Based on member inquiries, ³Ô¹ÏºÚÁÏÍø updated our CARES Act analysis as it applies to small business eligibility for the new Small Business Administration (SBA) loan program. Those changes are noted below.
- A business is eligible for such a loan if it employs 500 employees or fewer, or if the business is in an industry that has an employee-based size standard through SBA that is higher than 500 employees. Under SBA size standards, construction contractor firms are generally defined as a small business according to their (see Sector 23: Construction on linked website), not their number of employees. As such, ³Ô¹ÏºÚÁÏÍø assumes and has asked the SBA to make clear in guidance that construction contractor firms whose small business size standard is determined by gross receipts should simply determine if it has 500 employees or fewer to qualify for these loans. Construction supplies and manufacturers have small business size standards that are generally defined by the number of employees the firms employ.
³Ô¹ÏºÚÁÏÍø is concerned that there will be confusion among the construction industry because there will be two different regimes of rules for calculating if a construction firm has fewer than 500 employees: one for the new Families First Coronavirus Response Act (FFCRA) paid leave mandates as guided by the Fair Labor Standards Act; and the other for this new small business loan program under the federal Small Business Act and regulations.
Construction firms must use caution and be alert that if they are mandated to provide the FFCRA paid leave, as they may not necessarily be able to apply for these new SBA loans. Firms should seek legal counsel for guidance. ³Ô¹ÏºÚÁÏÍø will be working with the SBA and Congress to help mitigate this confusion and seek clarity and standardization among the new programs recently enacted whose applicability is based on a firm’s number of employees.