NCBA Update: SBA Guidance on Paycheck Protection Program (PPP)

Last night, the Small Business Administration (SBA) issued an interim final rule (IFR) providing additional implementation guidelines and requirements for its Paycheck Protection Program authorized by the CARES Act. Attached you fill find a copy of the IFR, and below are some key highlights: 

• 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 CARES (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 affiliate 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. However, there has been 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 classifies businesses based on economic activity. Under NAICS, the maximum level of receipts (not profits) that a beef cattle farm or ranch can have any 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/a determining factor of eligibility, NCBA is working to gain additional clarity on this issue.
• 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; and/or refinancing an SBA EIDL loan made between January 31, 2020 and April 3, 2020. At least 75% of the loan must be used for payroll costs.
o 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/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 serve basis. Individuals who are interested in applying for PPP should contact their lenders ASAP.
Please know that we will continue to update you as we gain additional information on COVID-19 assistance. In the meantime, don’t hesitate to reach out if you have any questions.

Best,

Danielle Beck
Executive Director, Government Affairs
NCBA Center for Public Policy

PPP Information