Farmers who run their operations as sole proprietors, independent contractors or otherwise self-employed individuals will have newly expanded access that began Jan. 11 to the Paycheck Protection Program under changes made in the COVID stimulus package Congress approved in December 2020. This latest round of the PPP provides $284B in funding through March 31, 2021 and allows certain existing PPP borrowers to apply for a Second Draw PPP Loan.
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. Those wanting to apply for a PPP loan should contact lenders directly for more information on when PPP will be open for that specific lender.
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 National Milk Producers Federation says.
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.
“NMPF is pleased that many of our dairy farmers will have fewer restrictions and limitations on the PPP support available to them as the program reopens this week,” says Jim Mulhern, NMPF’s president and CEO. “We have been grateful for the support already extended to dairy through PPP, and we deeply appreciate the improved access found in the latest stimulus package.”
All farmers and ranchers who file a Schedule F can apply or reapply for a PPP loan under the new rules once the program reopens. 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, NMPF says.
Funds available Jan. 15
The U.S. Small Business Administration, in consultation with the U.S. Treasury Department, will re-open the PPP loan portal to PPP-eligible lenders with $1 billion or less in assets for First and Second Draw applications on Friday, January 15, 2021 at 9 a.m. EST. The portal will fully open on Tuesday, January 19, 2021 to all participating PPP lenders to submit First and Second Draw loan applications to SBA.
“A second round of PPP could not have come at a better time, and the SBA is making every effort to ensure small businesses have the emergency financial support they need to continuing weathering this time of uncertainty,” said SBA Administrator Jovita Carranza. “SBA has worked expeditiously to ensure our policies and systems are re-launched so that this vital small business aid helps communities hardest hit by the pandemic.”
On Friday, SBA will continue its emphasis on reaching smaller lenders and businesses by opening to approximately 5,000 more lenders, including community banks, credit unions, and farm credit institutions. Moreover, the agency also plans to have dedicated service hours for these smaller lenders after the portal fully re-opens next week.
First Draw PPP Loans are for those borrowers who have not received a PPP loan before August 8, 2020. The first round of the PPP, which ran from March to August 2020, was a historic success helping 5.2 million small businesses keep 51 million American workers employed.
Second Draw PPP Loans are for eligible small businesses with 300 employees or less, that previously received a First Draw PPP Loan and will use or have used the full amount only for authorized uses, and that can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020. The maximum amount of a Second Draw PPP loan is $2 million.