The Treasury Dept. is allowing a one-week extension of the deadline for recipients of Paycheck Protection Provision (PPP) loans to return the money to the government if the companies determine they do not meet newly revised guidelines for eligibility, a major construction contractor group says.
But the Associated General Contractors of America said if Treasury fails to also revise and clarify the guidance for the highly popular, forgivable loans, construction firms that received the loans will decide to pay back the loans and lay off workers.
Treasury and the Small Business Administration, which administers the program, changed the deadline to May 14 in a frequently asked questions memo on SBA’s web page, revised on May 5. [See FAQ #43 for extension notice.]
According to a new AGC survey, almost 11% of construction firms that received the PPP loans and responded to the survey “are considering returning them and laying off staff,” due to uncertainty about the guidance, according to Stephen E. Sandherr, AGC’s chief executive officer.
AGC said it appreciated the extension, which AGC and other industry groups had sought. [See ENR 5/1/2020 story here.]
The loans, created under the Coronavirus Aid, Relief and Economic Security, or CARES, Act were aimed at helping small businesses soften the economic impact of the coronavirus pandemic.
Recipients must use the loan proceeds for payroll, rent, and certain other expenses, and 75% of the dollars on payroll alone. If they do, the federal government will forgive the loan.
The Small Business Administration, which administers the program, was swamped with applicants when it began taking applications on April 3.
Demand was so strong that SBA exhausted in just 13 days the $349 billion the CARES Act provided for the program.
Congress later added another $310 billion for the program in a CARES Act followup measure.
By the end of May 1—just five days into the second PPP round, SBA reported it had approved loans totaling $175.7 billion, more than half of the second funding installment.
Construction companies had received the largest share of PPP loans in the program's first round, $44.9 billion.
In a statement, Sandherr said Treasury was correct in providing the new one-week extension. But he added that “giving firms more time will do little to protect jobs or support small businesses unless the administration also clarifies recent, confusing Paycheck Protection Program guidance.”
Sandherr said, “This vague guidance has prompted many construction companies to reconsider their acceptance of the loans.”
Among other things, the revised guidelines, published on April 28, said loan applicants must certify that the “current economic uncertainty” made their loan application “necessary to support the ongoing operations.”
The guidance also said loan applicants must take into account “their current business activity and their ability to access other sources of liquidity.”
The changes came in the wake of reports that some publicly held companies had received PPP loans in the first round, and small mom-and-pop businesses did not. Some of the publicly held companies have decided to repay the loans. It is unclear whether any construction or engineering firms have done so.
Sandherr said, “Unless the Treasury Dept. provides clearer, well-defined guidance about who qualifies for these loans, many small employers will have no choice but to return the funds and cut staff.”