What Contractors Need to Know about the Paycheck Protection Program
Updated: Jun 25, 2020
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
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.
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