Agricultural partnerships facing barriers to PPP loans
Agriculture and ranching are capital intensive operations that often operate at a loss and with owners who often do not work for a salary. When Congress designed the original paycheck protection program, it failed to recognize these special circumstances faced by those who work in agriculture. As a result, many farmers and ranchers were not eligible for PPP assistance. Despite the changes to the following COVID relief programs, many farmers still face problems today.
Article 313 of the Economic Aid Law amended the initial PPP eligibility requirements, recognizing the special circumstances of people working in agriculture and helping many farmers and herders to participate in the program. Unfortunately, the SBA has since interpreted this language to exclude farms and ranches structured in partnerships and LLCs.
In a letter to leaders of the Senate Committee on Small Business and Entrepreneurship and the House Committee on Small Business, the National Corn Growers Association, along with K Coe Isom, led a coalition of 35 farm organizations urging Congress to work with the Small Business Administration to ensure that agricultural partnerships and limited liability companies (LLCs) are able to participate in PPPs.
“We believe this interpretation is wrong and prevents many farming and ranch families from participating in PPP,” the organizations write. “We ask that you clarify to the SBA that Congress intended to include agricultural partnerships and LLCs in section 313.”
Bill extends access
A bipartisan bill introduced by Rep. Jim Hagedorn, R-Minn., In the House would also allow farmers and ranchers classified as partnerships to use gross income when calculating maximum PPP loan amounts.
The CARES Act allowed farmers and ranchers to apply for PPP loans using net income in their loan calculations. Unfortunately, this prevents many agricultural partnerships from receiving the maximum PPP loan possible. The legislation provides increased flexibility by allowing the use of gross income to calculate the maximum loan amount. The bill also includes a retroactive provision allowing producers, who initially used net income, to recalculate their PPP loans, as long as the loans have not been canceled.
“Agricultural producers in southern Minnesota and across the country have suffered greatly from historic declines in demand and packaging plant closures throughout the COVID-19 pandemic. As we approach a return to normalcy and reopen our economy, it is essential that we ensure that our farmers and ranchers have access to the resources necessary to maintain their operations, ”said Hagedorn.
The legislation has received public support from the American Farm Bureau Federation, the National Cattlemen’s Beef Association, the Farm Credit Council, the CoBank, the NCGA, the Independent Community Bankers of America, Compeer Financial and the American Sugar Alliance.
Danielle Beck, senior executive director of government affairs at NCBA, said: “As the COVID relief plan of December 2020 established a new loan calculation to expand farmers ‘and ranchers’ access to PPP, many ranchers livestock continue to be lacking due to a narrow interpretation of the law. Federal aid depends only on access for those in need – and the NCBA is extremely grateful to Representative Hagedorn and the lawmakers on Capitol Hill who work tirelessly to ensure that agricultural producers have equitable access to P3s.