First-come, First-served Small Business Loans Available Now

Last night, the Small Business Administration (SBA) issued its The Interim Final Rule (IFR) announcing additional guidelines and requirements for the Paycheck Protection Program (PPP). The temporary expansion of this loan program, authorized last Friday when the President signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, makes up a portion of the $376 billion in relief the Act will provide for workers and small businesses in America.

The National Cattlemen’s Beef Association (NCBA) has highlighted the following as key highlights from the IFR for ranchers and beef producers:

• Agricultural producers are eligible for PPP. However, all small businesses are subject to SBA’s affiliation rules under 3 CFR 121.301(f) unless specifically waived in the CARES Act (generally, “affiliation” exists when one business controls or has the power to control another or when a third party –or parties—controls or has the power to control both businesses. Control may arise through ownership, management or other relationships or interactions between the parties. Additional information on SBA affiliation rules can be found here).
• The determining factor of eligibility appears to be size, and any small business with 500 employees or fewer is eligible to participate. This understanding is supported by the loan application itself, which (on page 2 under “Certification and Authorizations”) lays out the eligibility requirement that “The Applicant…employs no more than the greater of 500…employees or, if applicable, the size standard in number of employees established by the SBA in 13 C.F.R. 121.201 for the Applicant’s industry” (emphasis added).
  • There has been some speculation that small businesses will also be required to meet the SBA small business industry specific standards, which are set up using the North American Industry Classification System (NAICS) and classify businesses based on economic activity. Under NAICS, the maximum level of receipts (not profits) that a beef cattle farm or ranch can have and still be considered small is $1 million. The maximum for feedlots is $8 million. While the IFR clearly defines eligibility based on size, meaning industry specific standards would not be applicable or a determining factor of eligibility, we continue to hear conflicting reports regarding whether ag will be subject to an employee threshold versus a NAICS receipts threshold. NCBA’s interpretation of the above (which is consistent with Congressional intent) is that all entities with fewer than 500 employees are eligible for PPP. Additionally, NCBA has heard from several cattle producers whose applications were processed and approved solely on the employee threshold.
• Loans of up to $10 million will be made available to cover 2.5 times the average monthly cost of payroll, which is measured by payroll costs of the 12 months preceding the loan origination date, plus an additional 25% for non-payroll costs. This includes salaries, employee benefits (including health care and retirement), mortgage interest payments (but not prepayments or principal payments), rent, utilities, interest payments on any other debt obligations that were incurred before February 15, 2020, or refinancing an SBA Economic Injury Disaster Loan made between January 31, 2020 and April 3, 2020. At least 75% of the loan must be used for payroll costs.
  • One potentially limiting factor to note: payroll expenses cannot include salaries for foreign workers or independent contractors (independent contractors are eligible to apply for PPP individually).
• PPP is retroactive to February 15, 2020 and loans will be available through June 30, 2020. PPP funds used during this eight-week period of time can be 100% forgiven, as long as this funding is used on approved expenses and employees aren’t terminated and their wages aren’t reduced. Any loan proceeds in excess of this amount are subject to repayment rate of 1%. Employers will need to keep careful documentation of these expenses in order to apply for loan forgiveness.
• The maturity date is confirmed at two years and no payments are due for six months. However, interest will accrue from the date of loan funding. Individuals can only apply for one loan.
• While the program is open until June 30, loans will be available on a first come, first served basis. Individuals who are interested in applying for PPP should contact their lenders ASAP.

To download the Paycheck Protection Program Borrower Application Form, click here. To find an eligible lender near you, click here.

In addition, Governor Newsom announced yesterday that the state is designating additional dollars in loan guarantees for those not eligible for the relief being offered federally.

Specifically, the Governor’s Office says, “the state is allocating $50 million to the California Infrastructure and Economic Development Bank for loan guarantees to small businesses to help eliminate barriers to capital for individuals who do not qualify for federal funds, including low wealth and undocumented immigrant communities. The state is also allowing small businesses to defer payment of sales and use taxes of up to $50,000, for up to 12 months.”

To read the Governor’s full announcement, click here.

For further information please don’t hesitate to reach out to CCA or NCBA.