Federal officials this week gave agriculture-related business exclusive access to a disaster loan program traditionally used for things like hurricane recovery, in an effort to ensure farmers have a chance to secure funding from the national CARES Act relief program.
The U.S. Small Business Administration mostly has been working to approve hundreds of billions in funding through the Payroll Protection Program, which was created by Congress to help small businesses pay their employees during the pandemic and keep them off unemployment rolls.
But the SBA has also been rolling out its existing Economic Industry Disaster Loan program, which isproviding vast sums of cash to local businesses in Washington and the rest of the nation, said Cynthia Cowell, spokeswoman for the SBA’s Office of Disaster Assistance.
“This is the first time in 30 years that SBA has been able to offer loans to ag businesses,” Cowell said. “We want to help as many businesses as we can. Right now, we are only accepting new EIDL loan applications for ag businesses only. That’s just for now. We just want to give them a chance to get in the system.”
Michelle Hennings, executive director of the Washington Association of Wheat Growers, said she and other farmers appreciate the SBA making the disaster loans available to area wheat farmers, who are struggling with a dry spring and prices that don’t quite cover the cost of producing a crop.
“A lot of commodities are struggling as a result of COVID-19,” Hennings said. “Beef has taken a dive. There are farmers out there really needing assistance right now. We definitely support a system that will help farmers.”
Both the Payroll Protection Program and the EIDL loans are intended to help small businesses with 500 employees or fewer. Business owners must use their lenders to apply for the PPP loans. For the disaster loans, they must apply on their own through the SBA to qualify. However, small business owners can get approved for money from both programs, Cowell said.
“We are encouraging every business to apply for everything that is out there. This is an unprecedented time,” Cowell said. “The only thing we need to caution people about is if they apply for both the EIDL and PPP, they can’t use the money for the exact same item.”
For instance, a business owner could use PPP money to cover its payroll for one week and the disaster loan to pay its employees the next week. They just can’t pay their payroll from both funding sources at the same time, she said.
As of April 24, the most recent date for which numbers are available, the SBA had approved just less than $7 billion in disaster loans across the nation. Of that total, about $311 million had gone to businesses in Washington.
The disaster loans, which have a limit of $2 million per application, also have an added bonus. They provide up to $10,000 relief to business owners even if their application is later denied by the SBA, Cowell said.
As of April 24, the SBA had disbursed about $5 billion worth of the $10,000-maximum advances nationwide with more than $115 million going to Washington and about $19.5 million going to Idaho businesses.
However, unlike the PPP, which converts to a grant as long as the business owners use 75% or more on their payrolls, the disaster loans act like an extra home mortgage. Disaster loan recipients must pay them off after 30 years and the loans come with a 3.75% interest for businesses. Nonprofit organizations, including churches, can get the same loans for 2.75% interest, she said.
“We try to make it as affordable for businesses as possible,” Cowell said. “Because everybody is suffering during this pandemic, the first payment is deferred for a year.”
Hennings, the wheat advocate, said she is just getting back results from a recent survey of area farmers that showed only about 12% of the roughly 50 who replied had applied for the PPP relief program. Of those who did, only a couple got approval.
“So the PPP wasn’t a good fit for farmers at all,” Hennings said. “It’s great that the SBA came up with a program strictly for farmers.”
Cowell said exclusive access to agriculture-related businesses started Monday but she wasn’t sure how long it would last.
“It used to be that those engaged in farming were not eligible” for the disaster loans, she said. “They had to go through (the U.S. Department of Agriculture). But now they can come to us just for COVID-19 relief.”
However, just like the problems plaguing the early rollouts of the payroll relief program, the SBA has a large backlog of applications for the disaster loans, even after the agency added scores of new employees to process the paperwork.
“I know we have millions of applications that we have been processing,” Cowell said.
As of April 24, only about 39,000 applications had been approved. As a result, some businesses have applied multiple times.
“Anyone who has an application number that starts with 3 is in the system. That means we are actively processing their application,” she said. “These are loans that are available every time there is a disaster. We have made tweaks to modify it for this particular disaster.”
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