The Small Business Administration (SBA) has extended the deadline to repay Paycheck Protection Program (PPP) loans by one week. The “safe harbor date” for businesses with PPP loans has been pushed back from May 7 to May 14.
The SBA said borrowers will not need to apply for the extended deadline. The SBA’s updated guidance also reminds borrowers to review carefully the required certification for PPP loans that “[c]urrent economic uncertainty makes this loan necessary to support the ongoing operations of the Applicant.” The SBA administration plans to provide additional guidance on how it will review the certification of safe harbor prior to May 14.
The Associated General Contractors of America (AGC) supported the decision to extend the deadline for safe harbor. AGC CEO Stephen Sandherr said additional clarification is needed on the PPP's guidance requiring borrowers to certify that current economic uncertainty made loan requests necessary.
“This vague guidance has prompted many construction employers to reconsider their acceptance of the loans. Indeed, nearly 11% of construction employers that received the loans report they are considering returning them and laying off staff because of the confusion around this guidance, according to a survey the association is running," Sandherr said.
The PPP originally was allocated $349 billion as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The construction industry led all other subsectors with nearly $40 billion in loan approvals across more than 114,000 applications in the first two weeks of the PPP. Initial funding for the program ran out within two weeks, but the government was quick to approve a bill including an additional $310 billion allocation for the PPP.
Under the PPP, small businesses--companies with 500 employees or fewer--can apply for partially forgivable loans that can cover operating expenses. Borrowers can apply for loans up to 2.5 times the company’s monthly payroll costs for the period between February 15, 2020, and June 30, 2020 or $10 million, whichever is smaller. The portion of a PPP loan used to cover the first eight weeks of payroll, interest on mortgages, rent, and utilities can be forgiven. Forgiveness is also contingent upon employers maintaining or quickly rehiring employees and maintaining salary levels.
Last week, the Internal Revenue Service (IRS) stated employers who received loans through the PPP would not be eligible for tax deductions on expenses if payments of those expenses funded by the loan resulted in the loan being forgiven.
