Quick Facts: Here’s What You Need to Know About Applying for a PPP Loan Before June 30
There’s no doubt that COVID-19 has impacted ag operations in South Dakota and across the country. As we navigate these historic times, the Paycheck Protection Program (PPP) is available to alleviate the financial burden on producers and keep family productions afloat. Many South Dakota producers have already taken advantage of this lifeline, but for those who haven’t, funds are still available. The deadline to apply for a PPP loan is June 30, so if applying is something you’ve been considering, act now.
Here are a few things you should know about the PPP:
1. What exactly is the PPP? The Paycheck Protection Program is a lending program delivered by the Small Business Administration (SBA) to help employers keep workers on payroll and offer critical support to help pay the bills during this economically challenging time. PPP loans are eligible for forgiveness if at least 60 percent of the loan are used on payroll costs. The other portion of the loan can be used for debt obligations, including interest on a mortgage, rent payment, or utility payment.
2. Am I eligible for a PPP loan?Ag-related industries such as production of food and fiber, ranching and raising of livestock, aquaculture, and all other independently owned farming and agriculture-related entities are eligible to participate in the program. Additionally, the PPP extends eligibility to 501(c)(3) non-profit organizations, electric co-ops, and telephone co-ops organized as 501(c)12s.
3. How do I apply for a PPP loan? The process is simple. You can apply through any SBA 7(a) lender and most credit unions, farm credit lenders, USDA lenders, and community banks. Call your current lender to see if they are facilitating PPP loans or view a state-by-state list of lenders at sba.gov/ppp under the “Loan Detail and Forgiveness” section. (The list of South Dakota lenders begins on page 469.) When applying, you will need to provide your facilitator with documents including your payroll processor records or payroll tax filings. Independent contractors will have to provide their 1099-MISC forms. Once you are approved for a PPP loan, you should receive the funds within 10 days.
4. Can you tell me more about the loan details and forgiveness process? As previously mentioned, these are forgivable loans as long as 60 percent of the loan is used for payroll and the remainder is used for forgivable costs, like rent and utilities. A borrower can choose to use the loan for other working capital needs, like purchasing equipment or inventory, but those portions of the loan can’t be forgiven. Loans issued after June 5 have a maturity of 5 years and an interest rate of 1 percent. If you have received a PPP loan and are ready to proceed with the forgiveness process, the forgiveness application can be found at sba.gov/ppp in the “Loan Forgiveness” section.
5. Am I eligible for any other SBA assistance programs? Ag-related industries are now eligible to participate in the SBA’s Economic Injury Disaster loan (EIDL) program, which includes EIDL Advances. SBA’s EIDL program offers assistance for small businesses and can provide vital economic support to help overcome the temporary loss of revenue. These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the adverse impact of COVID-19. The interest rate on these loans is 3.75%, the first payment is deferred for 12 months, and the term for repayment is up to 30 years. Applicants can request an Advance on their EIDL loan based on $1,000 per pre-disaster employee (i.e., as of January 31, 2020) up to a maximum of $10,000 in addition to their EIDL assistance, and the Advance does not have to be repaid.
6. Who can I contact if I need more information about the SBA or these programs? SBA District Offices have been working tirelessly to serve small businesses and the ag community. To speak with someone in the South Dakota SBA office, call 605.330.4243. You can also learn more and find answers to Frequently Asked Questions at sba.gov/ppp.
By Dan Nordberg, SBA Rural Affairs Director