What Happened to the PPP Loan for Contractors

The $349 billion small business forgivable loan program ran out of funding on Thursday April 16th. Fortunately as part of the program, there were 1.6 loans extended as of April 16. Unfortunately, like any government program, both independent contractors and self-employed people were at a disadvantage. They were unable to apply for the program until April 10 and the US Treasury didn’t issue application guidance until April 14.

What is the PPP Loan?

The PPP or the Paycheck Protection Program. The Coronavirus Aid, Relief and Economic Security Act, which was signed into law late last month, created the PPP as a way to provide businesses immediate cash infusions to pay employees rather than firing them. They are also allowed to use the money for other urgent expenses, such as paying their rent or mortgage. The money is structured as an SBA loan made by authorized financial institutions, but businesses can apply for loan forgiveness. Employers that lay off employees or reduce wages by more than 25% have that forgiven amount reduced. An interim SBA rule issued shortly after the law passed suggested that smaller construction companies and homebuilders would not be eligible for PPP loans. The agency then revised the rule to allow all construction companies with fewer than 500 workers access to PPP. Whether homebuilders could participate is less clear. “Banks around the country are inconsistently allowing or disallowing homebuilding companies to apply” for PPP loans

Which Contractors Received the PPP Loan

The construction industry, which is weathering mandated shutdowns in some places, had the largest chunk of PPP money of any industry as of Monday, the latest day for which data is available. Over 114,000 loans totaling almost $34B were approved for construction companies, or 13.73% of all PPP funding, the Small Business Administration reports.

  • Retailers obtained $21.2B, or about 8.57% of the total,
  • Real estate-related companies got $7.9B, or 3.22% of the total. T
  • The accommodation and food services sector, which includes hotels and restaurants, received $22.7B, or 11.2% of the total.
  • Transportation and warehousing businesses got $7.8B, or 3.1% of the total.

The SBA uses the North American Industry Classification System to define businesses.

The SBA then revised the rule to allow all construction companies with fewer than 500 workers access to PPP. Whether homebuilders could participate is less clear. “Banks around the country are inconsistently allowing or disallowing homebuilding companies to apply” for PPP loans, National Association of Home Builders CEO Jerry Howard told MarketWatch. As of Monday, the SBA has overseen more than 1 million PPP loans through 4,664 lenders. The majority of the loans (70%) were for less than $150K, totaling $37.1B. About 15% of the loans were for between $150K and $350K, totaling $35.7B.

Disagreements on Capitol Hill have prevented more money from being put into the PPP. Senate Republicans have proposed putting another $250B in the program, while House Democrats have insisted that another $250B for hospitals and state and local governments be part of any package.

Prepare for the Next Disbursement of PPP Funds

Prepare for next time in case the pot is refilled. Gather documents, get in touch with your accountant and consider checking in with your local bank so that you can get in line.