Farmers gain greater access to small business support as PPP reopens

Farmers who run their operations as sole proprietors, independent contractors, or otherwise self-employed individuals will have newly expanded access to the Paycheck Protection Program (PPP) under changes made in the COVID stimulus package Congress approved last month.

Producers who were denied PPP loans or whose loan amounts did not consider self-employment compensation may now be eligible for the vital federal small business support. Eligibility information and more details can be found here.

Congress created PPP in the CARES Act in March of 2020 to help American small businesses keep employees during the coronavirus pandemic. Still, the program’s emphasis on payroll raised inadvertent yet sizable challenges for many farmers and ranchers who do not issue structured payroll — namely those operating as sole proprietors, independent contractors, or self-employed producers who file a Schedule F with their 1040 income tax form. The program’s loan application required such producers to use their net farm profit amount from their Schedule F tax form as a stand-in for their self-employment compensation when applying for a PPP loan. However, many farmers and ranchers filed a zero or negative net farm profit on their 2019 tax forms, effectually making them ineligible for the small business support.

The revised legislation allows farmers and ranchers who file a Schedule F to use their gross income, capped at $100,000, when applying for a PPP loan. The bill also permits producers who received a PPP loan based on their net farm profit to reapply with their gross income figure, with lenders allowed to offer the difference should the new loan amount be larger than the original amount.

All farmers and ranchers who file a Schedule F can apply or reapply for a PPP loan under the new rules. In general, agricultural producers and co-ops with 500 or fewer employees, including employees of businesses with which they have an affiliation, are eligible. Alternative size standards may qualify larger businesses, and interested larger borrowers are encouraged to explore options with lenders and/or their accountants.

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