UPDATE ON SBA LOANS FOR FARMERS
4-27-20
As you have likely heard, Congress passed legislation for more funding for the SBA emergency loan programs. The legislation also clarified that farm businesses will now be eligible for the Emergency Injury Disaster Loans (EIDL) through SBA. Here are the latest details:
PPP Loans
Any PPP loan applications that were submitted prior to the time when SBA ran out of funding can now be processed and submitted to SBA by your Bank or Lender, provided that they have all the required documentation. If your Bank or Lender has requested additional documentation, please
get that to them ASAP, so the PPP loan application can be submitted. It is expected that the additional PPP Loan funding to SBA will again be depleted quite rapidly.
Reminder, once the Loan Docs. are signed, the PPP loan becomes an 8-week loan. The loan recipients are responsible to provide their Bank or Lender with the necessary expense documentation to have the show that loan can be forgiven after 8 weeks. Remember, at least 75% of the expenses need to be for payroll related expenses, with the other 25% expenses being for utilities, rent or mortgage interest payments, etc., in order to have the entire PP loan forgiven. Any portion of the PPP loan that is not forgiven must be repaid to the Bank within 2 years.
NOTE — As near as we can determine, if a farmer has no other form of payroll verification for
2019, and is using the Schedule F from their 2019 Tax Return for documentation for a
PPP loan application, the farm operator would not be eligible to apply for a PPP loan,
if the Schedule F shows a negative “Profit” for 2019 on Line 34.
(We are continuing to check on this and will let you know if there are any changes.)
EIDL Loans through SBA
The legislation that was passed by Congress clarifies that farm businesses are eligible to apply for the SBA Emergency Injury Disaster Loans (EIDL). (Previously, SBA had not been allowing most farm entities to apply.) Applications for the EIDL loans are made directly through SBA and the EIDL applications are available on the SBA website. The EIDL loans are financed at 3.75% for up to 30 years; however, the EIDL loans are not forgivable and must be repaid under a normal P & I payment schedule over the course of the loan. The EIDL funds can be used for a much wider range of farm business expenses, as compared to the PPP loans, and have a more favorable collateral requirement than normal commercial long-term loans. Up to $10,000 of the EIDL loan may be received up front, which is treated as a grant that does not need to be repaid. The SBA EIDL loans may be a financial option for larger crop and livestock operations that may be limited by payment limitations in the USDA CFAP ag aide payments. Information for the SBA Loan programs is available on the SBA website at:
https://www.sba.gov/disaster-assistance/coronavirus-covid-19
Caronavirus Food Assistance Program (CFAP) Payment Update
Still no further word from USDA on how the CFAP payments for crops and livestock will be calculated. There will likely be an announcement sometime later this week. To get the latest information on the CFAP payments and other USDA information, go to the USDA website at:
KENT THIESSE
Farm Management Analyst
Lake Crystal, MN
(507) 726-2137 or (507) 381-7960
E-mail — kent.thiesse@minnstarbank.com