WHAT NEW PPP LOAN GUIDANCE MEANS FOR CONTRACTORS

After the Payment Protection Plan went into effect on April 15, there have been multiple updates, interpretations and news articles regarding the loan program. In a survey by the Associated General Contractors of America, 18 percent of the members that received the loans thought about returning them. New rules are in process to make the program more user friendly.

FEDERAL GUIDANCE UPDATES
The Treasury Department and Small Business Administration (SBA) previously stated that all businesses that applied for PPP loans above $2 million and applied for forgiveness, will be audited. Those who did not provide sufficient evidence to support the forgiveness would be referred to the Department of Justice (DOJ). An update stated: “loans in excess of $2 million would be reviewed by the SBA and may need to be repaid if they did not meet economic requirements set out by the loan, however no penalty of enforcement action or referral to the DOJ would be made.” Loans below $2 million were deemed to automatically be “in good faith.”

LOANS AND LENDER DUTIES
Under a new rule for PPP Loans, lenders have more duties, including confirming the receipt of the application from the borrower, verifying the receipt of documentation for payroll and non-payroll costs, and checking the numbers for the application. However, the accuracy of the information in the loan is still the responsibility of the borrower.

SPECIFIC CHANGES
Thanks to an amendment to the CARES act called Paycheck Protection Program Flexibility Act of 2020, the following additional changes have since been made:

• Extended the covered period for PPP loans from eight to 24 weeks.
• Funds for forgiveness changed from 75 percent payroll costs/25 percent non-payroll costs to 60 percent payroll costs/40 percent non-payroll costs.
• Created a safe harbor for employers that made a good faith effort to hire or rehire qualified employees.
• Extended the maturity from two to five years.
• Allow the deferral of payroll taxes through the end of 2020.

CONSTRUCTION INDUSTRY INSIGHTS
With regards to the construction industry, the extension of the covered period from the previous eight weeks to 24 weeks for forgiveness is critical, as most contractors are still dealing with backlogged jobs. This should aid construction companies waiting on jobs to resume.

PREPARING FOR LOAN FORGIVENESS
While many contractors found the PPP stimulus money to be helpful, the timing was actually a bit too early. Many contractors could have more effectively used the cash flow six to nine months later than they actually received it. However, it was a needed boost for all industries. As we are now at the end of the 24-week period for most taxpayers, contractors should be putting together their support for forgiveness and working closely with their banks to submit the application to receive forgiveness of the loan from their local bank and ultimately by the SBA.