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  • Joe Lombardi

What Contractors Need to Know about the Paycheck Protection Program

Updated: Jun 25

When discovering the strength of the Coronavirus in early March, the state of the

country was unclear. Many hoped that the virus would not be brought to the United

States. Jobs and certain industries would be changed forever.



As we are midway through June, the U.S. has been in quarantine for almost three full

months. Jobs have been lost. Markets have plummeted. Industries have been shell

shocked.


Luckily, upon realizing the strength of the virus, lawmakers came up with a way to

provide economic relief for those who have been impacted by the virus.


The Coronavirus Aid, Relief, and Economic Security Act (CARES) has created the

Paycheck Protection Program, (PPP). Read how it can benefit you:


The Paycheck Protection Program (PPP) is intended to provide short term financing to

small businesses that would have been forced to lay off their workers or close their

business due to the stay at home order. This act has accrued roughly $659 billion over

two total rounds of funding.


There are many benefits to the PPP. The main benefit is that small businesses are able to

continue to stay afloat and do their business as usual to some extent. Another benefit

that the PPP offers is that the loans are eligible for forgiveness as long as the money that

the business is given from the PPP is put back into payroll and other expenses that it

may need to thrive. Additionally, the loan is only forgivable if the employer retains the

same amount of employees as they did before the 8 week period. If this is not the case,

forgiveness will be reduced.


This has caused some troubles for employers, however. Some employers feel inclined to

return their funds to the PPP in order to lay off their workers and not face any

consequences in doing so. Constructiondive.com states, “In fact, the Associated General

Contractors of America reported last week that 18% of the contractors it surveyed are

thinking about returning their PPP loans. In an earlier report, the AGC said that 75% of

its members have either applied for or intend to apply to the program.”


Some of the PPP applications can be considered a “rollercoaster process” though. There

is a lack of guidance and “flip flopping” regarding the eligibility of employers.

When the program first began, employers were unclear as to whether or not they were

supposed to take foreign owned affiliates and their employees into consideration. The

reason for the confusion was because the government advised applicants to count all

foreign and domestic employees.


“Information about which companies have been approved for PPP loans have been

gleaned from the documents that publicly traded firms must submit regularly to the

Securities and Exchange Commission.” This quote, along with the fact that the Small

Business Administration (SBA) has yet to give a list of all employers benefitting from the

PPP, shows the flaws in the system.


The PPP does have many rules, changes, and updates that are important to keep in mind

so that you are not faced with a penalty. “Potential penalties include having to pay back

three times the loan amount, other monetary fines, reputational harm and, for federal

contractors, suspension or debarment.”


There luckily are a few ways you can avoid penalties. The first way to make sure that

your company meets the up to date size that the PPP is looking for. Lenders are not

reliable for mistakes, but applicants are. Second, make sure all of the statements and

certifications are accurate and correct before applying. Next, document how and why

your firm is eligible to receive these funds. Whether it be because of lost revenue or

certain conditions, do some research and make sure to document them. Lastly,

document and track how your PPP money is being used. Keep considering the PPP

funds, maybe in a different account, but know that with no records of how the money is

spent, the forgiveness will not be available.


The material submitted does not fall within the purview of Penn Mutual/HTK marketing and advertising review. Please review the comments noted on the submission, if applicable. Also, please ensure due diligence as there may be other content considerations. Thank you for your cooperation. If you have any questions regarding the compliance comments on this review, please contact your designated Field Supervision Specialist or local Field Leader.


Not securities-related - Formal HTK approval is not required.


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