“If you are on the fence about applying for the Paycheck Protection Program (PPP) you need to decide soon. According to SBA, because their last day to accept applications from banks is August 8th, most lenders will stop accepting applications on or before August 3rd.
Getting 100% PPP loan forgiveness has become more accessible for businesses. Congress extended the period from 8 to 24 weeks, they reduced the amount that needs to be used for payroll from 75% to 60% 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 2 years to 5 years. The PPP is a no-cost, federally guaranteed 1% 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/businesses who had high net income on their Schedule F (or Schedule C) in 2019. Only the payroll for your employees whose primary residence is the USA is eligible for PPP, but the definition of residence does not automatically exclude non-US citizen/visa workers. If your farm uses H2A, and you have H2A workers 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 in-eligible 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.
Right now it is more important that farmers follow the documentation practices that will allow them to get forgiveness than to apply for forgiveness. Most important:
- Get in writing offers to hire employees that were laid off back to work and the employees refusal to come back to work. Make sure you have notified NYS DOL unemployment agency for employees that were offered to be hired back but refused within 30 days. Keep documentation.
- Keep written documentation of attempts to hire employees for positions that are not filled (want ads, responses to want ads, reasons why applicants aren’t hired)
- Keep written documentation of employees that quit and your attempts to rehire.
- Keep written documentation of workforce reductions that are due to state mandated COVID policies that affect your workforce numbers. So if you have a restaurant and can only legally operate at ½ capacity and therefore cant use workers, keep documentation of dates where that is in effect.”
This information was provided by:
Elizabeth Higgins
Ag Business Management/Production Economics Extension Specialist
Cornell Cooperative Extension
Eastern NY Commercial Hort Program