One of the most anticipated aspects of the $908 billion coronavirus relief measure signed by President Trump last week includes $284 billion for a revamped Paycheck Protection Program.
The measure — attached to a $1.4 trillion bill set to fund the federal government through September — allows existing borrowers with less than 300 employees to apply for a second loan of up to $2 million as long as they show a revenue decline of at least 25% in at least one quarter of 2020. The legislation also features a simplified forgiveness application for loans of $150,000 or less that requires borrowers simply to state the number of employees retained and the amount of PPP funds spent on payroll.
The provisions for additional and new PPP loans and potential forgiveness will provide much-needed relief to many construction firms, according to Phillip Ross, Anchin partner and leader of the firm’s A&E and Construction groups.
“The AEC industries operate with long pipelines,” he said. “Shrinking backlogs remain a reality in the wake of the pandemic and so further relief will go a long way to ensuring that the building industry remains active."
The relief package addresses some of the pain points that plagued prior iterations of the small-business loan platform, according to industry analysts. Chris Hurn, CEO and founder of Fountainhead Commercial Capital, told Banking Dive, our sister publication, that the simplified one-page forgiveness application for smaller loans will help both borrowers and lenders.
"It will free up the borrowers to focus on running their business, and it'll free up the lending community to focus on taking in more applicants and helping more businesses," he said.
The relief package also put to rest concerns that forgiven loans might be taxable, Ross said. IRS guidance in November indicated that expenses paid with the forgiven proceeds would not be deductible, potentially creating bigger tax bills for some contractors.
"With Congress making the PPP loan forgiveness non-taxable, this overrides the initial IRS ruling and will help deliver on the original intent of the law,” he said. “This will be a huge help to the AEC firms that did the right thing, according to the rules, and kept employees on payroll.”
Mike Brauneis, managing director and U.S. financial services industry leader at global consulting firm Protiviti, said the Small Business Administration's infrastructure should be better positioned than it was in April to handle what may be a huge initial surge of applications.
"That said, the draft legislation came together very quickly and there are many fine-point details that SBA will need to issue guidance to address before banks and other lenders can begin making loans," he said.
In addition, as businesses gear up to apply for the latest PPP loan window, they may face a smaller pool of lenders willing to participate, Hurn said.
"There's a fair amount of PPP fatigue and burnout in the lending community right now," he said. "I am sure there is going to be a sizable chunk of lenders that participated in the first-draw PPP loans that do not participate in the second draw.”
Portions of this story first appeared on sister website Banking Dive.