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Construction Firms Receive $13.7B in PPP Loans

Monday, March 1, 2021

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According to a report by the Small Business Administration issued at the beginning of February, construction firms have already nabbed $13.7 billion in loans under the latest version of the Paycheck Protection Program.

The industry is the second in total loan amounts received thus far, following restaurants and hotels, which received $18 billion.

2021 PPP Loans

In the latest report of 2021 numbers, the SBA details that over a million loans have already been approved since the beginning of the year, totaling more than $100 billion.

Of the approved loans, the SBA further notes that 69.7% were given for $50,000 and under, while 12.6% were loans between $50K-100K; 6.5% were granted for loans between $100K-150K; and 6.5% of loans were granted for amounts between $150K-350K.

No loans were granted for amounts requesting more than $2 million, thus far.

To look at the number by industry, the data reveals that loans to construction firms makes up 14% of all funds paid as of Feb. 7. The industry was also listed as a top recipient in the two rounds of PPP issued last year. Additionally, roughly three-quarters of the companies receiving money this round, also received PPP funds last year.

Just like in the previous rounds of PPP, the loans can be used to pay for mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism, as well as certain supplier costs and expense for operations.

mphillips007 / Getty Images

According to a report by the Small Business Administration issued at the beginning of February, construction firms have already nabbed $13.7 billion in loans under the latest version of the Paycheck Protection Program.

In addition to the loan report, the SBA also reported that it plans to improve the Paycheck Protection Program so that small businesses can more easily access necessary funding. To do so, the Administration is working alongside the Agency to increase equitable access to underserved small businesses, to assure the integrity of the program, and to promote rapid and efficient distribution of funds.

The SBA is also working to improve resolving data speed mismatches and eligibility concerns so that small businesses have as much time as possible to access much needed PPP funds, while maintaining the integrity of the program. The changes will:

  • Enable lenders to directly certify eligibility of borrowers for First Draw and Second Draw PPP loan applications with validation errors to ensure businesses who need funds and are eligible receive them as quickly as possible;
  • Allow lenders to upload supporting documentation of borrowers with validation errors during the forgiveness process; and
  • Create additional communication channels with lenders to assure we are constantly improving equity, speed, and integrity of the program, including an immediate national lender call to brief them on the Platform’s added capabilities.

“We are pleased that the Paycheck Protection Program is targeting the smallest of small businesses and providing economic relief at a crucial time in American history,” said SBA Senior Advisor to the Administrator Michael Roth.

“The SBA has achieved another major milestone to provide critical recovery capital to America’s small businesses by approving 1.3 million PPP loans totaling $104 billion in the current round. While we are excited that we are doing a better job of reaching the hardest hit industries and communities, we are committed to taking additional steps to ensure that there is equitable access for underserved businesses and that we are leading with empathy to support small businesses in a difficult spot.”

The full PPP report can be viewed, here.

PPP Tax Credit

In addition to loan forgiveness programs, also in February, the Internal Revenue Service announced that companies denied forgiveness of the of their Small Business Interruption Loan under the Paycheck Protection Program are eligible for an employee retention tax credit.

The new policy reflects a change that was part of the Taxpayer Certainty and Disaster Tax Relief Act of 2020, which passed in December. Prior to the change, companies couldn't accept credit if they also took a PPP loan. Now, as long as the loan doesn't qualify for forgiveness, firms can apply for the credit.

According to the notice, if an employer received a PPP loan and included wages paid in the second and/or third quarter of 2020 as payroll costs in support of an application to obtain forgiveness of the loan, and the request for forgiveness was denied, they can claim the ERC related to those qualified wages on the fourth quarter 2020 Form 941, Employer's Quarterly Federal Tax Return.

The IRS adds that employers can also report any ERC attributable health expenses that are qualified wages that were not included in the second and/or third quarter Form 491 on the fourth quarter Form 491.

However, if firms choose the limited fourth quarter procedure, the ERC attributable should be added to the second and/or third quarter qualified wages and health expenses on line 11c or line 13d (as relevant) of the original fourth quarter Form 941 (along with any other ERC for qualified wages paid in the 4th quarter).

COIVD-19 Relief Loans History

In wake of the COVID-19 pandemic, in April, the Small Business Administration released an interim final rule for the PPP, stating that to qualify, businesses must have 500 or fewer employees and fall below the agency’s small business size standards.

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.

The PPP officially opened on April 3.

By the end of the month, the SBA found that the first round of PPP reportedly saw the most money divvied out to the construction industry. 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.

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.

By the middle of May, the SBA released an 11-page application for lenders and small businesses to apply for PPP loan forgiveness. However, in June, the U.S. Senate unanimously approved a bill updating the PPP terms. H.R. 7010, or the “Paycheck Protection Program Flexibility Act of 2020,” included 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.

In addition to the changes in the amendment, the government issued an updated 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 loans less than $2 million would 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.

Also in May, The Washington Post, The New York Times, Bloomberg LP, Dow Jones and ProPublica issued a lawsuit under the Freedom of Information Act against the SBA for the access of government records detailing which companies have received loans under the PPP and the Economic Injury Disaster Loan program. The suit seeks not only the names of the companies, but the loan amounts and processing banks, to no avail.

The lawsuit arrived after the SBA temporarily boosted its Express lending limit from $350,000 to $1 million as part of the pandemic relief effort. According to reports, unlike the PPP program, SBA Express doesn’t offer loan forgiveness, nor does it require borrowers to spend 75% of the loan amount on payroll. SBA Express also allows lenders to use their own forms and procedures, apply in-house collateral standards and make the final credit decision. The guarantee amount, however, is 50% rather than the 75% that’s typical for SBA 7(a) loans.

At the time, SBA argued that releasing such information could violate their privacy, as PPP loans are tailored to the size of a business’s payroll.

In July, the SBA disclosed the names, addresses, ZIP codes, demographic data and industry codes of borrowers receiving PPP loans amounting to $150,000 or more. However, according to The Wall Street Journal roughly 4.5 million of the 5.2 million PPP loans issued (or less than 15%) were for $150,000 or less.

At the end of month, the SBA inspector general called for a closer oversight of the EIDL program after receiving over 5,000 complaints of suspected fraud from lenders.

In September, PaintSquare Daily News reported that businesses that received PPP loans during the pandemic could experience higher tax revenues. The concern arrived after the IRS ruled that businesses couldn’t write off tax reductions for wages and rent paid using the forgivable PPP loans as to prevent a “double tax benefit.”

However, through the PPP Flexibility Act, employers can defer these taxes even after the PPP loan has been forgiven. If deferred, employers are required to pay 50% of the deferred taxes that accumulated in 2020 by Dec. 31, 2021, and the other 50% of the deferred amount would have to be paid by Dec. 31, 2022.

In October, the SBA—in consultation with the U.S. Treasury Department—released a simpler loan forgiveness application for PPP loans amounting to $50,000 or less. The new form arrived as an effort to ease the burden for lenders and small businesses. Approximately $62 billion of the $525 billion in PPP loans that have been issued total $50,000 or less.

Not only will the simplified PPP forgiveness process ease the burden on small businesses, but the SBA and Treasury report that the burden is also reduced for PPP lenders, allowing them to process forgiveness applications more swiftly. However, while the streamlined forgiveness will affect 3.57 million of the 5.2 million loans originated under the program, some trade groups are calling for further action from Congress.

SBA began approving PPP forgiveness applications and remitting forgiveness payments to PPP lenders for PPP borrowers on Oct. 2.

In November, Judge Boasberg of the U.S. District Court for the District of Columbia issued an order to the SBA to release the names and precise loan amounts of all Paycheck Protection Program and Economic Injury Disaster Loan borrower recipients.

The suit was filed Dec. 8 in the United States District Court for the District of Columbia.

At the beginning of December, the SBA released detailed loan information following a temporary stay U.S. Federal Judge James Boasberg granted to the SBA regarding its original Nov. 19 deadline.

According to The Washington Post, of the more than 5 million loans released in response to a Freedom of Information Act request and lawsuit, more than half the money provided through the PPP program for small businesses went to just 5% of the recipients.

Previously, the SBA and Treasury Department officials argued that the program benefited small businesses, given that more than 87% of loans distributed were for less than $150,000. However, the newly released data reveals that more than half of the $522 billion of allotted funding went to bigger businesses, and only 28% of that amounted to less than $150,000.

The other 72% was distributed to about 600 mostly larger companies, including dozens of national chains, received the maximum amount allowed under the program of $10 million. In a diagram, the Post shows that the top 1% of borrowers received more than a quarter of the total loan value, while the top 5% of loans amount to more than half of the total loan value.

By the end of that month, former President Donald J. Trump signed a $900 billion COVID-19 relief package, allotting $10 billion for highway infrastructure programs. The package also includes authorization of the Water Resources Development Act, which supports water-related infrastructure such as ports, harbors and inland waterways.

In addition to the $10 billion allotted for highway infrastructure programs, the legislation also offers $284 billion for first and second PPP loans to support small businesses, expanded PPP eligibility for local newspapers, television and radio broadcasters and $15 billion for movie theaters and live venues.

   

Tagged categories: Business management; Business matters; Business operations; COVID-19; Funding; NA; North America; Program/Project Management; Small Business Administration

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