Farm Credit Quickly Stands Up Paycheck Protection Program

In the early days of 2020, Farm Credit was largely untouched by the COVID-19 pandemic. The earliest outbreaks hit urban areas hardest, first in Washington state and New York City. Other cities followed, making it seem like the threat might miss rural residents. It was not until after Memorial Day that rural communities across the country became the epicenters of the virus. The first news reports appropriately focused on the health and safety impacts of the virus and on the need for protective equipment and ventilators.

As it became obvious there was nowhere to hide from the economic blow, Congress began a push to help the country. The CARES Act became law on March 27, providing the Small Business Administration $349 billion to start up a new loan program from scratch—the Paycheck Protection Program, or PPP. If borrowers qualified, their loans could later be forgiven. It was a lifeline to small businesses across the country. Designed to help businesses slammed by the pandemic keep their employees on the payroll, it was also meant to help stem unemployment and cushion the economy.

The program was instantly popular, and the SBA was asked to move almost 15 times its annual loan volume through the new program as soon as possible. As you can imagine, there were hiccups. But when the money ran out, Congress made an additional $310 billion available.

That is amazing! All in the same day. I know why we switched banks... that is for sure.

Recognizing that demand would exceed supply, Congress directed SBA to set aside funds for rural lenders, and Farm Credit institutions answered the call to get involved. A few were SBA lenders before the PPP, but most were not. The process to become a PPP lender was not for the faint of heart, but it was worthwhile. After applying and getting approved in a single day, one customer said, “That is amazing! All in the same day. I know why we switched banks... that is for sure.”

That dedication to rural America is why Farm Credit institutions persevered, received SBA’s approval and made these loans to customers—including some who headed to other banks, fearing that CARES Act money would run out before Farm Credit could make PPP loans. Some of those customers came back when Farm Credit institutions got approved, because they were still waiting at the banks.

CoBank and 51 associations loaned almost $1.4 billion to nearly 16,000 customers. And 91% of those loans were $150,000 or less. CoBank’s district accounted for over half that loan volume. In addition to CoBank, affiliated associations partnered with the SBA to make these loans. It’s safe to say that every one of those loans was important to the customer.

Kapapala Ranch

One of those loans went to Lani Petrie, owner and operating manager of Kapapala Ranch on the Big Island of Hawaii. On the slopes of the dormant Mauna Kea volcano, Lani runs over 1,200 mother cows. Her 1,000 goats serve double duty as brush cleaners and meat for Hawaii’s Asian market. While Petrie lives in a paradise, she is familiar with natural and economic disaster. In her words, “I had never seen anything like this. COVID-19 simply shut down the world.”

The first wave of PPP funds ran out even before farmers could access the program. But as Petrie put it, “Within just a few days, it seemed, our American AgCredit Manager, Linus Tavares, was calling me to let me know that they had got the portals in place with SBA and to fill out our application online. The application was refreshingly simple!” Less than a week later, she had the funds, calling it “unbelievable.”

Joe Golter

Meanwhile, on the other side of the country near Portsmouth, New Hampshire, lobsterman Joe Golter was facing similar challenges. Golter loves his work of 40 years, still going out on his 42-foot wooden boat, custom-built in Maine. Named for Golter’s sister, his dad bought the Sharon Rosanne in 1986. Golter rebuilt the boat 15 years ago, crediting his ability to weather the hard work of lobster fishing to its solid construction.

The mission of the Farm Credit System is to serve as a reliable source of credit for agriculture and rural communities.

In addition to fishing, Golter runs a bait business, developed a waterfront pier and is expanding his wholesale lobster sales operation. Golter watched the lobster industry shut down. With little demand and low prices, he turned to his finance partner of 37 years, Farm Credit East. They helped him quickly process a PPP loan, allowing him to avoid laying everyone off. As Golter put it, “Farm Credit’s great. They are smart and know this business. And when I need financing, the money is in the account the next day.” And then he rattled off a list of his Farm Credit lenders over the years, describing how they became friends.

Joe Golter learned the importance of hard work as he learned the lobster business from his dad. He has seen the value of what he describes as a “wonderful relationship” with Farm Credit over and over—when times were good, and this year especially when they weren’t.

“The mission of the Farm Credit System is to serve as a reliable source of credit for agriculture and rural communities,” said Bill Davis, CoBank executive vice president of Farm Credit Banking. “The System’s response to COVID-19, especially the help it provided through the PPP program, is a powerful demonstration of Farm Credit’s importance to the rural economy in this country.”