Paycheck Protection Program (PPP) was created by the lawmakers of the US as a form of relief during the pandemics of COVID-19. PPP is a form of the Coronavirus Aid, Relief and Economic Security (CARES) is totaling 659 billion dollars of funds being administered by the Small Business Administration. What contractors need to know about the PPP initiative.
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Short-term Financing for Small Businesses
The industry is already recording reduced numbers in the domain of employed construction workers, showing that nearly a million construction workers have lost their jobs due to the crisis with the COVID-19 pandemics. PPP initiative was created to provide financial support for small businesses to prevent layoffs. It appears that the guidelines on the PPP loans are not clear enough for contractors in terms of not understanding eligibility and requirements. That is how contractors are considering to return the PPP loans and lay off workers fearing there would be penalties.
Forgiveness for Contractors through PPP Loans
The most favorable thing about the PPP initiative is that loans given to contractors are eligible for forgiveness under certain requirements. In case contractors would like to become eligible for forgiveness on PPP loans, there shouldn’t be layoffs, the employer needs to retain the same number of employees, all the loaned funds need to be spent on payrolls, and similar expenses during the eight-week long disbursement.
Returning the PPP Loans
Forgiveness can be used for PPP loans in case of contractors’ compliance with all the mentioned requirements, while the forgiveness will reduce in case the full-time headcount of employees is reduced compared to the time before taking the loan. The same case goes if companies decrease employees’ salaries. The maturity of loans under the PPP initiative is two years with an interest rate of 1%.
