Iryna Demko et al., An overview of the Paycheck Protection Program (PPP) loans and implications for agricultural enterprise recovery from COVID-19 (2021)

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Policy brief by Iryna Demko, Ana Claudia Sant'Anna and Kathleen Liang in the Journal of Agriculture, Food Systems, and Community Development, Volume 11, Issue 1, published October 28, 2021, on Paycheck Protection Program loans to farms. Production agriculture received 617,128 PPP loans totaling $17 billion, and at least one farm got a loan in 80% of U.S. zip codes. The average farm loan was $27,744, against a national average of $74,156. Using SBA data released June 1, 2021, the appendix shows 554,190 of the farm loans went to businesses with 1 to 4 employees. The authors add interviews with recipients and note the gaps by scale and region.

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Journal of Agriculture, Food Systems, and Community Development
ISSN: 2152-0801 online
https://foodsystemsjournal.org

P OLICY AND P RACTICE B RIEF

An overview of the Paycheck Protection Program (PPP) loans and
implications for agricultural enterprise recovery from COVID

Iryna Demko a
Cleveland State University

Ana Claudia Sant’Anna b
West Virginia University

Kathleen (Chyi Lyi) Liang c *
Center for Environmental Farming Systems and
North Carolina Agricultural and Technical State University

Submitted August 8, 2021 / Published online October 28, 2021

Citation: Demko, I., Sant’Anna, A. C., & Liang, K. (C. L.). (2021). An overview of the Paycheck
Protection Program (PPP) loans and implications for agricultural enterprise recovery from
COVID. Journal of Agriculture, Food Systems, and Community Development, 11(1), 201–208.
https://doi.org/10.5304/jafscd.2021.111.003

Abstract provided loans to support businesses during the
In this policy and practice brief, we analyze the COVID-19 pandemic. Some businesses received
U.S. Paycheck Protection Program (PPP). The PPP timely relief from the PPP loans, while some were
not able to acquire assistance. Production agricul-
a Iryna Demko, Research Associate, Center for Economic ture received 617,128 PPP loans totaling $17
Development, Maxine Goodman Levin College of Urban billion.1 The reach of PPP loans across the country
Affairs, Cleveland State University, Cleveland, OH, USA; was broad. In 80% of U.S. zip codes, at least one
i.demko@csuohio.edu
farm received a PPP loan. The average size of the
b Ana Claudia Sant’Anna, Assistant Professor, Division of

Resource Economics and Management, West Virginia Funding Disclosure
University, Morgantown, WV, USA; This study was funded in part using Levin College Women’s
anaclaudia.santanna@mail.wvu.edu Fund Award; EDA CARES Act Supplemental Award ID#
ED20CHI3070034; Scientific Article No. 3416 of the West
c * Corresponding author: Kathleen (Chyi Lyi) Liang, W. K.
Virginia Agricultural and Forestry Experiment Station,
Kellogg Distinguished Professor of Sustainable Agriculture, Morgantown. This material is based on work that is partially
Director, Center for Environmental Farming Systems, College supported by the National Institute of Food and Agriculture,
of Agriculture and Environmental Sciences, North Carolina U.S. Department of Agriculture, Multi-State Hatch Project
Agricultural and Technical State University; Coltrane Hall 105 under WVA00731. The statements, findings, conclusions, and
B, 1601 East Market Street; Greensboro, NC 27411 USA; recommendations are those of the author(s) and do not
+1-336-285-4683; cliang@ncat.edu necessarily reflect the views of the U.S. Economic
Development Administration or the U.S. Department of
1 All currencies are U.S. dollars. Commerce.

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ISSN: 2152-0801 online
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loan in agriculture ($27,744) was substantially By the time the CARES Act was passed on
smaller than the national average ($74,156). The March 27, 2020, small business owners were
authors conducted interviews with PPP recipients already severely affected by disruptions related to
and present some findings from those. The most COVID-19: 60% had already laid off at least one
recent data reveal challenges and opportunities for worker (Humphries et al., 2020). The number of
agricultural businesses, depending on their scale of active small business owners in the U.S. plum-
operations and regional disparities. Community meted by 3.3 million, or 22%, from February to
organizations working with small agriculture- April 2020 (Fairlie, 2020). More than 97,900
related businesses need to be aware of various businesses had permanently closed during the
impacts while providing future assistance. pandemic as of the second quarter of 2020 (Yelp,
2020). Almost 80% of respondents to the Small
Keywords Business Credit Survey, conducted by the U.S.
Paycheck Protection Program (PPP), Agriculture, Federal Reserve Banks in September and October
Entrepreneurship, COVID-19, Pandemic, 2020, reported a decline in revenues and a 50%
Governmental Support reduction in their workforce between 2019 and
2020 (Federal Reserve Banks, 2021).
Background of the Issues Many scholars struggle to comprehend the
Entrepreneurs and small businesses are the heart magnitude and complexity of entrepreneurship
and soul of our communities. According to the development in a “new normal” with multiple
Small Business Administration (U.S. SBA)’s Office shocks (Acs et al., 2017; Alvedalen & Boschma,
of Advocacy, more than 30 million small busi- 2017; Mayer & Motoyama, 2020). Several studies
nesses in the U.S. represent 99.9% of all U.S. have explored the impact of COVID-19 on small
businesses (U.S. SBA, 2020a). Nearly half of all businesses in the U.S. For example, Bartik et al.
Americans are employed by small businesses, (2020) surveyed over 5,800 small businesses early
which the SBA generally defines as firms with in the pandemic (between March 28 and April 4,
fewer than 500 employees. In considering the 2020) and reported that mass layoffs and closures
industrial sectors, agriculture has one of the highest triggered higher risks of business closure as the
shares of small business employment (86%) by pandemic extended to a longer period of threats.
industry, followed by construction (82%) and real Small businesses became financially fragile and
estate (68%). were hesitant to seek aid due to bureaucratic has-
Unfortunately, the COVID-19 pandemic has sles and difficulties navigating the application
created unprecedented impacts on all companies process. Humphries, Neilson, and Ulyssea (2020)
and employees worldwide. The U.S. economy found that the smallest businesses were the least
mirrors these global concerns. The U.S. govern- aware of the government assistance programs
ment provided support to small businesses by available and had the slowest growth in awareness
implementing the Paycheck Protection Program after the passage of the CARES Act, never
(PPP). This policy and practice brief analyzes the catching up with larger businesses. Demko and
PPP created as part of the Coronavirus Aid, Relief, Sant’Anna (2021) also found that smaller busi-
and Economic Security (CARES) Act. We provide nesses had less knowledge about the programs
a descriptive and geographical analysis of the PPP available when compared to larger businesses.
loan program by analyzing secondary data provided
by SBA for the years of 2020 and 2021. Summary What Do We Know About the PPP Loan
statistics are presented at various levels of impor- in Agricultural Sectors?
tance: zip code level, business size, experience, loan In response to a small business crisis, Congress
amount, and years of the program (i.e., 2020 and established the PPP, administered by SBA, to help
2021). This allows a greater understanding of small businesses, self-employed workers, sole pro-
program participants and loan distribution to prietors, eligible nonprofits, and tribal businesses
agriculture. keep their employees on the payroll. Agricultural

202 Volume 11, Issue 1 / Fall 2021
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enterprises were eligible to receive loans on the 617,128 loans totaling $17 billion. Production agri-
same basis as other small businesses (Hungerford culture includes industries under North American
et al., 2021). While the PPP has been one of the Industry Classification System (NAICS) Code 11—
largest economic stimulus programs in U.S. history, Agriculture, Forestry, Fishing and Hunting. Using
the SBA also offered other, smaller disaster relief national firm–level data on all PPP loans released
programs to assist small businesses during the by SBA, we mapped the program coverage in agri-
COVID-19 pandemic, such as the Economic culture. The reach of PPP loans across the country
Injury Disaster Loan (EIDL), EIDL Advance, was broad. In 80% of U.S. zip codes, at least one
Targeted EIDL Advance, Supplemental EIDL farm received a PPP loan in 2020 or 2021 (Figure
Advance, Restaurant Revitalization Fund, Shut- 1). At the same time, the average size of the PPP
tered Venue Operators Grant, and SBA Debt loan in production agriculture ($27,744) was
Relief program. smaller than the average across all 24 industrial
According to experts, “The scale of PPP is sectors of the economy, where the average was
historic” (Parilla & Liu, 2020, para. 2). From April $74,156.
3, 2020, through May 29, 2021, during the first and PPP reached smaller farms in 2021 as the
second PPP draws, production agriculture received average PPP loan was three times smaller, $19,204

Figure 1. Distribution of Paycheck Protection Program (PPP) Loans in Agriculture

Source: Analysis of 2020 and 2021 PPP data released by the Small Business Administration (SBA) in June 2021.

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compared to $58,136. In 2020, during the first loans to these borrowers was $15,038 (Figure 2 and
draw of PPP loans (approvals from April 3 through Appendix, Table A1). Beginning farmers (those
August 8), production agriculture received $8 bil- with fewer than two years of experience) received
lion in PPP. Later, the program was reopened from 8,238 PPP loans totaling $578 million. The average
January 11 until May 31, 2021. In 2021, the amount loan size received by a beginning farmer was
of PPP issued to agriculture increased by $1.4 bil $70,155, on par with the average loan size received
lion (+18%) in comparison to 2020. In addition, by any small business in the U.S. (Appendix,
the number of PPP loans to production agriculture Table A2).
entities saw a three-fold increase, from 135,374 in
2020 to 481,754 in 2021 (Table 1). Discussion and Recommendations for
Farms with fewer than five employees received Research, Policy, and Practice
50% of the approved amount ($8.3 billion) and Many U.S. government agencies have spent signifi-
90% of all loans (554,190). The average size of PPP cant time and resources to support enterprise and

Table 1. Paycheck Protection Program (PPP) Loans to Agriculture

Number of Median Average Loan
Timeline Loan Amount Loans Loan Size Size
First PPP draw April 3–August 8, 2020 $7,870,051,274 135,374 $20,000 $58,136
Second PPP draw January 11–May 31, 2021 $9,251,580,911 481,754 $20,741 $19,204
Total for PPP 37 weeks and 6 days $17,121,632,186 617,128 $20,537 $27,744

Source: Analysis of 2020 and 2021 PPP data released by SBA on June 1, 2021. All values in US$.

Figure 2. Paycheck Protection Program (PPP) Loan Recipients in Agriculture by Business Size

100%
509 loans, $0.9B
250 to 499
1,584 loans, $1.4B employees

2,661 loans, $1.2B
80% 100 to 249
employees
9,472 loans, $2.1B
50 to 99
16,114 loans, $1.6B employees
60%
32,487 loans, $1.5B 20 to 49
employees
40%
10 to 19
employees
554,243 loans,
$8.3B 5 to 9 employees
20%

Under 5 employees

Source: Analysis of 2020 and 2021 PPP data released by SBA on June 1, 2021.

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community development attempting to improve work because farming activities are usually deter-
social and economic mobility. Challenges com- mined a year before. Therefore, policymakers
promise these programs’ outcomes and effective- should design future programs by taking into
ness (Aziz, 1984). Scholars have shared concerns account the particular characteristics of the
that rural communities are generally underper- business it aims to target.
forming compared to metropolitan areas, and the While conducting interviews, Demko and
gap is widening in wealth distribution and com- Sant’Anna (2021) confirmed that the lack of clarity
munity well-being (Drabenstott, 2003; Falcone et and transparency about the PPP application was an
al., 1996; Henderson & Novack, 2002; Lyons, issue. Although SBA provided an application form,
2002; Porter et al., 2004). In 2021, SBA made every lender had its own form, format, or portal.
changes to focus the COVID-19 relief program on Lenders also required different information on
businesses in low- and moderate-income (LMI) their respective applications. For more than 30
communities (Schweitzer & Borawski, 2021). As a years, SBA has been prohibited by law from
result, the rate of loans to small businesses in rural providing disaster assistance to agricultural
areas increased by 12% compared to the daily businesses (SBA, 2020b). However, in May 2020,
average rate of loans before the changes (SBA, changes in legislation allowed American farmers,
2021). However, the exclusive application period ranchers, and other agricultural businesses to have
only lasted two weeks, while the first PPP draw in access to the Economic Injury Disaster Loan
2020 lasted 18 weeks, and the second draw in 2021 (EIDL) program. In such circumstances,
lasted for over 19 weeks. agricultural enterprises were less likely to have
The authors performed interviews with a vari- established relationships with SBA. They would
ety of small businesses to provide a qualitative have benefited from technical assistance and
assessment of business’ experiences applying for guidance through the SBA’s PPP application and
and receiving PPP loan funds in 2020. Small busi- forgiveness processes. One business owner shared,
nesses interviewed voiced that the exclusive PPP “I would ask for help from the banker, and they
application period created by SBA was a valuable said to talk to my accountant. My accountant said
change, though its duration was too short. Policy- you have to talk to your banker.” This highlights
makers should look into dedicating a longer period the importance of communication strategies and
of time for the PPP loan application to smaller technical assistance to guarantee the success of a
businesses. This action is essential if the PPP loan public policy. Future research could investigate
program aims to reach more diverse businesses in which communication strategies are more cost
terms of ownership and size. effective for which type of public policy depending
Some articles reported mixed impacts of PPP on the target group.
loans on U.S. agriculture. According to the Many interview respondents did not realize
American Farm Bureau Federation (2020), PPP that rent, mortgage, and utility payments could be
loans had minimal impact on farmers and ranchers included in the requested PPP amount. As a result,
due to their limited use of the program. Reasons they missed out on the opportunity to receive high-
included (1) farmers and ranchers had limited or no er forgivable loan amounts from SBA. Most busi-
experiences applying for SBA loan programs, (2) nesses do not have experience in doing their finan-
farming enterprises differ in characteristics and cials. For these, there was a steep learning curve to
nature of operations in comparison to other small understand out how to apply for PPP. “For us, it
businesses (for example, having different tax forms was all foreign language,” said one PPP recipient.
and a labor force that varies according to produc- In the case of agriculture, 55% of approved loans
tion and seasons), and have more complicated asset covered payroll only. Research is also needed to
structure dynamics (for example, land and equip- understand how asymmetric information affected
ment) on one farm. Additionally, the slow release access to PPP due to business characteristics. This
of guidance on the PPP posed limitations for farm- would help identify best practices for similar future
ers and ranchers to complete and prepare paper- programs.

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PPP helped many industries to stay afloat, and “eight weeks of pay cannot be enough to sustain a
some would not have survived without it. In some business for six months of the downturn.” Many
cases, PPP recipients in the first round were not community organizations have been assisting those
eligible in the second round because they did not small businesses who have survived the economic
suffer a 25% loss of revenue in 2020. Here, the loss and mental stress of the pandemic to figure
first PPP draw helped these businesses maintain out how to recover more fully from the COVID
their workforce and continue operating normally, disaster. To many agricultural businesses, recovery
avoiding large negative effects on their revenue. is a long road filled with unknowns. PPP offered
The U.S. was the only country in the world to some relief to a limited number of businesses in
implement a payroll subsidy via banks and financial the agriculture and food industry. More transfor-
institutions (Hamilton, 2020). While PPP offered mative strategies and well-defined and well ex-
necessary financial relief by allowing small busi- plained policies will need to be established soon to
nesses to continue paying their employees, this prevent permanent damage to entrepreneurs and
type of support inevitably is insufficient to keep small businesses who are the heart and the soul of
some businesses afloat. One business owner said, our communities.

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Appendix

Table A1. Paycheck Protection Program (PPP) Loan Recipients in Agriculture by Business Size

Business Size Loan Amount Number of Loans Median Loan Size Average Loan Size

No (0) employees $507,867 53 $6,160 $9,582
1 to 4 employees $8,334,109,387 554,190 $17,985 $15,038
5 to 9 employees $1,474,244,595 32,487 $38,400 $45,380
10 to 19 employees $1,562,332,173 16,114 $86,800 $96,955
20 to 49 employees $2,107,368,419 9,472 $199,500 $222,484
50 to 99 employees $1,231,982,198 2,661 $434,513 $462,977
100 to 249 employees $1,407,453,605 1,584 $790,650 $888,544
250 to 499 employees $865,667,043 509 $1,283,600 $1,700,721

Source: 2020 and 2021 PPP data released by SBA on June 1, 2021.

Table A2. Paycheck Protection Program (PPP) Loan Recipients with Fewer than Two Years of
Business Experience

Loan Amount Number of Loans Median Loan Size Average Loan Size

Agriculture $577,940,325 8,238 $20,400 $70,155
All industries $42,943,743,902 608,347 $20,566 $70,591

Source: 2020 and 2021 PPP data released by SBA on June 1, 2021.

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