What Contractors Need to Know About the Paycheck Protection Program
As you well know, the coronavirus disease 2019 (COVID-19) is having an incredible impact on construction, especially on small businesses within the industry. While larger construction companies are better equipped to deal with absenteeism, sick leave, and payroll demands, smaller companies are left with far fewer resources. Fortunately, the U.S. Small Business Administration (SBA) has just issued an Interim Final Rule on the Paycheck Protection Program (PPP) created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
The PPP will provide $349 billion in forgivable loans to small businesses — needed relief to small construction companies that have been deemed essential businesses during this time. Below, an Orlando construction attorney with Cotney Attorneys & Consultants will detail the main points of this historic initiative.
Through the PPP, businesses with less than 500 workers can apply for a one-time loan that can be forgiven under specific circumstances. Although businesses can put this loan towards any business expense, the loans are to mainly be used to cover employee payrolls over an eight-week period after the loan is made. It can be expected that no more than 25 percent may go to non-payroll costs. Loan payments will be deferred for six months (the interest rate is 1.00 percent fixed rate) and will be due in two years. However, all loans will be forgiven so long as two requirements are met:
- The loan proceeds go towards payroll, mortgage interest, rent, and utility costs
- Employee and compensation levels are maintained
In order for you to qualify for loan forgiveness, the majority of your loan will need to go to payroll costs (capped at $100,000 on an annualized basis for each employee). As they pertain to the construction industry, payroll costs include:
- Salary and wages
- Employee benefits, including family, medical, or sick leave and payments required for group health care benefits
- State and local taxes taken out of employee compensation
- Earnings for independent contractors or sole proprietors
When to Apply
This is where things get a little hazy. As stated on the SBA website, small businesses can begin submitting applications to an approved lender (participating federally insured depository institution, federally insured credit union, and Farm Credit System institution) as early as April 3rd. However, as reported by Forbes, banks are having difficulty accepting applications. It remains to be seen when exactly banks will begin accepting applications. “In the meantime, prepare the best you can. This is a first-come, first-served process, so you will need to be ready when they do start taking applications.” Loans will be available through June 30 or until funds run out — consult a coronavirus construction lawyer from our law firm for any needed assistance.
For Any Assistance
The PPP comes as a much-needed relief for contractors that are providing our nation with essential services. We certainly hope that this relief comes in time for you and your business. For additional resources, we encourage you to look through our COVID-19 Resources Page. And for any assistance during this difficult time, turn to a coronavirus construction attorney from Cotney Attorneys & Consultants.
If you would like to speak with one of our Orlando construction attorneys, please contact us today.
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.