Treasury Eases Construction Firms' Path to COVID-19 Paycheck Protection Loans

New federal guidance changes earlier SBA rule

Secretary of the Treasury Steven Mnuchin addresses aspects of the stimulus bill in a March 25, 2020 file photo. Photo by Tia Dufour for the White House

In a quick solution to a problem flagged by construction contractors, the Treasury Dept. has issued new guidance that should clear the way for construction firms to apply for loans through the new Paycheck Protection Program (PPP), an important and highly popular tool to provide more cash flow for businesses battling to cope with the sharp downturn caused by the coronavirus pandemic.

In another positive development regarding the PPP, created in the Coronavirus Aid, Relief and Economic Security, or CARES, Act, Treasury Secretary Steven Mnuchin said on April 7 that the White House would ask Congress to add $250 billion to PPP, to supplement the $349 billion that the CARES Act provided for the program.

Mnuchin said he expected Senate and House votes within days on legislation providing that additional funding, according to a White House press pool report.

Competition for the loans has been fierce. A White House official reported on April 6 that more than 10% of the available loan total had already been committed in about three days after PPP's April 3 launch.

One of the main reasons for PPP's popularity is that if borrowers use all of the loan proceeds for payroll, health insurance premiums and certain other types of expenses, the government will forgive the loan, essentially turning it into a grant. Companies also must use 75% of the loan dollars only for payroll.

The CARES Act states that companies, nonprofits and other entities with 500 or fewer employees are eligible for the loans.

AGC blasts SBA rule

But on April 2, the SBA issued an interim final rule that added a second requirement for construction companies seeking a PPP loan—their annual revenue also would have to stay within SBA-set limits that the agency uses to determine whether a firm qualifies for other SBA loans.

The Associated General Contractors of America contended that the SBA's interim final rule—stating that construction contractors must meet both the workforce-size and annual revenue limit—contradicted the CARES Act itself. [View 4/6/2020 ENR story on the loan program controversy here.]

AGC on April 4 had urged federal officials to issue a new document to essentially overturn SBA's interim final rule. On April 6, Treasury acted, issuing formal guidance saying that, to be eligible for PPP, a company must meet either the 500-employee threshold or the annual revenue ceiling—but doesn't have to meet both criteria.

Stephen Sandherr, AGC chief executive officer, in an April 7 statement, praised the Trump administration for issuing the new PPP guidance. He said, “This change means the program is now more likely to help smaller firms continue to operate and retain staff.”

Jeff Urbanchuk, a spokesman for the American Council of Engineering Companies, said via email on April 8, "The law is very clear that engineering firms that fit within the 500-and-below employee metric qualify for the new SBA loans, and the latest Treasury guidance reinforces this point."

Urbanchuk noted that most engineering firms are small and "are essential to maintaining America's critical infrastructure." He added, "Our recovery coming out of this crisis will depend heavily on these smaller firms being able to use stimulus dollars to keep their people engaged in this essential work."

Bipartisan Backing for PPP Increase

Meanwhile, there was strong bipartisan sentiment on Capitol Hill for providing additional funds for the PPP loans.

Senate Majority Leader Mitch McConnell (R-Ky.) said in an April 7 statement that “it is quickly becoming clear that Congress will need to provide more funding or this crucial program may run dry.”

McConnell said that he was working with Mnuchin and Senate Minority Leader Chuck Schumer (D-N.Y.) and hoped to have the Senate approve the additional funding for PPP on April 9, when the Senate will be in pro forma session.

House Minority Leader Kevin McCarthy (R-Calif.) also said more money is needed for the PPP.

Schumer and House Speaker Nancy Pelosi (D-Calif.) said they support $250 billion for small businesses, but they want half of that sum "channeled through community-based financial institutions that serve farmers, women, and minority- and veteran-owned small businesses and nonprofits in rural, tribal, suburban urban communities...."

They called for an additional $100 billion for hospitals and community health centers and other health systems to provide "desperately needed resources to the front lines of this crisis...."

In addition Schumer and Pelosi want $150 billion for state and local governments and a 15% increase in the maximum benefit under the Supplemental Nutritional Assistance Program.

Story updated on 4/8/2020 with comments from American Council of Engineering Companies and congressional Democratic leaders.

Tom Ichniowski has been writing about the federal government as ENR’s Washington Bureau Chief since the George H.W. Bush administration, and he has covered at least five major highway bills. A recognized expert on government policy on infrastructure and regulation, Tom is also a Baltimore native and Orioles fan who grew up rooting for Brooks and Frank Robinson. He is a graduate of Columbia College and Columbia’s graduate school of journalism, where he once used “unrelentless” in a headline.