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Small Business Loan Clarified for Construction

Thursday, April 9, 2020

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The U.S. Treasury Department recently released a clarification on its Small Business Administration Paycheck Protection Program just days after the Associated General Contractors of America wrote a letter noting that the loan guidance had appeared to exclude many construction firms.

Now, the Administration has clarified that all businesses that employ fewer than 500 people qualify for the program.

What Happened

The Administration released an interim final rule on April 2 for the PPP, that stated that to qualify, businesses must have 500 or fewer employees and fall below the agency’s small business size standards to qualify.

The standard in question revolves around small size standards (as defined in section 3 of the Small Business Act, 15 U.S.C. 632). For construction businesses, this is generally determined by an average annual income threshold, not a number of employees threshold.

JTSorrell / Getty Images

The U.S. Treasury Department recently released a clarification on its Small Business Administration Paycheck Protection Program just days after the Associated General Contractors of America wrote a letter noting that the loan guidance had appeared to exclude many construction firms.

The AGC responded with the initial guidelines on April 5, with CEO Stephen E. Sandherr saying:

“This error appears to severely undermine the purpose of the new loan program by endangering the survival of many construction firms—the vast majority of which are family-owned businesses—that Congress intended to qualify for the program. As a result, tens of thousands of construction professionals will be forced to suffer new economic hardships because agency officials are misstating the law and subsequent eligibility guidance from the U.S. Department of the Treasury.”

On April 8, the Treasury issued a clarification in the form of a Q&A. The items listed included:

  • Question: Does my business have to qualify as a small business concern (as defined in section 3 of the Small Business Act, 15 U.S.C. 632) in order to participate in the PPP?
  • Answer: No. In addition to small business concerns, a business is eligible for a PPP loan if the business has 500 or fewer employees whose principal place of residence is in the United States, or the business meets the SBA employee-based size standards for the industry in which it operates (if applicable).

“Administration officials have done the right thing and revised their guidance to allow, as Congress intended, for firms that employ 500 or fewer people to qualify for the Paycheck Protection Program loans,” said Sandherr, in response to the clarification.

“This change means the program is now more likely to help smaller firms continue to operate and retain staff.”

Other AGC Action

Sandherr and the AGC have been active throughout the COVID-19 pandemic.

In early March, Sandherr issued a statement saying that shutting down construction projects is an unnecessary step.

“Halting construction activity will do more harm than good for construction workers, community residents and the economy,” he said. “Construction firms are already acting to ensure the safety and health of their employees in the face of the coronavirus outbreak. These new measures, which include increased hygiene and halting group gatherings of staff, are in addition to the fact construction workers already wear protective equipment, including gloves that will help protect them and their co-workers.”

He went on to say that, because of the protective measures already put in place for construction workers, halting construction would only undermine the economy, depriving more people of wages and risking the firms who are under contractual obligations to stay on schedule.

Later that month, the AGC released a survey researching the impact that the COVID-19 pandemic is having on the construction industry.

A main takeaway is that 39% of the contractors surveyed report that project owners have halted or canceled current construction projects.

View all of PaintSquare Daily News' coverage on COVID-19, here.

   

Tagged categories: Associated General Contractors (AGC); Business matters; COVID-19; Good Technical Practice; Government; NA; North America

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