Deadline to apply for most lenders will be Aug. 3, 2020
Submitted by Myron Thurston
If you are on the fence about applying for the Paycheck Protection Program, you need to decide soon. According to the Small Business Administration, because their last day to accept applications from banks is Aug. 8, 2020, most lenders will stop accepting applications on or before Aug. 3.
Getting 100-percent PPP loan forgiveness has become more accessible for businesses. Congress extended the period from eight to 24 weeks, they reduced the amount that needs to be used for payroll from 75 percent to 60 percent, and they also have included flexibility for firms whose workforce has been reduced due to COVID-19 federal, state or local guidelines or where workers are not able or willing to return to work and the employer has made a good faith effort to re-hire or hire workers.
Finally, the repayment period for the loan was increased from two to five years.
The PPP is a no-cost, federally guaranteed 1-percent loan, so even without full loan forgiveness the terms are very good.
If you are a good fit for the program, have any cash flow concerns this season or are facing higher costs due to COVID-19 safety practices, you should apply for the PPP, as it is the most generous federal COVID-19 program for businesses that meet its conditions. The PPP is most likely to be beneficial to farms that have high payroll costs or farms or businesses that had high net income on their Schedule F (or Schedule C) in 2019.
Only the payroll for your employees whose primary residence is the U.S.A. is eligible for PPP, but the definition of residence does not automatically exclude non-U.S. citizen/visa workers. If your farm uses H2A, you have H2A workers who have returned to your farm for many years and they tend to stay for the full growing season (not just a short term harvest crew), they may meet the test for residency for PPP and their wages could qualify.
If you have no paid employees in 2019 and negative net income on your Schedule F, you probably will not be eligible for PPP; however, PPP will make you ineligible for Pandemic Unemployment Insurance and, if you received an EIDL advance, the amount of the advance will be subtracted from the amount of the PPP loan that can be forgiven, so it might not be worth getting a small PPP loan if you already received an EIDL advance and do not want a loan.
The PPP may also affect your eligibility for some federal payroll tax credits. So there are some farms that should look at other options.
For more information, call 315.430.7504 or email myron.thurston@cornell.edu.