The Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L. 116-136) created the Small Business Administration's (SBA's) Paycheck Protection Program (PPP) and Emergency Economic Injury Disaster Loan (EIDL) grants to provide short-term, economic relief to certain small businesses and nonprofits. For more information on SBA-related emergency relief provisions, see CRS Report R46284, COVID-19 Stimulus Assistance to Small Businesses: Issues and Policy Options, by Robert Jay Dilger, Bruce R. Lindsay, and Sean Lowry.
Important note: On April 16, 2020, the SBA reported that it had exhausted all funding provided by the CARES Act for the PPP and Emergency EIDL grant programs and was no longer accepting new applications for these programs. Congress is currently negotiating another round of PPP and Emergency EIDL funding. The Senate-passed Paycheck Protection Program and Health Care Enhancement Act (H.R. 266) would include additional funding for both programs and a provision (Division A. Sec. 101) that would permit agricultural enterprises as defined by Section 18(b) of the Small Business Act (15 U.S.C. ยง647(b)) with not more than 500 employees to receive emergency EIDL grants and EIDL loans.
This Insight will be updated to reflect any legislative changes affecting these programs.
PPP loans feature a two-year term at 1% interest, the waiver of the SBA's up-front loan guarantee and annual servicing fees, relaxed underwriting requirements, deferred payments for six months (interest does accrue), and loan forgiveness of up to 100% of the loan's principal amount under specified conditions related to the borrower's retention of employees and wages and the use of the funds for specified purposes, such as payroll and employee benefits.
PPP loans can be used for payroll costs; costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums; employee salaries, commissions, or similar compensations; payments of interest on any mortgage obligation (excluding any prepayment of or payment of principal on a mortgage obligation); rent (including rent under a lease agreement); utilities; interest on any other debt obligations that were incurred before February 15, 2020; and refinancing an SBA EIDL loan made between January 31, 2020, and April 3, 2020.
Agricultural enterprises, defined in Section 18(b) of the Small Business Act as "small business concerns engaged in the production of food and fiber, ranching, and raising of livestock, aquaculture, and all other farming and agricultural-related industries" may apply for a PPP loan if the applicant meets the PPP's eligibility requirements:
Sole proprietors, independent contractors, and eligible self-employed individuals are also eligible to receive a covered loan.
As of April 16, 2020, the SBA reports that 46,334 PPP loans, totaling $4.37 billion (1.28% of the total amount approved), went to agricultural, forestry, fishing, and hunting businesses.
EIDL Loan Terms and Eligibility and Emergency EIDL Grants
EIDL loans related to economic damages caused by the COVID-19 pandemic feature a term of up to 30 years with 3.75% interest for small businesses and 2.75% interest for private nonprofit organizations. The loans may be used for fixed debts (rent, etc.), payroll, accounts payable, and some bills that could have been paid had the disaster (in this case, the COVID-19 pandemic) not occurred.
The CARES Act authorizes the SBA to provide EIDL to borrowers adversely affected by the COVID-19 pandemic an advance payment of up to $10,000. The advance payment, referred to as an emergency EIDL grant in the CARES Act, does not have to be repaid, even if the applicant is subsequently denied an EIDL. Due to high demand, the SBA limited EIDL advance payments to $1,000 per employee, capped at $10,000.
Small businesses, most private nonprofit organizations, small agricultural cooperatives, small aquaculture businesses, and nurseries deriving less than 50% of their annual receipts from the production of nursery or other agricultural products are EIDL eligible. The CARES Act temporarily expands, through December 31, 2020, EIDL eligibility to include startups, cooperatives, and eligible ESOPs (employee stock ownership plans) with fewer than 500 employees, sole proprietors, and independent contractors.
Historically, agricultural enterprises, other than small agricultural cooperatives, small aquaculture enterprises, and eligible small nurseries, have not been eligible for EIDL assistance because language was added to Section 18 of the Small Business Act prohibiting the SBA from duplicating "the work or activity of any other department or agency of the Federal Government," to exclude agricultural enterprises. At one time, the Small Business Act specifically mentioned the Farmers Home Administration as a source of program duplication, but that reference has been removed. Section 18 also specifies that if "loan applications are being refused or loans denied by such other department or agency responsible for such work or activities ... then, for purposes of this section, no duplication shall be deemed to have occurred."
As mentioned, the Senate-passed Paycheck Protection Program and Health Care Enhancement Act would permit agricultural enterprises with not more than 500 employees to receive Emergency EIDL grants and EIDL loans.