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Farmers and Ranchers


Farmers and Ranchers

If you are a farmer or rancher looking to obtain either a First Draw or Second Draw loan, there are a few important factors you must consider when applying:

  • If you obtained a previous PPP Loan and have not gone through the forgiveness process, you can request an increase to your existing PPP loan.
  • You can now calculate loan amounts using gross Income vs. monthly payroll costs.

See below for more details.

Determining Which Loan to Apply For

If you’ve obtained a previous PPP Loan and have not gone through the forgiveness process, you can request an increase to your existing PPP loan. Read below for information on how to calculate your new loan amount.

If you’ve already applied for forgiveness, you would be applying for a Second Draw loan using the loan calculation formula below. In order to qualify for a Second Draw Loan, you must demonstrate a reduction in revenue. Additional details about revenue reduction and eligibility requirements for a Second Draw loan can be found here.

Loan Calculation Formula for Farmers and Ranchers

If you are a farmer or rancher, you can calculate you loan amount using gross income instead of monthly payroll costs. How you calculate your maximum loan amount depends upon whether you employ other individuals.

Farmers and Ranchers With No Employees
If you have no employees, the following methodology should be used to calculate your maximum loan amount:

  1. Step 1: Find your 2019 or 2020 IRS Form 1040 Schedule F line 9 gross income (if you are using 2020 and you have not yet filed a 2020 return, fill it out and compute the value). If this amount is over $100,000, reduce it to $100,000. If this amount is zero or less, you are not eligible for a PPP loan.
  2. Step 2: Divide the amount from Step 1 by 12.
  3. Step 3: Multiply the average monthly gross income amount from Step 2 by 2.5.
  4. Step 4: Add the outstanding amount of any Economic Injury Disaster Loan (EIDL) made between January 31, 2020 and ending on April 3, 2020 that you seek to refinance. Do not include the amount of any advance under an EIDL COVID-19 loan (because it does not have to be repaid).

You must provide the 2019 or 2020 (whichever you used to calculate loan amount) Form 1040 Schedule F with your PPP loan application to substantiate the applied-for PPP loan amount and a 2019 or 2020 (whichever you used to calculate loan amount) IRS Form 1099-MISC detailing nonemployee compensation received (box 7), invoice, bank statement, or book of record that establishes you are self-employed. You must provide a 2020 invoice, bank statement, or book of record to establish you were in operation on or around February 15, 2020.

Farmers and Ranchers With Employees
If you have employees, the following methodology should be used to calculate your maximum loan amount:

  1. Step 1: Compute 2019 or 2020 payroll (using the same year for all items) by adding the following:
    1. The difference between your 2019 or 2020 Form 1040 Schedule F line 9 gross income amount (if you are using 2020 and you have not yet filed a 2020 return, fill it out and compute the value), and the sum of Schedule F lines 15, 22, 23, and 37, up to $100,000 on an annualized basis, as prorated for the period during which the payments are made or the obligation to make the payments is incurred, if this amount is over $100,000, reduce it to $100,000, if this amount is less than zero, set this amount at zero;56
    2. 2019 or 2020 gross wages and tips paid to your employees whose principal place of residence is in the United States computed using 2019 or 2020 IRS Form 941 Taxable Medicare wages & tips (line 5c- column 1) from each quarter plus any pre-tax employee contributions for health insurance or other fringe benefits excluded from Taxable Medicare wages & tips; subtract any amounts paid to any individual employee in excess of $100,000 on an annualized basis, as prorated for the period during which the payments are made or the obligation to make the payments is incurred and any amounts paid to any employee whose principal place of residence is outside the United States; and
    3. 2019 or 2020 employer contributions for employee group health, life, disability, vision and dental insurance (portion of IRS Form 1040 Schedule F line 15 attributable to those contributions), employer contributions for employee retirement contributions (Form 1040 Schedule F line 15), and state and local taxes assessed on employers for employee compensation (primarily under state laws commonly referred to as the State Unemployment Tax Act or SUTA from state quarterly wage reporting forms).
  2. Step 2: Calculate the average monthly amount (divide the amount from Step 1 by 12).
  3. Step 3: Multiply the average monthly amount from Step 2 by 2.5.
  4. Step 4: Add the outstanding amount of any EIDL made between January 31, 2020 and April 3, 2020 that you seek to refinance. Do not include the amount of any advance under an EIDL COVID-19 loan (because it does not have to be repaid).

You must supply your 2019 or 2020 (whichever you used to calculate loan amount) Form 1040 Schedule F, Form 941 (or other tax forms or equivalent payroll processor records containing similar information) and state quarterly wage unemployment insurance tax reporting forms from each quarter in 2019 or 2020 (whichever you used to calculate loan amount) or equivalent payroll processor records, along with evidence of any retirement and health insurance contributions, if applicable. A payroll statement or similar documentation from the pay period that covered February 15, 2020 must be provided to establish you were in operation on February 15, 2020.

Any employee payroll costs should be subtracted from the farmer’s or rancher’s gross income to avoid double-counting amounts that represent pay to the employees of the farmer or rancher.

How to Apply

Talk with your banker for details on how to apply.

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