Can Family Farms Qualify for SBA COVID Disaster Loans?

As of this writing, we are closing in on nearly 5 million confirmed COVID-19 cases in the United States. The virus has taken a toll not only on the health of its victims, but on the health of the economy, especially small businesses.

Many of those small businesses are family farms, and some of our clients, whose families have farmed in Ohio for generations, have felt the impact of COVID-19. One of the questions we have frequently received is “What kind of disaster relief is available for family farms during this pandemic?”

It’s been a rough few years for family farms. Even before the pandemic, the vast majority of federal subsidies in the past few years have gone to help large corporate farms rather than struggling family farms. Now, the pandemic has closed restaurants, reduced demand for agricultural products, and disrupted the usual supply chains.

Fortunately, there is some assistance available from the federal government in the form of Small Business Administration COVID disaster loans. Many family farms will qualify for this assistance.

Which Farms Qualify for SBA COVID Loans?

Let’s talk about the criteria for qualifying for SBA COVID disaster loans. The Economic Injury Disaster Loan (EIDL) program allows small business owners in the U.S. and its territories to apply for a loan advance of up to $10,000 and ultimately borrow up to $2,000,000. Agricultural enterprises—farms—are permitted to apply for these long-term, low-interest loans.

In order to be eligible for an EIDL, an agricultural enterprise must have no more than 500 employees. An “agricultural enterprise” is defined in 15 U.S. Code § 647 as being “engaged in the production of food and fiber, ranching, and raising of livestock, aquaculture, and all other farming and agricultural-related industries.”

Most Ohio family farms will qualify under these criteria. But meeting eligibility requirements, and actually getting a loan, can be two different things.

Applying for An Economic Injury Disaster Loan for Your Family Farm

The SBA has opened an online loan and advance application portal for use by farms and other agricultural enterprises. It is estimated that it will take a little over two hours to complete the application.

To apply, you must certify the size of your operation and confirm, among other things, that you are not engaged in illegal activities, a lobbyist, a state or municipal entity, or a member of Congress. You will also need to state the farm’s cost of operations for the 12 months preceding January 31, 2020, as well as the farm’s gross revenues and cost of goods sold during that period. Personal contact information will need to be supplied for each owner.

The Future of COVID Relief for Family Farms?

The status of funding for COVID relief for small businesses and family farms is constantly evolving. If you applied for relief when the CARES Act was rolled out and did not get a loan, there may still be hope. As of the end of July 2020, members of the Senate Agriculture Committee, Finance Committee, and others were trying to focus a spotlight on the needs of small farmers in the pandemic. Recognizing that months-long closures of schools, restaurants, farmers’ markets, and other outlets have hurt family farmers, a number of U.S. Senators are pushing for more relief for family farms.

Senator Kirsten Gillibrand (D-NY),U.S. Senator Ron Wyden (D-OR), U.S. Senator Cory Booker (D-NJ), and Senator Bernie Sanders (I-VT) are advocating for the inclusion of the Relief for America’s Small Farmers Act in any upcoming COVID relief package.

The senators introduced this proposed legislation because many family farms have had a difficult time gaining access to the federal farm aid they have needed during the coronavirus pandemic. Among the proposals it includes are one-time debt forgiveness for debt arising from any of three USDA FSA loans: Direct Farm Operating, Direct Farm Ownership, and Emergency Loans. The legislation would also allow family farmers who receive debt forgiveness under the program to remain eligible for additional USDA Direct and Guaranteed loans in the future.

The proposed legislation would make all small farms with an average adjusted gross income (AGI) for the prior five years eligible for relief. As of this writing, however, the Relief for America’s Small Farmers Act remains a proposal. As the coronavirus pandemic rages on, it remains to be seen what measures federal legislators will put into action to help small family farms.

If you have questions about the financial security of your family farm in Ohio, we invite you to contact Gudorf Law Group to schedule a consultation.