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Steep bank to climb: Payroll Protection Program could help small businesses including ag

Dakota First

The name might be a play on words but the effect has serious impact. As coronavirus quickly shuttered local business across their state, First Dakota National Bank launched Dakota First, putting $60,000 into local economies. “We asked ourselves, ‘What can we do as a bank during these times?’” says Nate Franzen, president of the ag division of First Dakota National Bank. “We wanted to be there for our communities and help the businesses that are suffering.”

So the bank, which is the largest in Dakota territory and has been in existence for 148 years, gave each employee $148 to spend locally. There were few stipulations except they could not spend it online or at a big box store. The idea was simply to pour back into local communities.

Franzen says they created a simple leave-behind card stating First Dakota cares about you and about our communities.

“The feedback we’ve received from our employees and the people we touched through that program has been amazing,” says Franzen. One recipient of the funds had part of his bill at a local repair shop paid for. “We got a personal letter from him; it was very emotional and touching. It’s amazing what impact we can all make in these times.”

As the world shifts to pandemic “norms” – if there can be such a thing – people in some professions are finding themselves with too much time off while others are burning the candle at both ends.

Most bankers are in the second group.

Nate Franzen is president of the ag division of First Dakota National Bank, and works out of Yankton, S.D. He says the banking industry is in a tight crunch, with the highest priority now being getting ranchers and farmers enrolled in the Payroll Protection Program. Figuring out what the program offers and who is included has been a big hurdle for almost everyone – from senators to loan officers.

Franzen said his lenders were already hopping following the Fed dropping interest rates in March. “We’ve done a lot of readjusting of loans, especially long-term rates, to current terms. Plus this is the standard season for renewal of many of our operating lines,” he says. “Across our whole bank, business and ag banking both, we’ve had people working weekends and evenings trying to move this PPP program.”


Part of the Coronavirus Aid, Relief and Economic Security Act (CARES), the PPP offers loans through the Small Business Administration designed to incentivize small businesses to keep employees on the payroll or hire back those they have had to let go. The program originally did not include ag, but was revised shortly after rollout after strong pushback from the ag lobby.

Ag operations can apply for two and a half months’ worth of payroll, which must then be used for payroll, interest on mortgages, rent and utilities. The loan is processed through the SBA or, in the case of farmers and ranchers, their lender. Neither banks nor the government are permitted to charge fees or interest on the loan, but are reimbursed through the program for their work in processing applications. After eight weeks the loan will be fully forgiven if the funds are used for approved costs. No collateral or personal guarantees are required.

Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels, and will be reduced if full-time headcount declines or if salaries and wages decrease.

The loan has a maturity of two years and an interest rate of one percent. Lenders were able to start submitting applications on behalf of ag producers on April 3. The program runs through June 30. Beginning on April 10 self-employed and independent contractors were also eligible to apply for PPP money, although there is still some question as to what that component will look like.

“We’re all waiting for guidance on what kind of documentation will be required on that,” says Franzen. “It’s real possible some of our self-employed farmers may be eligible on that round if they weren’t on the first, but we’re waiting to see what it looks like.”

Beth Eppley is the executive director of the Eastern Plains Economic Development Corporation and works out of Baker, Mont. She says the initial rollout of the PPP brought some uncertainty, but now that the rules are in place there is good momentum in place and producers are utilizing the program.

“I really think it is helpful that this program goes through the local banks. People have a professional to walk them through the process, and a live person to work with and answer questions. It does put a big strain on the banks, but those relationships are definitely being utilized now.”

Eppley says since the program is on a first-come, first-served basis, she encourages producers to get their paperwork in as soon as they can.

For ag producers, the pandemic has truly kicked ’em while they were down. For several months ag commodity prices have teetered precariously as the world watched to see how international trade would pan out. In mid-March, they completely toppled.

“The economy is complex and it’s hard to give a short answer to what was going on,” says Franzen. “As anyone in the industry knows, commodity prices have fallen, prices have dropped and margins are tight. The past two months those margins got much tighter.”

He noted industry issues of collapse of oil prices, shuttering of ethanol plants, changes in dine-in beef consumption, and decline in milk consumption as tough concerns that had already exhausted the industry. The pandemic and the emergence of government bail-out programs have left many wondering what the new normal will look like.

Obviously the underlying question of everyone is: How long will this last?

“Everyone is doing contingency planning, looking ahead,” says Franzen. “But our farmers are resilient and we remain confident in them. Meanwhile, we’re going to our best to service them and make it through this hard time.”

Franzen says his banks’ current priority is on servicing their existing customers first, and allocating their resources to getting their paperwork submitted. However, he says they will take on new customers – and new opportunity – as their capacity allows.

“Uncertain times naturally make people more cautious – but there are some out there who see this as a potential time to invest in something that may be undervalued because of the times.”

Franzen says his best advice is to keep a level head.

“Don’t overreact, be diligent and do what is best for your health and the health of your families and the people you work with. Work with your close valued partners to maximize the situation based on your individual position. Everyone is different. Plan the best you can for the uncertainty but don’t panic.”

As questions get answered, more will likely arise as everyone stumbles forward to a new normal.“This is a first step,” says Eppley. “It’s not our only step. There will definitely be some long-term recovery.” F




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