Farmers may apply for Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL) but will need to use them for different purposes.
“You can apply for all three programs, the PPP, EIDL and EIDL Advance,” explained Robert Scott, Small Business Administration (SBA) regional administrator. “You want to comply with a PPP loan first because that’s a forgivable loan. For your EIDL loan, that can be spent on basically anything else once you’re out of that eight-week period (after documenting use of the PPP loan). I would use the EIDL for other business purposes not in PPP. Then once you get out of eight weeks, you can use them for those purposes, so you get the most benefit.”
The SBA is processing all loans on a first-come, first-served basis until funds run out. Interested producers should meet with their lender as soon as possible.
Dale Lattz, University of Illinois farmdoc research associate, discussed PPP eligibility and loan forgiveness requirements during an RFD Radio Network interview.
“There are two stages,” explained Lattz. “One is the eligibility ... regarding whether they have payroll, hired labor or just themselves. The other important part of that is there is a certification process. When you fill out the application you have to check some boxes. One of those is ‘The current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant.’”
If the lender approves the up to $10 million loan, they will then submit it to the SBA for verification. SBA will almost instantaneously reply with an approval or denial.
If approved, the lender has up to 10 days to distribute the loan funds. Then the loan recipient has eight weeks to document use of the loan in order to qualify for forgiveness. Producers should consider using a separate bank account to track expenditures.
Payroll expenses may include salaries, commissions, tips, employee benefits, state and local taxes, and compensation to sole proprietors or independent contractors.
Nonpayroll expenses may include the following incurring or beginning before Feb. 15 — interest on mortgage obligations, rent under lease agreements and utilities.
“If you don’t meet that (eight-week deadline) it’s a two-year loan basically at 1%, so that’s not all bad,” said Lattz. “But the ideal situation to get the most benefit would be to use the funds as they’re supposed to be used and get the loan forgiveness.”
The EIDL and EIDL Advance online application portal opened May 4 for agricultural enterprises only. Producers can apply for both loans through the online joint application.
The EIDL is a low interest, long-term loan that can be deferred for one year, while the EIDL Advance is for those with a temporary loss of revenue. The advance is up to $10,000, based on $1,000 per employee and does not have to be repaid.
For more information on federal stimulus, visit IFB's COVID-19 page.