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With the coronavirus shutdown expected to last until at least May 1, much of American business has ground to a halt. Although construction has been deemed an essential business in most states, but not all, the stay-at-home orders are having a profound and increasing impact on the entire economy, which necessarily impacts construction. A survey by the Associated General Contractors of America (AGC) found that 27% of contractors are laying off workers and 55% are being told to delay or cancel projects due to the pandemic. To learn which states are deeming construction essential and what projects are being delayed, check out this interactive map from AGC.
On the face of it, the small business portion of the package offers much-needed relief. The Paycheck Protection Program (PPP) provides $350 billion in U.S. Small Business Administration loans to small businesses under 500 employees and nonprofits for the purpose of maintaining the existing workforce. It also includes $17 billion for the SBA to cover six months of payments for small businesses with existing SBA loans. There had initially been some question whether construction companies would qualify as small businesses due to a revenue limit but new guidance from the treasury department clarifies that any construction company with 500 or fewer employees does qualify.
Starting April 3, 2020, small businesses and sole proprietorships can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders. Any business with 500 or fewer employees can borrow up to 2.5 times the average payroll from 2019. And if the money is used for employee expenses, rent, mortgage interest, or utilities through June 30, the entire loan can be forgiven. Even if the loan is used for other purposes and can’t be forgiven, the interest rate will only be 1% on a two-year loan, making it cheaper than most alternatives.
The Treasury Department recommends that most small businesses work with their current banker if possible. The application is simpler than most loan applications so businesses should move quickly since the money is available on a first-come, first served basis. For more information, check out the U.S. Treasury Department's PPP Fact Sheet.
While most agree the relief package is a good start, AGC called for more measures to help firms cope with the economic fallout. “The industry will not be able to truly recover until federal officials pass measures designed to stimulate new demand for construction, make contractors whole for losses because of the coronavirus, and protect employee retirement and health plans,” said Stephen E. Sandherr, AGC’s CEO.