CARES Act: Paycheck Protection Program

UPDATE April 15, 2020

The Small Business Administration (SBA) released an interim final rule (IFR) that provides guidance for sole-proprietors wanting to access benefits through the Paycheck Protection Program (PPP). The guidance document has yet to be published in the Federal Register but the SBA released the guidance on its website, which can be viewed here.

The IFR provides information on these topics:

  • Eligibility: Clarifies that self-employed individuals who were in business on February 15, 2020 are eligible provided the individuals principal place of residence is in the United States and files a Schedule C Profit or Loss from Business.
    • Most farmers file a Schedule F, “Profit or Loss from Farming.” While it may be reasonable to assume that the Schedule F will be treated the same as the Schedule C. Farm Bureau is requesting clarification.

Guidance for partnerships is also included. Receipt of a PPP loan will impact the ability of an individual to claim unemployment.

  • Calculation for Loan: Explains how to calculate maximum loan amounts. The maximum amount that may be borrowed will be based on net profit, line 34 on the Schedule F or line 31 on Schedule C. However, if the sole-proprietor has employees, employee payroll costs can be added to the net profit number.
  • Using Loan: Explains how PPP loans are to be used.
    • Owner compensation replacement, payroll costs, mortgage interest payments and other interest payments to support the ongoing businesses operation in a way similar to way expenditures were made in 2019.
  • Payroll Limitations: Continues the requirement that 75 percent of PPP loans must be used to cover payroll costs.
    • Farm Bureau is requesting that owner compensation count towards the 75 percent payroll calculation.
  • Loan Forgiveness: Explains the amount of the loan that will be forgiven is for eight weeks of employee wages/some benefits, eight weeks of owner compensation replacement based on 2019 net profit, mortgage interest and interest on other business property, rent and utilities.
    • This will be problematic for farmers who did not report a profit last year. Farm Bureau is considering additional methods to expand eligibility for these farmers, including an option to use equipment profits recorded on IRS Form 4797.

Farmers should consult with their accountant, tax preparer and/or financial advisor about the application of the IFR to their particular situation.

Farm Bureau has heard from multiple agency and lender sources that the PPP funding will be exhausted as early as Thursday, April 16. SBA is advising businesses to continue applying for PPP loans, even if the funding runs out. SBA is creating a virtual queue to hold a business’ place in line once Congress replenishes PPP funding.


USDA has published a FAQ website pertaining to a multitude of COVID19 related concerns for farmers including a section on PPP. The USDA website is:

The SBA and Treasury Department released the following resources. Please review these links for more specific information:

Treasury FAQs on Paycheck Protection Program (updated on April 14, 2020)
PPP Borrower Application Form (Updated April 2, 2020)

The Coronavirus Aid, Relief, and Economic Security (CARES) Act allocated $350 billion to help small businesses, including farms, keep workers employed amid the pandemic and economic downturn. Known as the Paycheck Protection Program, the initiative provides 100% federally guaranteed loans to small businesses who maintain their payroll during this emergency. Importantly, these loans may be forgiven if borrowers maintain their payrolls during the crisis or restore their payrolls afterward. Loans will be provided on a first-come, first-served basis. Payroll for labor whose home is principally outside of the United States (such as H-2A) is not eligible for forgiveness. Independent contractors (such as workers which receive IRS Form-1099) do not count as employees for payroll costs purposes; these independent contractors are eligible to apply for their own PPP loan.

The Small Business Administration (SBA) has released its rules for the Paycheck Protection Program (PPP). Farm Bureau’s understanding of the PPP rule is an agriculture enterprise which employs 500 or less people is eligible. The SBA guidance on “Small Business Concerns” has removed the revenue threshold for the PPP loan and is solely based on employee size standards.  However, there is a caveat with how the rule applies to affiliations. Affiliations will be determined on a case-by-case basis and has the potential to impact a business’s employee count.  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.

More analysis from American Farm Bureau of the PPP can be found here.  

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.