PPP and EIDL Fact Sheet #4

Nicole Tommell, Area Ag Business Management Specialist/Team Leader
Central New York Dairy and Field Crops

Last Modified: August 31, 2020

The Paycheck Protection Program and Health Care Enhancement Act was signed on April 24th. So as of today, April 27th, the Paycheck Protection Program is back in business with $310 billion more in appropriated funding. A new interim final rule was issued by SBA/Dept of Treasury on April 24th  https://home.treasury.gov/system/files/136/Interim-Final-Rule-on-Requirements-for-Promissory-Notes-Authorizations-Affiliation-and-Eligibility.pdf and the Treasury Department also issued an updated FAQ as of April 26th https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf

In order to make this factsheet more efficient a summary of the PPP program can be found at https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program, and we have included links to earlier fact-sheets which provide more in-depth analysis of the PPP program. In summary, the Paycheck Protection Program PPP is a low interest (1%) loan authorized in the CARES Act designed to provide a direct incentive for small businesses to keep their workers on the payroll. SBA will forgive up to 100% of PPP loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities. You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. The last day for SBA to approve a PPP loan is June 30, 2020.

The Paycheck Protection Program and Health Care Enhancement Act did not significantly change the PPP. The biggest change in the Act was a set aside of $60 billion of the $310 billion authorized PPP funds to be distributed through minority serving and smaller banks - with the intent of helping small businesses that had "banked locally" to have a better shot at receiving a PPP loan.  One criticism of earlier rounds of PPP funding was that an applicant's ability to get funded depended more on who they banked with than their need for the program. Applicants who had banked with larger banks, BoA and Wells Fargo for example, have been reported to have had an advantage in applying as they were quicker to accept applications.  Smaller banks were hesitant to jump into the PPP early on as they were (rightfully) worried about assuming risks in a program with few rules or guidance. Many community banks also had less robust on-line application portals. These delays may have disadvantaged their customers because the funding was obligated so quickly.

Because of the speed with which the first round of PPP funding disappeared, it is also clear that Congress will be looking at who gets PPP funding. Prior to the authorization of additional funds, there was widespread outrage about small businesses being squeezed out of the funding program, while large companies, with relationships with banks and the ability to raise money by issuing shares, received tens of millions of dollars.  Shake Shack notably returned their loan and several hundred million more will likely to be made available to the PPP fund from large companies returning loans made in earlier rounds.

Although the recent Act did not place additional explicit constraints on large businesses, the updated April 24th interim final rule and April 26th FAQ do make it clear that need for the loan matters. The rule includes Section 5 Limited Safe Harbor with Respect to Certification Concerning Need for PPP Loan Request which states:

"Consistent with section 1102 of the CARES Act, the Borrower Application Form requires PPP applicants to certify that "[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant." Any borrower that applied for a PPP loan prior to the issuance of this regulation and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith. The Administrator, in consultation with the Secretary, determined that this safe harbor is necessary and appropriate to ensure that borrowers promptly repay PPP loan funds that the borrower obtained based on a misunderstanding or misapplication of the required certification standard but indicated that firms that don't return the funding will be subject to scrutiny by the Treasury Department that they were not applying to the loan in good faith." 

The April 26th FAQ's Question 31: Do businesses owned by large companies with adequate sources of liquidity to support the business's ongoing operations qualify for a PPP loan? The Treasury Department responded:

"In addition to reviewing applicable affiliation rules to determine eligibility, all borrowers must assess their economic need for a PPP loan under the standard established by the CARES Act and the PPP regulations at the time of the loan application. Although the CARES Act suspends the ordinary requirement that borrowers must be unable to obtain credit elsewhere (as defined in section 3(h) of the Small Business Act), borrowers still must certify in good faith that their PPP loan request is necessary. Specifically, before submitting a PPP application, all borrowers should review carefully the required certification that "[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant."  Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business.  For example, it is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification. Lenders may rely on a borrower's certification regarding the necessity of the loan request. Any borrower that applied for a PPP loan prior to the issuance of this guidance and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith."

What does this mean for you? First the good news is that Congress is now making more effort to better target the PPP funding to small businesses. Some of the kinks of the first round are being addressed and an attempt is being made to better reach small businesses. Small farm businesses in New York State are unlikely to be the primary focus of programmatic scrutiny and Congressional belt tightening so if you have real concerns about your markets and labor this season, you can apply for a PPP loan in good faith, even if you haven't experienced a significant loss in income yet.  COVID-19 economic impacts are likely to be long lasting and should times get hard, accessing affordable credit could be a challenge for many small businesses. That is what these programs can help with.

The bad news is that it is not clear what additional requirements or restrictions there will be for PPP loan forgiveness. The PPP is a new program put together quickly. It is kind of like building an airplane while flying. As the program unfolds, the program rules seem to be establishing the groundwork the SBA to hold businesses to a standard of suffering economic harm in order to receive loan forgiveness, especially as obvious issues with funding allocation are identified. There could be more documentation of economic harm required or more restrictions placed on forgivable uses of the funding. Right now, loan forgiveness in the PPP is based on hiring at the same level you had in 2019 and being able to pay out most of the grant in the first 8 weeks after you receive funding. Some businesses are having trouble meeting this standard because of worker shortages or changes in how they are operating right now. This is something you as a business owner should be prepared for. Our recommendation is if you are applying to the PPP because, like many farms you are unsure of how your season will unfold, be prepared to pay the loan back if your season goes well and consider your PPP funds as a low interest, safety net.  If you operate this way you protect yourself from short term cash-flow problems. If you are ultimately eligible for loan forgiveness then you will be ahead and if you are not, you will not be worse off. Even if you must pay the PPP loan back, at 1% interest and no fees it is a very affordable loan and might be worth having for peace of mind.

Neither the April 24th Interim Rule nor the April 26th FAQ included any new guidance to lenders about using the Schedule F or alternative sources of documentation for assessing owner income for the PPP. We are hearing that farms with negative net income reported on their Schedule F, line 34 are being denied owner income for the PPP, which is consistent with the guidance that was given to lenders for using the Schedule C in the April 14th Interim Rule.  So, if you do not have paid employees and you reported net negative income on your 2019 Schedule F, it is possible you will not qualify for PPP funding. You should contact your lender to verify your eligibility prior to applying.

We had said that H2A employee eligibility for PPP was a grey area. It still is. The April 26th FAQ Question 33 did add some clarifying language about how a lender should determine whether an employee's principle place of residence is in the United States, but it is not really that helpful for H2A employers.  The answer is "PPP applicants and lenders may consider IRS regulations (26 CFR 1.121-1(b)(2)) when determining whether an individual employee's principal place of residence is in the United States."  So, this is the applicable CFR language (26 CFR 1.121-1(b)(2)):

2) Principal residence. In the case of a taxpayer using more than one property as a residence, whether property is used by the taxpayer as the taxpayer's principal residence depends upon all the facts and circumstances. If a taxpayer alternates between 2 properties, using each as a residence for successive periods of time, the property that the taxpayer uses a majority of the time during the year ordinarily will be considered the taxpayer's principal residence. In addition to the taxpayer's use of the property, relevant factors in determining a taxpayer's principal residence, include, but are not limited to—

(i) The taxpayer's place of employment;

(ii) The principal place of abode of the taxpayer's family members;

(iii) The address listed on the taxpayer's federal and state tax returns, driver's license, automobile registration, and voter registration card;

(iv) The taxpayer's mailing address for bills and correspondence;

(v) The location of the taxpayer's banks; and

(vi) The location of religious organizations and recreational clubs with which the taxpayer is affiliated.


The Treasury Department/SBA are punting on this one and it will be up to a farmer and their lender to determine if any of their H2A employees meet this test and this could vary quite a bit depending on how the farm uses H2A workers and how much time the H2A worker had spent in the US in the past few years.

EIDL and Advance Update

The Paycheck Protection Program and Health Care Enhancement Act made the SBA Economic Injury Disaster Loan available to farms for the first time. EIDL is the SBA's primary disaster assistance program to businesses. It provides low interest loans (3.75%) for working capital that are intended to help a business keep going during a period of business interruption due to a disaster. Businesses can apply for up to $2 million. The terms for repayment of the loan can be quite long (up to 30 years) with the intention that the repayment costs are low enough to help the business stay economically viable after the disaster.

The CARES Act also added the ability for businesses applying for EIDL Loans to receive up to $10,000 as an advance to "provide economic relief to business experiencing a temporary loss of revenue."  The Advance does not have to be repaid and businesses that receive the advance, but ultimately are turned down for the loan, do not have to return or repay the advance if they were otherwise eligible to apply for EIDL and the purpose of the loan was eligible.  Because of demand for EIDL, SBA had been limiting the Advance to the number of employees that the business had - so businesses with fewer than 10 employees were receiving less than $10,000. There has been some pushback from Congress about this reduction in the Advance, so it is unclear as to whether that reduction will continue with the new round of funding. Right now, $50 billion of the new appropriation is to fund loans under EIDL and $10 billion is for the Advance.

Unlike PPP, which you apply to through a commercial lender, you apply directly to SBA for the EIDL. SBA had closed their application portal for EIDL when funding was fully obligated on April 15th. They have not yet reopened the application portal because they had a backlog of applicants. According to the SBA website https://www.sba.gov/disaster-assistance/coronavirus-covid-19 (as of April 27th): "With the additional funding provided by the new COVID-19 relief package, SBA will resume processing EIDL Loan and Advance applications that are already in the queue on a first come, first-served basis. We will provide further information on the availability of the EIDL portal to receive new applications (including those from agricultural enterprises) as soon as possible."  

There is some concern that because of the backlog in applications that no new applicants will be able to apply, effectively closing the EIDL to farms. However, because the EIDL is a long-standing program, with fewer glitches than PPP, further rounds of funding if there is enough demand and demonstrated need could be forthcoming. We advise you to keep trying to apply. Small Business Development Center (SBDC) staff are a great resource to help guide you through this process as they are very experienced with EIDL loans. You can find your local SBDC center at https://americassbdc.org/  


Next Steps

You can apply for both the PPP and the EIDL and because the programs are so competitive if you need this help for your business is probably worth applying to both, just in case you are not able to access the other program. However, you cannot use the funds for the same purpose. So, if you do receive a PPP loan, it would be to your benefit to first use the PPP loan funds for salary because that use of the PPP is forgivable and uses of the PPP are more restricted.  EIDL loans, for example, can be used to pay vendors and pay other operating costs. Many local areas are also developing emergency loan and grant programs for businesses, so it may be worth looking closer to home - especially if the amount of funding you need is more in the under $10,000 range.

Here is a chart summarizing the differences between the two assistance programs:

See pdf for chart.    

Difference between PPP and EIDL

Prior Fact Sheets:

  • Fact Sheet #1 CARES Act's Emergency Resources for Farm Businesses: Paycheck Protection Loan Program, April 2, 2020 https://bit.ly/358Q3Ye
  • Fact Sheet #2 April 8th Update to the Paycheck Protection Program (PPP) - Where the only constant is change!, April 8, 2020 https://bit.ly/2Yamx2Y
  • Fact Sheet #3 A new interim rule, the first round of funding is depleted. What does the future hold? April 14, 2020 https://bit.ly/2ScV7pr


PPP Fact Sheet #4 (pdf; 1093KB)









Upcoming Events

Livestock Trainings Offered Online

March 25 - December 31, 2020

During this time away from the field we have had quite a few producer's asking about certifications offered online.

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Virtual: To Market, To Market

October 6 - November 10, 2020
9am - 12pm

Have a great idea? This exciting six-week class will help you develop a product or service from start to finish! Local CCE Educators Mariane Kiraly, David Cox, Nicole Tommell, Laura Basillio and Jim Barber have partnered to offer "To Market, To Market," a six-part series to be held virtually and in-person at five regional locations to make your learning experience comfortable, safe, and flexible. Participants will learn how to develop and screen an idea, analyze current trends, develop a budget, consider cash flow, determine pricing, manage marketing and distribution, access funding, test a prototype, consider legalities, manage risk, navigate regulations, and much more. A logical, process-oriented curriculum will lead to dynamic business plans that create new economic opportunities in the region.
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Virtual: Design Your Succession Plan

October 8 - October 29, 2020
6:30pm - 8pm

How will your family farm operate in the future when the owner retires or is gone? Are you currently working with another generation who may be questioning their role in the future of the farm or are you yourself questioning your current role?

To help NYS farm families start their succession planning process, Cornell Cooperative Extension educators will be utilizing a new interactive program designed by North Dakota State University Extension, Design Your Succession Plan. This program will provide tools and resources for producers who want to begin the succession planning process.

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Onboarding Dairy Employees~Safe, Engaged and Productive from Day One

Cornell Agricultural Workforce Development is seeking farmers to participate in the second year of an onboarding project funded by the New York Farm Viability Institute.

Employee onboarding is a management process to bring new employees into the farm business, complete necessary paperwork, equip them with safety and performance knowledge and skills, and help them feel connected to and engaged with a worthwhile team.

Find all the details at their website: http://agworkforce.cals.cornell.edu/onboarding/

Resources for Farm Business Safety Plan Required

As the New York Forward plan is implemented across the state, businesses of all kinds are required to have a COVID-19 written safety plan in place. Both essential agricultural businesses that have remained open throughout the COVID-19 pandemic and those non-food related agricultural businesses who will re-open must have a safety plan. A task force of Cornell Cooperative Extension (CCE) specialists developed a new set of resources to help farms comply with this requirement and efficiently prepare plans during this busy time of the year. NY Forward Business Safety Plan Support for Farms contains:
  • Plan Templates
  • Considerations and Examples for Your Plan
  • Key References and Support Documents
See the complete guidance

COVID-19 Safety Plans Required for All Businesses

COVID-19 Safety Plans Required for All Businesses in "New York Forward"

New York Forward is the state's plan to begin re-opening in phases as regions of the state achieve certain COVID-19 management metrics. An important part of New York Forward is for all businesses to have a customized, written safety plan that details specifically how each business will prevent and manage COVID-19. Details for particular industries, including agriculture can be found here.

Dialing Into Your Best Dairy-Podcast series

Find the podcast series "Dialing Into Your Best Dairy" on the PRO-DAIRY website.

PRO-DAIRY offering Webinars and Podcasts

PRO-DAIRY has sent out a list of Webinars and Podcasts.  Find this list and more at our Resource page.

Team Programming and the Coronavirus (COVID-19) Outbreak

To all of our valued program participants and partners:

The Central NY Dairy, Livestock and Field Crops Team will not be conducting any meetings or in person assistance until further notice. All scheduled meetings have been cancelled as we look to support efforts to minimize the spread of COVID-19. If possible we may move them to an online format.

We will continue to monitor the situation and keep in touch with you.

Please continue to reach out to us by cell phone, email, and text as we will gladly respond. We will also continue to contact you by those same methods as we put out newsletters or share other pertinent pieces of information.

Again we are still here expecting to assist you as always, just for the near future not in the in-person way we have in the past.

Stay healthy.

Erik Smith, Field Crop Specialist
David Balbian, Area Dairy Specialist
Ashley McFarland, Area Livestock Specialist
Nicole Tommell, Area Ag Business Management Specialist

COVID-19 response:
Need information? View the following Cornell CALS and CCE Resource Pages Updated Regularly
General Questions & Links: NY Extension Disaster Education Network 
Food Production, Processing & Safety Questions 
Employment & Agricultural Workforce Questions
Cornell Small Farms Resiliency Resources  

Prevention & Control of the Novel Coronavirus for Farms

Find the an article on how to prevent and control the Novel Coronavirus on farms at: Novel Coronavirus Prevention & Control for Farms

Interim Guidance for Animal Care Operations

Interim Guidance for Animal Care Operations release from New York State Department of Agriculture and Markets on March 22, 2020.  Find article here

Links to Services

As we navigate through some very uncharted territory over the next few days/weeks/ months, the CNYDFLC team would like to offer you a list of services that may be of help to your farm business. Remember, our entire team is only a phone call, email or video conference away. Please do not hesitate to contact us if a need arises, we will do our best to assist you in the ways previously mentioned.  Find our contact information for each team member on the Contact Us page.

The list of websites and/or phone numbers can be found at our Resource page