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Another $284.5 billion in federal funding from the Paycheck Protection Program (PPP) is now available to construction businesses that have had to cut employees and experienced other losses due to the effects of the pandemic. For this funding round, loans are available for businesses that have received funding previously as well as first-time applicants.

Administered by the U. S. Small Business Administration (SBA), the PPP was first enacted as part of the federal CARES Act in March, 2020, and later modified in the Paycheck Protection Program Flexibility Act of 2020. Many aspects of the process, including the loan forgiveness application process, are generally the same.

Here are key program changes and rules for this latest round of PPP funding.

Businesses with no more than 300 employees can apply for a second loan.

To be eligible, during any quarter of 2020 the business must have had a reduction in gross receipts of at least 25% compared to the same quarter in 2019.

There are some exceptions for seasonal businesses or those that were not operating during 2019, but were operating on Feb. 15, 2020. On or before the disbursement of the second loan draw, the business must have spent the full amount of its first PPP loan proceeds on eligible expenses.

For most borrowers, the maximum loan amount of a second draw PPP loan is 2.5 times the average monthly payroll costs up to $2 million. Average monthly payroll costs can be based on calendar 2019 or 2020, or on the 12-month period prior to loan application.

At least $25 billion is being set aside for second draw PPP loans to eligible borrowers with a maximum of 10 employees or for loans of $250,000 or less to eligible borrowers in low or moderate income neighborhoods.

Borrowers can select their loan forgiveness covered period.

The covered period begins on the date the loan proceeds are disbursed and ends on any date the borrower chooses that is between eight and 24 weeks after the covered period begins.

Expanded group insurance payments qualify as payroll costs.

Payroll costs now include group insurance payments for vision, dental, disability and life insurance.

Additional non-payroll costs are eligible for forgiveness.

Eligible PPP expenses now include certain operating expenses (e.g., software and cloud computing expenses), property damage incurred during public disturbances in 2020 that insurance did not cover, certain supplier costs, and certain worker protection expenditures incurred to comply with COVID-19 health guidelines.

One important note: Even though the type of eligible non-payroll costs have been expanded, borrowers must still use 60% of the loan proceeds for payroll costs to be eligible for full forgiveness of the loan.

Ordinary business expenses paid with PPP loan proceeds are tax-deductible.

For federal income tax purposes, borrowers can deduct ordinary business expenses paid with PPP loan proceeds. This change applies to expenses paid with proceeds from an original PPP loan as well as a second draw PPP loan.

Eligibility for the simplified loan forgiveness application has been increased from $50,000 to $150,000 or less.

Even though the loan forgiveness application is less detailed, the SBA may review and audit PPP loans of $150,000 or less and access any records the borrower is required to retain.

PPP borrowers are also eligible for the Employee Retention Credit.

Employee Retention Credits (ERC) allow eligible entities to receive a refundable payroll tax credit on qualified wages. This provision is retroactive to 2020. A borrower cannot apply the same wages to both the PPP and the ERC. Borrowers that qualify for full forgiveness of their PPP loan using only payroll costs should consider maximizing the use of non-payroll costs for PPP loan forgiveness (subject to the 60-40 payroll requirement) in order to reserve wages for the ERC.

This round of PPP loans will continue until all funds are distributed. According to the SBA, construction businesses have been among the top recipients of PPP funding. For more information or to apply for a loan, visit the SBA website or contact your lender.


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