New Paycheck Protection Program Updates and Expansion – What Contractors Need to Know

The new round of Paycheck Protection Program (PPP) funding has opened to all lenders on January 19.  The “Second Draw” of the PPP looks slightly different from last year’s program, and certain aspects of the “First Draw” loans have been updated.

Important updates include a deadline of March 31, 2021 for borrowers who have not yet applied for the first round of PPP.  The same basic rules apply to receive funding, including a good faith certification of eligibility and the use of the funds over an 8 to 24-week covered period.  Also, at least 60% of the funds should be used for payroll costs.  Borrowers can have no more than 500 employees and the loan amount is the lesser of 2.5x the average monthly payroll costs or $10 million.  Borrowers can use payroll from 2019, 2020 or a rolling 12-month average.

There was also an expansion of the allowable costs.  Specific to contractors, these can include certain operation expenses such as payment for business software or cloud computing services that help facilitate business operations, product or service delivery, the processing, payment and/or tracking of payroll expenses, human resources, sales and billing functions, and/or accounting or tracking of supplies, inventory, records and expenses.

Borrowers who received loans greater than $2 million will need to complete Form 3509, PPP Loan Necessity Questionnaire. Certain considerations borrowers should keep in mind regarding Form 3509 include the timing of the notice.  Borrowers have 10 days to respond back to the lender’s notice asking for Form 3509.  If no response is received within 10 days, forgiveness could be forfeited.  It would be best practice to complete the loan questionnaire before you file for forgiveness.  Any type of action a borrower took, or plans to put in place to “keep the lights on” and keep workers employed should definitely be stated on the loan questionnaire form as these details would only work in a borrower’s favor for forgiveness.

An open dialogue with your accountants, banks and other stakeholders is always important, but especially critical with relief programs and in these challenging and uncertain times.  Feel free to reach out to your Sax advisor with any questions relating to the Paycheck Protection Program, loan forgiveness and the Construction industry overall.


About the Author

Angelo Straface, CPA is a Senior Manager at Sax and a member of the firm’s Construction Practice.  Angelo is also a valuable member of Sax’s COVID-19 Recovery Task Force and leads the charge with regards to ensuring clients appropriately and accurately prepare for loan forgiveness.  He can be reached at [email protected]