Alabama Commissioner of Agriculture and Industries Rick Pate wants to remind farmers and agribusinesses in the state facing unprecedented economic disruption due to the Coronavirus (COVID-19) outbreak, they are eligible for small business loans.
The Department of Treasury and Small Business Administration (SBA) recently announced that farms and agribusinesses are eligible for Paycheck Protection Program (PPP) loans as long as they have fewer than 500 employees and meet the definition of a “small business.” While the loans are subject to SBA’s affiliation rules, financial institutions, including the Farm Credit system, will be responsible for actually processing loan applications and administering loans.
Commissioner Pate said, “Farmers and agribusinesses feed America and this program can provide some much-needed relief for our producers based on eligibility. I encourage them to get started on the application now.”
According to the Alabama Department of Agriculture and Industries (ADAI), eligible businesses include limited liability companies (LLC), S corporations, sole proprietorships, contractors and non-profits with 500 or fewer employees. Loans are capped at $10 million but can include up to eight weeks of average monthly payroll costs from last year plus an additional 25% of non-payroll costs. Different calculations apply to seasonal and new businesses.
Loans have an interest rate of 1% and mature in two years with loan payments being deferred for the first six months. Loan amounts are calculated based on the payroll costs for all employees whose “principal place of residence” is in the U.S. Loans will be fully forgiven if at least 75% of the funds are used for payroll costs, and the remainder is used for interest on mortgages, rent and utilities. Loan forgiveness is also based on the employer maintaining or quickly rehiring employees at the same salary level.
Agricultural producers should reach out to their bankers and/or agricultural lenders to apply. The PPP will be available through June 30, 2020.