Boats moored in Kodiak, Alaska. Photo courtesy Undercurrent News.
US harvesters must race to make use of last-minute COVID-related loan rule
US fishermen will now be able to count their crews when tallying payroll on applications for Paycheck Protection Program (PPP) loans made available by recently passed coronavirus-related relief legislation thanks to a change just made by the Small Business Administration (SBA), but they’ve got to act fast.
The deadline for applications is June 30 -- just four days from the date on which the interim rule change was published on the SBA website, after first appearing on the Treasury Department website Thursday evening. It was something both the Seafood Harvesters of America (SHA) -- a coalition of 18 US fishing groups representing thousands of fishermen across the country -- and Saving Seafood, a seafood industry advocacy firm, had been fighting for.
Leigh Habegger, SHA's executive director, issued a statement Thursday expressing gratitude for the change and applauding a group of Alaska lawmakers she said were key to getting it done, including senators Lisa Murkowski and Dan Sullivan as well as Representative Don Young, all Republicans. They wrote a letter to treasury secretary Steven Mnuchin and SBA administrator Jovita Carranza, to request the solution.
“Extending the program to fishermen impacted by the pandemic will be a critical lifeline so they can continue to provide Americans with the safest, most sustainable seafood in the world,” Habegger said.
She is now urging harvesters to take advantage of the program by getting their loan applications in as quickly as possible. Though Bob Vanasse, executive director of Saving Seafood, told Undercurrent News that applications are easy for businesses that have their payroll records together, and banks now have lots of familiarity with the program.
Saving Seafood said Friday morning that it also has been working with the White House and Commerce Department to get the change. The organization credited David Frulla, a Washington, DC-based lobbyist with the firm of Kelly Drye; David Borden, executive director of the Offshore Lobstermen’s Association; and also Pamela Lafreniere at the Port of New Bedford, Massachusetts, as being instrumental.
In passing and signing the Coronavirus Aid, Relief, and Economic Security (CARES) Act in late March, Congress and president Donald Trump gave the SBA authority to back as much as $350 billion worth of loans for businesses with 500 or fewer employees. In early May, Congress provided another $320bn.
Loans can be as high as 2.5 times a business’s average monthly payroll costs, but no greater than $10 million.
The PPP has gotten some heavy use, too, as SBA has already used the program as well as the Economic Disaster Recovery Loan program to back some $630bn in combined small business loans since the crisis began, CNBC reported this week.
Nearly a quarter of small businesses have considered closing their doors permanently because of COVID-19, and 12% are facing potential bankruptcy, according to a survey published last week by Small Business for America’s Future.
Commercial fishermen are suffering, too, having lost sales due to the closure of restaurants around the US and also seeing prices on their landings fall. However, they've not been able to take full advantage of the PPP because their crew members are often paid in shares of the catch and, under Internal Revenue Service guidance, are considered general contractors. Crewmembers' 1099 form incomes could not be listed on loan applications by fishing boat captains.
The crewmembers could apply for PPP loans separately, the SBA suggested.
It was a real punch in the gut, said Habegger and Robert Dooley, the organization's president, in a letter sent May 7 to senators Marco Rubio, of Florida, the chairman of the Senate Small Business Committee, and Ben Cardin, of Maryland, the panel's ranking member.
Payroll is a fishing captain's biggest expense, ahead of even boat mortgage payments, Habegger said.
"One fishing vessel operating as a small business could have anywhere from two to over 20 crewmembers for the relevant PPP loan time period," the two SHA executives wrote in their letter to Rubio and Cardin, adding that the suggestion that crew members could apply separately was not based in reality.
"Many of those crewmembers may not have existing business bank accounts at lending institutions, and many banks are currently overwhelmed and limiting PPP loans to only existing business customers," they said. "Enabling a fishing business to include crewmembers will allow PPP benefits to flow to the appropriate people and reduce the number of applications lenders will have to process."
That's now changed thanks to the SBA interim rule, however. While 1099s will continue to be filled out the same way, crewmember pay may now be listed by fishing captains on loan forms as a payroll-related business expense, Habegger explained.
"The fix announced today by secretary Mnuchin and the Trump administration is welcome news for the countless Alaskans who depend on our waters for their livelihoods," Young said in a press release jointly issued late on Thursday with Murkowski and Sullivan. “I am more optimistic than ever that our seafood industry will come out of this pandemic stronger than ever before.”
Contact the author jason.huffman@undercurrentnews.com