Seasonal Employer's Are Different

Published on: 08:56AM Apr 02, 2020

We just received the following comment this morning:

"Have you seen the details regarding the impact of seasonal labor? Two examples: cotton gins that incur large labor costs during fall harvest but have almost no labor now; and watermelon farmers who have large labor costs in the summer during harvest. These will qualify for large PPP's, but won't spend that money during the first 8 weeks. I have seen some mention of some provision related to seasonal labor, but have not seen any details. Do you have any details?"

It is likely that the SBA will classify these entities as seasonal employers (as was suggested in the comment).  A seasonal employer has a separate calculation of payroll costs as follows:

  • The average total monthly payments for payroll for the twelve week period beginning February 15, 2019 (not 2020), or
  • At the election of the eligible recipient, March 1, 2019 and ending June 30, 2019.

The borrower can determine which method gets them the highest loan amount.  

In the case of the comment's two examples, it is likely that the cotton gin will not qualify for much of a loan. 

The Watermelon farmer may qualify for a fairly large loan if most of their summer labor was incurred before June 30.  If this labor cost was in the month of June, then this farmer would want to wait until about May 1 to apply for the loan since the 8 week discovery period would run through the end of June.  Applying for the loan now would likely cause most of the proceeds not to be forgiven. 

The Payroll Protection Program was designed to provide funds for normal labor costs that would be incurred during February 15, 2020 to June 30, 2020.  If there would normally be little labor costs during that period, then the loan amount would be fairly minor.

If this applies to your situation (i.e. much of your labor cost is in the summer or fall), then make sure to review your labor costs during these periods listed above.  That is all you can qualify for.