The path to paycheck protection can be complex and frustrating.
The path to paycheck protection can be complex and frustrating.

As the government's Paycheck Protection Program rolled out around the nation, construction business owners were struggling with the challenge of applying for relief. As of April 13, the Small Business Administration reported approving more than $33 billion worth of loans to the construction industry. But by April 16, the SBA announced that it was out of money to lend, and could no longer accept new loan applications. JLC interviewed construction business owners around the country to hear their personal experiences with the PPP, and we learned that on the ground, results have been mixed.

Success story. In Atlanta, Georgia, builder and remodeler Keiffer Phillips, of Keiffer Phillips Patricia Brown Builders Inc., had quick success. "We went through the process and got approved and have already been funded," said Phillips. "We didn't have anybody laid off, and we plan to keep them all with the money. We had a couple of jobs delayed and a couple postponed indefinitely, so this allows us to keep everybody employed. There's five of us total."

Persistence pays off. In Ohio, remodeler Carrie Bordenkircher, of Kircher Design & Build, didn't get such satisfying results. A week into working with two lenders, Bordenkircher was still waiting for answers. "I applied with a small bank in southwestern Ohio, and I did not have a good experience with that initial application process," said Bordenkircher. "The program went into effect on a Friday, and it was Friday night before I got the application paperwork from the bank. I started working Monday morning with my office manager and we had guidance from a gal from the bank. I got everything together and submitted my application on Monday evening, all the paperwork that the bank asked for. And I got an automatic reply back within about a minute that said, 'Unfortunately we are no longer accepting applications at this time.' So I was extremely concerned. My thought was 'Oh my gosh, has this program run out of money already?'"

Tuesday went by with no information from the bank, so Bordenkircher turned to another lender: a local credit union who had financed some of the company's vehicles. "I talked to a nice man there who said he would take on our application. So on Wednesday I submitted everything to that man. He got my paperwork submitted on Wednesday afternoon to the SBA. And at this point [Tuesday April 14] I'm waiting to hear from them. I'm just keeping my fingers crossed."

But there was good news in the end for Bordenkircher. In an April 16 email, she told JLC, "Today I received an email that said my loan for the PPP funds was approved." On Friday April 17th she got the paperwork, and wrote: "They just sent me the documents so I will fill those out in a bit and provide my e signature and it will be done.They said I should get funded Monday."

Ruled out. Some business owners have learned that the PPP does not apply to them. In Virginia, builder and remodeler Linda Sewell, of Key Structures LLC, said, "We do not have employees any longer so the PPP doesn't apply to us. My husband did apply for the SBA up to $10K relief fund but who knows if we'll see anything." In Michigan, Detroit-area remodeler Gary Grabowski, of Greater Home Services LLC, said, "I've applied for everything. I applied for the PPP, but I'm a general contractor and I outsource everything. I have subcontractors for my labor. I'm essentially the only employee, but the IRS doesn't consider me an employee. They consider me an owner. But I applied for the PPP based on my net profit from last year. I'm an LLC, so I used my P&L. I said 'This is my income from last year, here's my operating expenses, and as an LLC, this is the number that I would report on my taxes.'" So far, said Grabowski on April 14, he hasn't heard back. "I'm not holding out much hope," said Grabowski. "I'm assuming that I will probably get a denial, or a reduced approval, or something like that."

Complications. In California, the PPP comes with a particular twist for remodeler Mike Pereira, of THE Construction Company of San Luis Obispo Inc. Last year, Pereira paid most of his labor force as independent contractors on 1099s. This year, new law in California forces Pereira to put all those workers on payroll, withhold taxes, and cover them with workers comp insurance. He doesn't have full-time work for most of these small trade contractors, hiring them on an as-needed basis. He could cover those payroll outlays with PPP money, but he has no idea how to document the amount needed. "I've put all those people on payroll. But the problem is that when I send in my 2019 payroll, it doesn't include those employees. They said to submit a letter explaining why you think that you deserve the amount that you deserve, and I explained that I have $30,000 worth of payroll that last year I was able to 1099 and this year has to be payroll. So I don't know if they're going to accept that, if they're going to include that, or exclude it."

As of April 16, a "very disappointed" Mike Pereira had not heard back on his loan application.

Thanks but no thanks. Also in California, one contractor JLC spoke with had second thoughts about the whole PPP concept. Steve Weaver, owner of Eagle Accessibility Solutions & Equipment in Auburn, California, said he mistrusts the government and bank to actually forgive the loan as promised. "I chose not to complete the effort," said Weaver. "Ultimately it's a loan. It's one that the government might call; they might change the parameters. I don't trust the government, so that's why I didn't do it."

As it happens, Weaver has taken the advice of well-known construction business coach Michael Stone by amassing a three-month cash reserve to cover his overhead and living expenses. By laying off his workers for now, he figures he can ride the crisis out.

"I’m going to go with my initial gut instinct and have my employees go on unemployment and risk the higher unemployment tax later," Weaver wrote on Facebook. "It seems like they will fare better than anything I could do with the PPP for them ... It works out better for my family, too, since we’re incorporated and, technically, employees of the company, so we can draw unemployment. And it makes it so that the company is not beholden to the government if/when they change their minds and not forgive the approved expenses."

Will owners get paid? Whether company owner compensation is covered by the PPP is an open (and complicated) question. Construction companies take many forms: sole proprietorships, limited liability corporations (LLCs), S corporations, and partnerships, or even sometimes C corporations. In some cases, the owners take wages or salaries; in that example, there's a case to be made that PPP funds can be used to cover that income. But what about "owner draws" or end-of-year net profits? Those cases are not so clear. On the website of the American Institute of Certified Public Accountants, one comment on those examples was: "Further guidance is needed." But for what it's worth, AICPA said: "The guidance provided to-date indicates that wage, commissions, income, or net earnings from self-employment or similar compensation are considered payroll costs for self-employed individuals."

For a good analysis of how Schedule C filers are treated under the PPP, check out this April 15 report from Forbes (see: "Self-Employed And Need A PPP Loan? The SBA Just Issued New Guidance For You," by Jason B. Freeman).