In a new frequently asked questions document published by the Small Business Administration (SBA) on April 28 about Paycheck Protection Program (PPP) loans, the SBA updated its guidelines about which companies are eligible for PPP loans, causing confusion among the construction industry about whether they are eligible. Stephen Sandherr, CEO of the Associated General Contractors (AGC) of America, wrote a letter to Treasury Secretary Steven Mnuchin on April 29 requesting clarification.

The SBA’s new guidance states that all borrowers must assess their economic need for a PPP loan under the standard established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the PPP regulations at the time of the loan application.

“Although the CARES Act suspends the ordinary requirement that borrowers must be unable to obtain credit elsewhere, borrowers still must certify in good faith that their PPP loan request is necessary. Specifically, before submitting a PPP application, all borrowers should review carefully the required certification that ‘[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant.’ Borrowers must make this certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business,” reads the new guidance.

It also states that any borrower that applied for a PPP loan prior to the issuance of the updated guidance that no longer is eligible can repay the loan in full by May 7, 2020 to be deemed by the SBA to have made the required certification in good faith.

In his letter to Mnuchin, Sandherr asked how the federal government wants companies that are “at a complete loss to determine whether they are [in full compliance]” to assess their ability to access other sources of liquidity.

In addition to requesting that the U.S. Department of the Treasury immediately provide additional guidance on the required certification, Sandherr requested that it also extend the May 7 deadline.

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