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Changes to PPP Pass Senate, Head to Trump

Monday, June 8, 2020

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Last week, the U.S. Senate unanimously approved a bill that updates terms of the Small Business Administration’s Paycheck Protection Program.

The changes, which aim to ease how small businesses can use the program and still seek forgiveness, now head to the President’s desk for his signature.

The Changes

H.R. 7010, or the “Paycheck Protection Program Flexibility Act of 2020,” includes changes such as:

  • An extended cover period of the PPP loans from eight weeks to 24 weeks;
  • A change in the forgiveness requirement from 75% of payroll costs to 60% of payroll costs;
  • A space for employers to make a good fair effort to hire or rehire;
  • An extended maturity of the PPP loans from two to five years; and
  • An opportunity for loan recipients to defer payroll taxes through the end of 2020.
JTSorrell / Getty Images

Last week, the U.S. Senate unanimously approved a bill that updates terms of the Small Business Administration’s Paycheck Protection Program.

In addition to the changes in the amendment, the government issued an updated an FAQ at the end of May dealing with the differences of loans above and below $2 million.

In previous guidance, the Treasury Department had said that all PPP loans of $2 million or more (upon an application of forgiveness) would be audited with the possible implication of investigation and penalty enforcement.

However, the recent clarification states not only that would loans less than $2 million be “automatically deemed” to have acted in good faith, but that while loans at and above $2 million would still be reviewed, the party would be required to pay back the loan without penalty of enforcement action.

The Associated General Contractors of America CEO Stephen E. Sandherr issued a statement commending the changes, saying that they will “save many construction jobs and allow thousands of construction firms to remain in business.”

He also called again for economic aid, saying: “Having fixed several problems with a measure designed to helped firms survive, it is time for Congress and the President to put in place measures to rebuild our economy. These measures include providing liability protection for contractors and other businesses that are taking steps to protect workers from the coronavirus, new infrastructure funding and measures to stimulate broader, private-sector demand for construction and development.”

Loans in Construction

The initial round of PPP opened on April 3, and just a day before, the Treasury 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.

At the time, Sandherr criticized the ambiguity, and on April 8, the Treasury issued a clarification in the form of a Q&A, which listed items such as:

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).

Data released at the end of April by the SBA revealed that the majority of funds divvied from the PPP ended up going to the construction industry.

The numbers indicated 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.

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

   

Tagged categories: Business matters; COVID-19; Finance; Good Technical Practice; Government; NA; North America; Regulations

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