What’s in the $2 Trillion Coronavirus Stimulus For Construction Businesses & Their Workers?

COVID-19 is crushing the economy. Businesses are closing, cities are shutting down construction projects, and companies are laying off workers in unprecedented numbers. The US federal government has been rushing to inject much-needed cash into a desperate economy, and limit the long-term financial fallout. The US government is getting set to pass a $2 trillion stimulus package, intending to put money directly into the hands of people and businesses that need it. So how will the $2 trillion stimulus money help construction companies – and their workers – that are struggling to make ends meet? And what do contractors and suppliers need to do to qualify for financial help?

What will construction businesses get from this stimulus bill?

Though the ultimate impact of the stimulus bill is unknown, it could provide a significant cash windfall for companies in the construction industry. The majority of construction businesses in the US will qualify for business loans in the package (which are forgiven if you meet the requirements). The bill will also give cash directly to their workers. But even beyond direct cash payments, loans, and grants, contractors and suppliers may benefit from investments in new or existing projects.

In particular, contractors who work on healthcare and public works projects could see a sharp uptick in jobs as infrastructure and hospital projects get off the ground quickly. In Pennsylvania, for example, all “non-life-sustaining” business – including most construction – is shut down. Meanwhile, construction on Penn Hospital’s $1.5 billion expansion is full speed ahead, considered a critical project to meet expected demand from COVID-19. Other states and counties are passing similar mandates allowing or shutting down construction.

The $2 trillion in the coronavirus stimulus package is divided among aid to individuals in (and recently pushed out of) the workforce, businesses, and local governments.

Support for construction workers (& their families)

Cash payments

The stimulus package provides direct payments to individuals and families. US adults would receive $1,200 each, with an additional $500 per child in the family. The payment is reduced for workers who earn over $75,000 annually (or $150,000 as a household).

The IRS plans to distribute these payments as tax refunds so they can get the money into US workers’ hands quickly.

Unemployment benefits

The bill also temporarily increases unemployment benefits for workers laid off because of this pandemic. The bill hopes to replace lost wages as much as possible. The bill increases benefits by $600 per week – above the normal unemployment benefit – for a period of four months.

Support for construction businesses

Small business loans/grants

Construction businesses with less than 500 employees will be able to access “payroll protection loans” of up to $10 million each. For each business, the maximum loan amount will be 2.5 times the company’s average total monthly payroll costs in the one-year period before the loan is made. (For the purposes of calculating these loans, payroll costs do not include prorated wages for salaries of more than $100,000/year, or wages to employees outside of the US.)

The vast majority of contractors and suppliers in the US will meet the bill’s definition of “small business,” including sole proprietors or self-employed construction workers. Additionally, the loans will be prioritized for small business concerns, underserved/minority businesses, women-run businesses, rural businesses, businesses in operation less than 2 years.

From what we’ve seen, nearly every construction business in the US can already check at least one of these boxes, if not all. The supply chain for construction materials from Asia and across the world have already seen significant delays. Some states and cities have shut down all but the most essential construction projects.

And even in states where construction is considered essential business, many individuals and companies are delaying or cancelling projects out of uncertainty or lack of money.

Construction companies can use these funds to pay their workers and provide employee benefits. They can also use the money to cover certain overhead costs, like rent, utilities, and interest on debt. As long as you use the money for these approved expenses, you won’t need to repay it.

The bill also expands the SBA’s disaster loan program for small businesses that they announced previously. This loan program also provides an emergency advance of up to $10,000 for maintaining payroll and benefits, meeting increased supply chain costs, paying rent, and repaying loans.

Loan forgiveness

While the “payroll protection” funds are technically loans, as long as businesses use them to keep their workers on staff, and pay other approved expenses, the loans will be forgiven. They essentially become grants if you follow the rules.

Generally, the stimulus bill requires that you use the money to meet payroll (without cutting staff or wages), and pay rent and utilities. Contractors and suppliers who take advantage of these funds will definitely want to keep detailed records. Loan forgiveness won’t be automatic. You will need to show documentation of full time equivalent employees (FTEE) and their pay rates, mortgage and utility payments, etc. If you don’t already have a good document retention strategy, now would be a good time to put one into action.

How to apply for a small business loan/grant

Construction businesses will be able to apply from qualifying banks through the Small Business Administration. Lenders authorized to make loans under the SBA’s current Business Loan Program are automatically approved to make loans under the new stimulus program.

Contractors and suppliers that meet the loan criteria will be able to apply for the funds through the regular SBA loan application process.

Other stimulus package benefits

Loans for large corporations

The bill contains about $500 billion to support corporations in the hardest-hit industries with loans and other aid, particularly airlines. Companies that keep employing workers may be eligible for a tax credit. Corporations will also be able to defer tax payments, and immediately expense construction costs for property improvements.

Tax benefits for businesses

The stimulus bill allows businesses to defer payroll taxes for the rest of 2020. You’re not off the hook for those taxes entirely, though you can pay half of them in 2021 and the other half in 2022.

Cash flow is hard to manage in normal times for contractors and suppliers – even more so while jobs are being delayed or cancelled. A tax deferral could help construction businesses free up some additional cash for the remainder of the year.

Support for local governments

The package includes $150 billion to be available for state and local governments.

Other Stimulus Benefits For Construction Businesses

The stimulus could create more investment in construction

While construction isn’t on the Department of Homeland Security’s list of “critical industries,” it is considered an essential part of the recovery process. Every critical sector, like healthcare, energy, and defense, is investing large amounts of money in repairing, upgrading, and building new facilities and infrastructure that help them deal with the crisis.

Construction projects – especially those in certain industries – are seen as critical right now. A significant amount of money in the stimulus bill is set aside for specific uses that help attack and recover from the pandemic:

• $156 million for “the study of, construction of, demolition of, renovation of, and acquisition of equipment for vaccine and infectious diseases research facilities.”
• $100 billion in emergency grants to hospitals. The bill allows the money to be used for new construction projects to increase patient capacity.
• $3.5 billion for Biomedical Advanced Research and Development Authority that “may be used for the construction or renovation of U.S.-based next generation manufacturing facilities, other than facilities owned by the United States Government.”
• $150 million “to prevent, prepare for, and respond to coronavirus, domestically or internationally, including to modify or alter existing hospital, nursing home, and domiciliary facilities in State homes.”

Education, Training & Advising

The stimulus package includes money for organizations to provide training and advising to small businesses about applying for federal resources, and updating business practices to deal with the effects of COVID-19.

This money would likely go to community organizations that partner with the Small Business Administration to deliver training and resources to local businesses.

One of the biggest impacts we’ve seen from the coronavirus response is the quick transition to remote and digital work. The construction industry is still heavily reliant on paper processes – submitting pay applications, daily logs, reporting, sending paper checks, etc.

While many contractors and suppliers have digitized their processes, and adopted software to manage the lion’s share of them, others still rely on paper and pen. This part of the stimulus could help bring a lot of construction businesses into the 21st century, giving them the training and advice they need to improve productivity and real-time reporting.

Is the stimulus package enough to get construction businesses through?

Whether or not this stimulus package will help dig the US out of the economic hole – and prevent a recession – remains to be seen. Some are already predicting that the $2 trillion won’t be nearly enough to prevent a recession.

Whether you expect a recession or economic turnaround, construction businesses should be taking steps now to protect their business, get paid, and get access to the cash they need. Contractors and suppliers that act quickly will be in the best position to make it through the worst of the coronavirus impact on construction – and survive in any economy.