On Friday, March 27th, President Trump signed the COVID-19 stimulus bill, known as the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). This law provides significant support, resources, and $350 billion in loans and grants to construction businesses. In this article, we’ll cover what contractors and suppliers need to know about the small business loan program, including who qualifies, and how to apply for an SBA loan.
Cash flow is essential to construction businesses – now more than ever. The coronavirus will continue to impact construction for some time, and businesses need as much cash as they can get their hands on. While some states and cities have designated construction an “essential business,” the future is uncertain. If you are looking for cash to help get you through the downturn, take advantage of every option available.
SBA Paycheck Protection Loans: Cash for construction during coronavirus
In response to the coronavirus pandemic, the CARES Act created a special loan program through the US Small Business Administration (SBA), known as the Paycheck Protection Program (PPP). This loan program is an expansion of the existing SBA 7(a) loan program. View the latest PPP fact sheet from the US Treasury.
The SBA Paycheck Protection Program provides $350 billion in forgivable loans to eligible small businesses, including contractors and suppliers that qualify. If businesses use the money to pay their workers and meet certain other expenses, the loan will be forgiven. As long as you keep workers on the payroll, and spend the loan money on the right things – and document everything! – the loan effectively becomes a grant.
However, Payroll Protection Loans are only one of several programs available to help construction businesses get cash right now. The SBA has other loans and debt relief available to help small businesses weather the coronavirus crisis.
Are construction businesses eligible for an SBA loan?
Size requirements
In order to apply for an SBA loan under the Paycheck Protection Program, your construction business must be any of the following:
- A business with fewer than 500 employees, or otherwise meet the SBA size standards (employee count includes full-time, part-time, and any other status)
- A sole proprietorship
- Operated by an individual as an independent contractor
- Operated by a self-employed individual who regularly carries on any trade or business
- A Tribal business concern that meets the SBA size standard
- Registered as a 501(c)(3) with fewer than 500 employees
- Registered as a 501(c)(19) Veterans Organization that meets the SBA size standard
In business before February 15
The SBA Paycheck Protection Program is only available to small businesses who had employees on the payroll before February 15, 2020.
How much can a construction business borrow?
Businesses that qualify can borrow 2.5x their average monthly payroll costs, up to a maximum of $10 million.
Get the Contractor’s Guide to SBA Loans & Cash During COVID-19
Learn more about the different SBA loans and cash opportunities available to construction businesses to help you survive the coronavirus crisis.