When several restaurants and grocery stores closed temporarily or permanently during the current pandemic, the demand for crops and livestock changed. This has created challenges for many farmers in Oklahoma and across the country. As a result, many of parts of an individual farmer’s operation could be suffering. And expenses, including staff wages, could be difficult to pay month to month.
The U.S. Small Business Administration (SBA) has given loans to farmers to help them keep up with payroll and other financial obligations. Maybe you are a farm owner waiting to hear back about receiving Paycheck Protection Program (PPP) assistance or you already received a loan. In either case, it’s crucial to keep up to date on the program rules and process.
Whether or not you’ve put the PPP to use yet, it’s essential to understand the importance of documentation. One of the hopes you probably have is to receive loan forgiveness. To achieve this, you will want to consider using a spreadsheet, using third-party service to track payroll and coordinate with lender on their expectations. Although, you can only use a small portion of the loan on non-payroll expenses, you should be sure to careful list these out too and save relevant receipts and invoices.
To earn maximum forgiveness, you’ll need to take specific restrictions into consideration. One of the main rules to keep in mind is the type of costs you may utilize the loan on. According to SBA, you can use 75% on payroll-specific costs and 25% on non-payroll costs — both of which must fall within a eight to 24-week coverage period. Non-payroll costs may include some rent, lease, mortgage and utility costs, while payroll costs may include wages and health care and retirement benefits.
It’s worth noting that you might be able to obtain forgiveness for many costs incurred prior to the coverage period but paid within the coverage window. One example may include a portion of the loan spent on wages during a pay period outside of the coverage period. While another example may include a mortgage bill you pay during the coverage period that is meant to cover the previous month.
It’s also important that you are mindful of potential reduction in loan forgiveness. A couple reasons you might not receive full repayment is if you let go of full-time employees and don’t replace them or if you set lower wages. To make sure you make the best use of the PPP, you can seek consultation and assistance from a legal expert.