Author(s): Jonathan Shepherd, Lacey Williams, Tyler Mark, and Jerry Pierce

Published: April 22nd, 2020

On April 2, 2020, the Small Business Administration (SBA) issued Interim Final Rules for the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) pertaining to the Payroll Protection Program (PPP).  At the time of this writing, the funds allocated for this program are exhausted; however, Congress is currently debating further appropriations to fund the program.  The PPP is just one of two new programs launched from the CARES Act.  PPP loan funds may be forgivable if specific criteria are met.  More on this in a future newsletter.  The idea behind the PPP is to provide businesses negatively affected by COVID-19 with assistance making payroll and other eligible expenses through June 30, 2020.  Specifically, the proceeds from a PPP loan may be used to pay payroll expenses (including health insurance costs), mortgage interest, rent/leases, and utility payments.

You are eligible to apply for a PPP loan if you: were in business before 02/15/2020, your principle residence is in the United States, have 500 or fewer employees, and you file a Form 1040 Schedule C.  It is presumed that a Form 1040 Schedule F is allowable since this is the equivalent for Farmers and Fishermen.  Your business can be structured as a sole proprietor, independent contractor, Sub S or C corporation, or LLC.  The SBA provides guidance for business owners who were not in business in 2019, but were in business before 02/15/2020.

The maximum loan amount allowed is the lesser of $10,000,000 or 2.5 times your average monthly payroll³.  At least 75 percent of the PPP loan must be used for payroll costs. To calculate monthly payroll, you take a simple average of 2019’s total payroll expenses for employees who were not compensated over $100,000/annually and whose principle residence was in the United States.  For seasonal employees, you can average payroll expenses over the period of 02/15/2019 through 06/30/2019.  You cannot include guest workers’ payroll as their principle residences are outside the United States.  For those who do not have hired employees, then you can use net farm income from Line 34 of Form 1040 Schedule F averaged over twelve months.  You can then borrow 2.5 times this averaged amount assuming it does not exceed $100,000.  In the case that it does, you have to lower your request to the maximum loan amount of $100,000.  These loans do require documentation and substantiation of requested funds.  Some lenders require you to provide your 2019 Form 943 (or 941 if non-agricultural).  In cases where you do not have employees, then a copy of your 2019 Schedule F (or Schedule C) is required.  You may also be asked to provide accounting records to substantiate the loan.  The current SBA FAQ’s are available here:

If second-round funding is secured, new or additional FAQs are likely to be released. It bears repeating that while monies are currently exhausted, Congress is actively (at the time of this writing) debating appropriating more funds for these programs.  It also is important to note that since there has been a lot of confusion about this program, there is a lot of potential misinformation about what is needed to document eligibility of the PPP loan and who is eligible.  This is an evolving program.  If further funds are appropriated, there may be further guidance and clarifications considering this program.  Qualifications needed to turn part of the PPP loan into forgiveness will be addressed in future communications. It is advised that you speak with your current lending and/or banking institution for further guidance and availability and documentation questions.

¹ For detailed information concerning documentation and eligibility please refer to your tax professional’s advice.

² For seasonal employers, also provide payroll record total for 02/15/19-06/30/19    

³ If you received an Economic Injury Disaster Loan (EIDL) used for payroll costs between January 31, 2020 and April 3, 2020, you must include it in the PPP loan calculation, as this amount does not have to be repaid if used for qualified expenses. Therefore, add any outstanding amount of EIDL (which was used for payroll costs) minus any advance to the PPP loan calculation.  


Author(s) Contact Information: 

Jonathan Shepherd  |  Extension Specialist  |

Lacey Williams  |  Area Extension Specialist  |

Tyler Mark  |  Associate Professor  |

Jerry Pierce  |  KFBM Program Coordinator |