injury Disaster Loan program provides small businesses with working capital loans of up to $2 million that can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing. In response to the Coronavirus (COVID-19) pandemic, small business owners in all U.S. states, Washington, D.C., and territories are eligible to apply for an Economic Injury Disaster Loan advance of up to $10,000. The loan advance will provide economic relief to businesses that are currently experiencing a temporary loss of revenue. Funds will be made available within three days of a successful application, and this loan advance will not have to be repaid.
Internal Revenue Service: CARES Act Employee Retention Credit
The Employee Retention Credit is a fully refundable tax credit for employers equal to 50 percent of qualified wages (including allocable qualified health plan expenses) that Eligible Employers pay their employees. This Employee Retention Credit applies to qualified wages paid after March 12, 2020, and before January 1, 2021. The maximum amount of qualified wages taken into account with respect to each employee for all calendar quarters is $10,000, so that the maximum credit for an Eligible Employer for qualified wages paid to any employee is $5,000.
Eligible Employers for the purposes of the Employee Retention Credit are those that carry on a trade or business during calendar year 2020, including a tax-exempt organization, that either:
- Fully or partially suspends operation during any calendar quarter in 2020 due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19; or
- Experiences a significant decline in gross receipts during the calendar quarter.