Federal officials are making it clear that small contractors have no reason to fear being shut out of the recently passed $2 trillion federal COVID-19 relief legislation allowing companies to take out forgiveable loans to cover payroll expenses.
Congress passed the $349 billion Paycheck Protection Program in March as part of the CARES Act, relief legislation meant to offset the effects of the economic shutdown brought on by efforts to curb the spread of the coronavirus. The program allows businesses to apply for U.S. Small Business Administration loans to cover eight weeks of payroll. If companies meet certain conditions, the loans don’t need to be paid back.
Some construction groups initially feared the program could shut out small contractors with fewer than 500 employees. But guidance released last week by the U.S. Treasury Department clarifies that all small contractors can make use of the program.
“Administration officials have done the right thing and revised their guidance to allow, as Congress intended, for firms that employ 500 or fewer people to qualify for the Paycheck Protection Program loans,” said Stephen E. Sandherr, CEO of the Associated General Contractors of America. “This change means the program is now more likely to help smaller firms continue to operate and retain staff.”
The program began accepting applications on April 3 for most companies, and began accepting applications for independent contractors and self-employed businesses on Friday. Qualified applicants stand to receive as much as $10 million in loans — or as much as two-and-a-half times their monthly payroll — through June 31 to cover payroll, rent, utilities and mortgage interest. Companies that go on to meet certain conditions, such as using 75% of the money to retain or rehire employees, can also avoid having to pay the loan back.
In Wisconsin, lending institutions are working quickly to offer the program. The vast majority of in-state banks and credit unions are SBA-approved lenders, said Rose Oswald Poels, president and CEO of the Wisconsin Bankers Association. Oswald Poels said the program is probably best-suited to companies that haven’t closed their doors completely in response to COVID-19 but are nonetheless seeing their business dwindle.
“There are businesses that are completely closed and don’t have payroll,” Oswald Poels said. “They aren’t eligible.”
Fortunately, most financial institutions came into the COVID-19 pandemic in a relatively strong position. That’s important because banks must have money on hand to lend out before they can be reimbursed through the program.
Initially, some were concerned that demand would quickly gobble up the $350 billion Congress had set aside for the loan program. Oswald Poels, however, said those fears may be overblown. Throughout the U.S., banks had lent about $100 billion by Wednesday night, she said. That still leaves a lot to do.
And federal lawmakers seem open to the idea of doing more. On Tuesday, U.S. Senate leaders said they were planning to pump an additional $250 billion into the paycheck protection program.
Banks, however, are still coming to terms with federal government’s guidance on the program, which seems to be added to and revised by the day, Oswald Poels said.
There are other stumbling blocks, too. The Wisconsin Bankers Association is asking that federal officials give SBA districts authority to make changes locally so that SBA-approved lenders can access an online portal for the system. Some banks have struggled to process applications through the online portal in recent days.
And because the program was passed so quickly, banks are still “scrambling” to make sure they’re following the program requirements, Oswald Poels said.
“Every day a few more answers are provided,” she said. “We don’t have answers to everything yet. In a normal time, you would never roll a program out like this without having a plan in place first.”Follow @natebeck9