April 17, 2020

PPP out of funds

Topic: Issues

Excerpted from AFBF's Market Intel

Just 14 days after enrollment opened for the Paycheck Protection Program, the $349 billion appropriated for the program was depleted. The speed at which funding was exhausted astounded even those administering the program. A prime example, on April 3, when the application window opened for all small businesses except independent contractors and self-employed individuals, Treasury Secretary Mnuchin predicted the funds would last through June 6.

The quick depletion had little impact on farmers and ranchers, who, according to SBA statistics, made very limited use of the program. There are several reasons for this, which need to be addressed if and when Congress appropriates additional funding for this program.

The Small Business Administration was given a large task when the CARES Act was passed on March 27. Administering a new program in such short order was undoubtedly challenging. The extremely quick seven days between the passage of the bill and the first application window made it unlikely that every possible question could be answered. This meant that businesses and lenders with previous SBA experience were better positioned to take advantage of PPP as it became available. Before the PPP, most farmers and ranchers had never worked with SBA. Those in agriculture were most often referred to USDA’s Farm Service Agency. The result is that farmers and ranchers and the SBA knew very little about each other.

Those who work within, for and around agriculture know that farms, ranches and horticultural businesses are unique. Agricultural enterprises, as they’re referred to by SBA, are different from other small businesses in many ways, including but not limited to utilization of different tax forms; a labor force that is supported by seasonal employees, including foreign workers in the U.S. on visas; utilization of labor contractors rather than directly hired employees; and rent that is not limited simply to a single structure, but often includes land, equipment, multiple structures, etc.

This is just a small list of farms’ and ranches’ many distinct business characteristics that immediately prompted questions when the PPP was launched. SBA and USDA have diligently tried to answer questions, but the slow trickle of information made it difficult for agriculturalists to apply.

Another important element that likely led to farmers’ and ranchers’ low signup was the slow release of guidance for the self-employed and independent contractors. SBA began accepting applications for these small businesses on April 10, but guidance related to these applications wasn’t released until April 14, less than 48 hours before funding ran out.

Read the entire article on AFBF's Market Intel.

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