How PPP Loans Affected the Transportation and Construction Industries

The government-backed the Paycheck Protection Program (PPP) loan and forgave it to assist small businesses and organizations that faced economic difficulties as a result of the COVID-19 outbreak. 

Companies that met the criteria were eligible for up to 2.5 times their monthly payroll expenditures. Businesses could use PPP loans to cover wages, other epidemic costs, and qualified consequential damages within the first 24 weeks after receiving loan money.

Who Qualified for the PPP?

Charitable institutions, veterans groups, indigenous enterprises, self-employed persons, private businesses, and freelance contractors qualified for the loan, including small corporations with 500 or fewer personnel. In some sectors, businesses with more than 500 employees qualified if they met the necessary Small Business Administration (SBA) employee-based size guidelines.

PPP Loans within the Transportation and Construction Industries

Managing a transportation and construction company can be difficult, particularly considering the unusual circumstances of the past few years. PPP loans and tax advantages provided tools to maintain good construction management, making it easier to retain workers throughout the labor shortage. They have recently changed, so you must stay informed about how the loans and taxes may impact your transportation and construction business.

Impacts on the Transportation and Construction Sectors

The construction sector is primarily made up of closely owned companies that met the basic requirements for a PPP loan. The building sector received 13% of PPP funds, the most authorized amount across any sector. 

Lenders, collateral, and other financial experts eagerly jumped in to safeguard their clients from bankruptcy after realizing that credit would be tight and bonding would be limited. Guarantors even sent letters to consumers, advising them credit line or equity use could risk their bonding ability in the long term.

Construction began and remained lucrative for many manufacturing enterprises, even as they incurred additional expenses to safeguard personnel and maintain employment agencies safer. The uncertainties became less immediate as a result of this, but long-term worries persisted. 

The construction sector took the brunt of the damage during the pandemic. Ongoing initiatives halted while new ventures in certain parts of the United States came to a standstill. Residential and business project revenues plummeted and federal grant funding ran dry, causing large and small construction enterprises to struggle. The construction industry turned to PPP loans to help them keep their personnel and stay on top of their business tasks. 

The industry historically has been a latecomer to downturns in the economy, and signs of future problems linger. This has created unique problems with responsible business administration, requiring a blend of longer-term planning and aligning the use of PPP loan funds to the program's short-term adherence framework.

PPP Loans and Tax Modifications

Construction enterprises such as self-reliant contractors, self-employed individuals, and sole proprietors previously had to determine their PPP funds using their profitability. Rather than using net income, these companies could use gross salary.

Those who filed for or received a PPP loan couldn’t raise the amount owed. Certain PPP debtors may be subject to scrutiny by the SBA. Transportation and construction companies with a gross salary of more than $150,000 fall into this category. Recently, people have pushed to allow enterprises that have already applied to make changes to their estimates.

Loan Forgiveness At Glance

Loan forgiveness refers to the termination or dismissal of an existing loan, meaning you are no longer liable for the loan's installments or penalties.

PPP has helped a lot of small firms obtain financing, and they could be erased as part of a government stimulus program. Therefore, recipients must observe large PPP loan forgiveness rules. Recipients must spend the money within a set period and for designated professional reasons for some or all of the loan to be pardoned. Forgiveness is crucial for many small firms struggling to survive the economic crisis brought on by the COVID outbreak.

Following the Federal Acquisition Regulations (FARs) 

The relevant share of any revenue payback allowance or other rebates relative to any allowed cost obtained by the contractor shall be credited to the govt as a reducing cost or a monetary rebate, as per FAR 31.201-5. Federal entities may argue that this pertains to pardoned PPP loans and that a credit to overhead is required.

FAR Expense Overhead Effect of Loan Forgiveness 

Contrary to common belief, it is important to remember that FAR 31.201-5 includes all costs, not simply indirect costs. It's worth noting that several state transportation agencies have recommended businesses to credit the fully forgiven PPP loan to overhead. As a result, businesses can compute and declare various overhead rates.

Effect of Lowering Overhead Rates 

State transportation contractors, designers, and engineers would have to cut their overhead expenses during the year the PPP loan is canceled by up to 40%. Based on how a company's agreements are set up, they may be forced to modify the previous year's service fees to the verified overhead rate, or they may be able to utilize the new rate as soon as it is authorized. Furthermore, when bargaining future fixed-price multi-year agreements using the deceptively low rate created by PPP loan forgiveness, the revenue impact can last throughout the rest of the deal. 

In addition, the IRS considers expenditures linked to a forgiven PPP loan to be non-deductible. In the year in which forgiveness was granted, taxable pay will go up.

How To Apply For PPP Loan Forgiveness 

Filing for forgiveness should not be taken lightly, and it is critical to conduct a thorough study before seeking transportation and construction industry PPP loan forgiveness. Companies should think about their whole contractual portfolios, future contractual prospects, and taxation. 

Depending on the overhead rate for enterprises predominantly operating on government contracts, loan forgiveness will likely be smaller than the recovered revenue amount. Based on the petition and updated SBA instructions, here are some essential PPP loan forgiveness tips: 

  1. Unpaid Payroll Expenses

Applicants are entitled to compensation expense forgiveness paid and incurred during the 24-week coverage period. Payroll expenditures accrued but not paid during the borrower's final pay period of the 24-week term are only forgiven if they are paid on or before the next normal pay period.

  1. Unpaid Non-Payroll Costs Incurred

Non-payroll charges must be covered or accrued throughout the coverage duration of 24 weeks. Costs that were accrued but not paid during this time must be reimbursed on or before the subsequent normal invoicing date, even if that date falls outside the 24-week term. 

The SBA has expressed that no settlements ahead of home loan interest will be acquitted; however, it has not expressed whether prepayment of finance expenses, lease, or utilities will be pardoned.

  1. Bonuses And Hazard Pay

The phrase payroll costs is broadly defined in the CARES Act to incorporate remuneration in the manner of payment, earnings, bonuses, or other similar incentives.

Staff bonuses and safety pay, as a consequence, are qualified for debt forgiveness as wage costs if the employee's total remuneration does not surpass half a million dollars on an annual basis. These payouts are a comparable sort of remuneration because they are a complement to a salary or earnings.

  1. Intervals of Coverage for Alternate Payrolls 

The SBA is giving an alternate payroll insured timeframe for those that have a biweekly or more regular payment schedule because the 24-week coverage duration doesn't always correspond with a corporation's payroll cycle.

Consequently, instead of utilizing the first day of the pay period after loan disbursement, you can determine qualified payroll expenditures using the 24-week period that commences on the first day of the pay period.

  1. Self-employed Applicants Require Clarity 

To assess their highest acceptable remuneration, self-employed entrepreneurs should compare their earnings to that of the previous year’s income, according to PPP guidance. The importance of documentation cannot be overstated. The pardon applications are quite thorough, and some of the final guidelines are unclear. 

Some documentation isn't necessary to be submitted with the forgiveness application, but the borrower must keep it. As a result, it's critical to keep track of any facts that may arise from forgiving.


There are a lot of exemptions to the full-time equivalent (FTE) requirements. The PPP was created to assist firms in paying their employees. As a result, firms who cut their employees will typically find their PPP forgiveness eligibility reduced. 

However, there are various exceptions, including:

  • A worker who was allowed to return to work but turned it down. 

  • An employee who willingly quit or was fired for cause. 

  • A worker who sought and was granted a shift decrease of their own volition. 

  • There are other exemptions to the FTE and pay regulations, which borrowers should be aware of when applying for a loan.

Equify Financial is here to help you with PPP loans to sustain your business. Get in touch with us today! 

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