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Construction Industry Leads in PPP Loan Awards

Wednesday, April 22, 2020

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The first round of the U.S. Small Business Administration’s Paycheck Protection Program reportedly saw the most money divvied out to the construction industry, according to data released by the SBA.

The program allowed for a cap of $349 billion in loans to be given to small firms that qualified during the COVID-19 pandemic. The money ran out April 16.

Construction Firms and PPP

The PPP opened on April 3, and just a day before, the U.S. Treasury Department released an interim final rule that stated that to qualify, businesses must have 500 or fewer employees and fall below the agency’s small business size standards to qualify.

This gave way to questions from those in the construction industry, mostly revolving around the 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 first round of the U.S. Small Business Administration’s Paycheck Protection Program reportedly saw the most money divvied out to the construction industry, according to data released by the SBA.

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.”

Loan Approvals

The numbers indicate that the construction industry received 177,905 loan approvals, totaling about $45 billion and amounting to 13.12% of all loans—the majority when divided up into subsectors.

The remaining top 10 industries include:

  • Professional, Scientific and Technical Services - 12.65%;
  • Manufacturing – 11.96%;
  • Healthcare and Social Assistance – 11.65%;
  • Accommodation and Food Services – 8.91%;
  • Retail Trade – 8.59%;
  • Wholesale Trade – 5.69%;
  • Other Services (except Public Administration) – 5.17%;
  • Administrative and Support and Waste Management and Remediation Services – 4.47%;
  •  and
  • Real Estate and Rental and Leasing – 3.14%.

Now, Senate Democrats and Republicans are reportedly negotiating a deal to allocate $310 billion more into the PPP, setting aside about $60 billion for rural and minority groups. An additional $60 billion would also go to the Economic Injury Disaster Loan program, which is separate from the PP but still under the SBA.

While many consider it just a matter of time before more money is added, banks cautioned that the first round allowed them to work through the system and eliminate backlogs, meaning that the additional funding is estimated to run dry even quicker than the first.

Consumer Bankers Association President Richard Hunt told Politico: "This is going to go within, at most, 72 hours, but the odds are more like 48 hours."

The second round also is unlikely to tackle some of the loopholes that allowed larger companies access to the funds, which led to its own controversy.

Additionally, several banks (Bank of America, JPMorgan Chase, U.S. Bank and Wells Fargo) are being sued by small business owners who accuse the institutions of unfairly reshuffling the PPP applications in order to prioritize higher loan amounts.

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


Tagged categories: Construction; COVID-19; Good Technical Practice; Government; NA; North America

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