Great News for Construction Businesses That Took Out PPP Loans
There has been a great deal of confusion surrounding the Small Business Administration’s (SBA’s) Paycheck Protection Program (PPP) loans, so much so that we’ve written several articles shedding light on emerging PPP guidelines. Many business owners have felt burned by the SBA’s strict guidelines, such as the requirement that 75 percent of a loan must be spent on payroll expenses.
Fortunately, some great news has been announced that should be a welcome change of pace for struggling business owners in the construction industry. Below, our Nashville construction lawyers discuss these new developments. We understand that this news may be of little comfort to contractors right now, but it’s a sign that things are starting to look up for this incredible industry.
Acting in Good Faith
When submitting your PPP application, you certified in good faith that the loan request was necessary to continue your business operations. As stipulated by updated SBA guidelines, “Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.” Essentially, the SBA and Department of Treasury are providing businesses that borrowed less than $2 million with “safe harbor” from audits or penalties.
This is great news for the many contractors hesitant to spend their PPP loan money out of fear of breaking one of the SBA’s many unclear rules. Let’s be clear, this doesn’t mean that you can’t be audited. And this doesn’t mean that your company will avoid scrutiny if it fails to abide by the SBA’s requirements for loan forgiveness. It means that the SBA and Treasury are focusing their efforts on auditing larger businesses. Consult one of our Nashville construction attorneys if you have any questions.
Extending Loan Forgiveness Period
As it stands, loan recipients have an incredibly short period of time — just eight weeks — to spend their loan money if they want it all to qualify for forgiveness. As The New York Times reports, this left many business owners hesitant to spend their loan money. “Some owners don’t see the point of hiring back workers when business is so slow. Others chafe at having to use the money within eight weeks, when they would like to keep the financial cushion for longer. And many of the owners are confused about whether they have any flexibility.”
Congress is looking to extend the forgiveness period to 12 or 16 weeks. A bill has been introduced that would even extend the forgiveness period for as long as the COVID-19 crisis lasts. It remains to be seen whether or not these bills will pass, but Congress appears united in its desire to extend the forgiveness period. For any assistance navigating the SBA’s ever-changing guidelines, a Nashville construction lawyer with Cotney Construction Law can assist you.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.