Announcement of PPP Loan Application Details

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Much of the latest Covid-19 relief package that was passed by Congress in late December was aimed at helping small businesses with another round of funding to reopen and strengthen the Payroll Protection Program (PPP) through from the US Small Business Administration (SBA).

PPP loans will be reserved for companies with less than 300 employees, as well as companies that have suffered a loss of revenue of at least 25% due to Covid-19 during a specific quarter of the year in 2020, compared to the similar quarter in 2019 The PPP provisions allow repayable loans of up to 2.5 times the average monthly salary costs for the year. The maximum level for PPP loans will be $2 million, and PPP loans under $150,000 will have a simplified application process.

The latest legislation allows certain self-employed individuals to reapply for Round 1 PPP loans, as well as to apply for Round 2 PPP loans. No. 1 will begin on January 11, with Round No. 2 PPP loan applications likely to begin in the near future.

As with previous PPP loans, this series of PPP loans will again be managed by local financial institutions. Farm businesses will once again be eligible for this new round of PPP loans, including farms that file taxes as a sole proprietorship. Here are some details and clarifications regarding agriculture-related PPP loan applications:

Clarification on round 1 of PPP loans: It appears that independent farmers (sole proprietorships) who were ineligible for the first round of PPP loan payments due to negative net farm income on Schedule F of their 2019 federal income tax return can now apply for the first round of PPP loan repayments. However, all the details are not yet clear about this process.

About 37% of farms, including many farmers in southern Minnesota, were ineligible for the first round of PPP loan payments due to negative 2019 farm profits following the poor 2019 crop year. Revised PPP loan application for sole proprietorship is based on gross farm income from 2019 tax return, up to a maximum of $100,000.

Based on the PPP loan formula, a farm could qualify for a maximum first-round PPP loan payment of $20,833 ($100,000 divided by 12 times 2.5). Farmers who applied for Round 1 PPP loans as a sole proprietorship and received less than the maximum of $20,833 may be eligible to apply for an additional Round 1 PPP loan up to to the maximum amount. Previous dollar amounts of Round 1 PPP loans that were received and canceled would be deducted from the maximum PPP loan amount these farmers are eligible for. Farms with employees who have applied as a partnership or corporation will likely not be significantly affected by this change.

Details of the new round 2 of PPP loans: Independent Farmers could once again potentially be eligible for Round 2 PPP loans. The same $100,000 maximum gross income level and maximum PPP loan payment that existed in Round 1 Farmers filing as sole proprietorships will exist for Round 2 PPP loan applications.

However, farms will be required to show at least a 25% drop in revenue for one quarter in 2020, compared to a similar quarter in 2019. For some farmers who were affected by the poor 2019 crop year and had less grain stocks to be sold at the start of 2020, compliance with the 25% reduction threshold will no longer be a problem. Farmers who had higher yields in 2019 may have a little more difficulty qualifying for Round 2 PPP loans, depending on the timing of their grain sales and income from government programs. It is likely that many ranchers will be able to qualify for the final PPP loan payments, due to the large mid-year losses in 2020.

There are still some unanswered questions about the latest round of PPP loans for farms, so watch for more details. For details on PPP loan applications, farmers and other businesses should contact their local agricultural lender or visit the SBA website at: www.sba.gov/.

General registration for the CRP in progress

The United States Department of Agriculture (USDA) has announced an open enrollment period for the Conservation Reserve Program (CRP) from January 4 through February 12.

This will be the second General CRP enrollment period since the enactment of the 2018 Farm Bill and the 55th CRP enrollment period since the CRP program began in 1986. There is also an enrollment in courses for the Continuous CRP Program. The CRP program was established in the 1985 Farm Bill and just completed its 35th year of operation in 2020. The CRP program aims to remove more environmentally sensitive cropland from production, with a focus on protecting water quality, improving wildlife habitat, improving air quality and controlling soil erosion.

There were over 30 million acres in the CRP program from 1990 to 2010, with CRP acreage decreasing from 2010 to present. The maximum CRP acreage will now be gradually increased under the 2018 Farm Bill to a maximum of 27 million acres of CRP by 2023.

Currently, just under 20.77 million acres are enrolled in the CRP program, including 13.2 million acres under general CRP contracts, 6.5 million acres under continuous CRP contracts and the remainder enrolled under programs Special CRPs. There are 3 million acres currently under a CRP contract that will expire on September 30 that are eligible for re-registration in CRP during the current registration period.

Landowners may also consider placing new land into the CRP during the general CRP registration period. To be eligible for CRP, the land must have been owned or operated for at least 12 months prior to the end of the CRP registration period.

In addition, eligibility for CRP requires that the land has been planted or considered planted in four of the six years from 2012 to 2017. Farmers and landowners may want to assess certain areas of difficult crops, which have been particularly exposed to extreme weather conditions during recent harvests. years, for possible enrollment in the CRP program.

Under the general CRP program, landowners submit bids to enroll land in the CRP program beginning October 1 following the 2021 crop year. The duration of CRP contracts is 10 to 15 years. CRP offers will be evaluated and ranked based on the “Environmental Benefit Index” (EBI) to determine which acres will be accepted into the CRP program in 2021. EBI factors include:

  • Benefits to wildlife habitat resulting from proposed coverage on CRP acres
  • Water quality benefits from reduced erosion, runoff and leaching
  • On-Farm Benefits of Reduced Erosion
  • Long-term benefits that will likely last beyond the term of the CRP contract
  • Air quality benefits from reduced wind erosion
  • Cost factor, as producers are allowed to submit lease offers for proposed CRP acres

The 2018 Farm Bill established maximum CRP rental rates at 85% of county average rental rates for CRP acres enrolled under the general CRP program. Landowners may offer rental rates below the general CRP program maximum rate to increase the likelihood that their CRP offer will be accepted.

Landowners can also enroll eligible acres in the ongoing CRP program, which is designed for the most environmentally sensitive lands. The ongoing CRP program does not require a bidding process for acres to be accepted into CRP, and annual rental rates are preset at 90% of the county average rental rate. The USDA Farm Service Agency (FSA) also provides cost-sharing assistance of up to 50% of the total cost to establish approved coverage on acres that are accepted into the CRP program.

Kent Thiesse is an agricultural management analyst and senior vice president at MinnStar Bank in Lake Crystal, Minn.

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