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The CARES Act and Construction

The government’s stimulus package and what it means for a construction industry that suddenly finds itself on pause
Some ink on a piece of paper dictates which directions trillions of dollars goes
Some ink on a piece of paper dictates which directions trillions of dollars goes
Some ink on a piece of paper dictates which directions trillions of dollars goes
By
Caleb Taylor
,
March 31, 2020
As you may have heard (just kidding, there’s no way to miss any piece of news in this never-ending-phone-scrolling existence known as quarantine): on March 25th, the Senate voted 96-0 in favor of a $2.2 trillion stimulus bill meant to mitigate the effects of coronavirus [COVID-19]. The bill, known as the CARES (Coronavirus Aid, Relief, and Economic Security) Act, is meant to be a patch on the nail-punctured tire that is the United States economy (it’s $2.2 trillion so the patch is bedazzled with 24-carat diamonds). If you’d like to spend your quarantine perusing
the 880-page package
yourself, you definitely have time.
Now you may be thinking, “What a cartoonishly large-sounding number $2.2 trillion is,” and you’re right. Like the size of our universe, this amount is a bit hard to conceive, let alone spend in 100 lifetimes. To compare, the 2008-2009 financial collapse was remedied
with a stimulus bill
for (then extraordinary, now measly) $831 billion. And again, this $2.2 trillion is only a patch to give immediate relief—a quick breath of air—the implication being more money is on the way. “From where,” is another topic for another day.
On March 27th, the House of Representatives agreed to the bill and the President signed it into motion. So the CARES Act is officially a thing, despite how cartoonishly large (or conveniently acronymed) it is. So what does it mean for the construction industry? It’s a very good thing. According to the Associated Builders and Contractors, the stimulus bill is a “
critical lifeline
.”
CARESquote
Let’s dig into the numbers. There are three primary subsections of the bill that pertain to people working in construction: Big Corporations, Small Businesses, and Individuals. Construction funding itself is contained within the $339.8 billion of the
State & Local gov't
section (see graphic below) of the overall package (
ENR calculates
that infrastructure and construction could be eligible for $43 billion of that amount).

1. Big Corporations — $500 Billion

In the United States, a “big corporation” is defined as having more than 500 employees. There are plenty of US construction firms with staff numbers in the thousands (i.e., Turner, Mortenson, Bechtel Group, PCL, Jacobs), and math tells us that the most construction layoffs will come from big corporations (thankfully, CARES Act ramifications for unemployment benefits have ramped up to $600 per week on top of normal UI compensation). Seeing as the construction industry has been dealing with
workforce shortages
well before any world-spanning infectious viruses, these layoffs will be painful and most assuredly short-lived.

2. Small Businesses — $377 Billion

As you may have guessed, if a company has 500 employees or less, they’re counted as a small business.
According to the SBA (Small Business Administration)
, there are 30.7 million small businesses in the United States which give jobs to 59.9 million Americans; 47.3% of the working country. Small businesses make up the majority of the construction industry and are comprised of smaller firms and tech companies the bigger firms rely on for their efficiency.
For sub-500 employee construction companies, this $377 billion chunk is allocated almost entirely to help remedy employee compensation in the wake of jobsite shutdowns and supply chain disruptions. There are two major programs under the Small Businesses subsection of the CARES Act:
Paycheck Protection Program
and
Economic Injury Disaster Loans Program
.

2a. Paycheck Protection Program

The
Paycheck Protection Program
portion of the Small Businesses subsection guarantees $350 billion in loans to small businesses for eight weeks of cashflow assistance. These low-interest (< 4%) loans are specifically for payroll, sick leave, salaries, health insurance, and mortgages. There’s a massive incentive for small construction companies to maintain their payrolls until June, as all portions of the loans dedicated to payroll will be forgiven. Yes,
forgiven
. Loan forgiveness also applies to companies that restore their payrolls after the crisis should they be forced to make cuts.

Loan Eligibility Requirements:

Less than 500 employees on payroll (full-time, part-time, and any other status combined)
Ongoing operations cannot continue financially due to current economic conditions
The loan must be used to keep employees and retain payroll
No similar past or pending loans

Borrowing Limits per Company:

Up to 2.5 times the borrower's average monthly payroll
Cannot exceed $10 million
For more information on Paycheck Protection Program loan elibility for small businesses, please see
the U.S. Chamber of Commerce's guide
.

Where can one apply for a PPP loan?

One can apply at an SBA-approved lender, ideally your local bank. Most SBA districts have a list of available preferred lenders in the resources section of their district homepage.
You can find your district here
.

2b. Economic Injury Disaster Loans (EIDL) Program

Separate from Paycheck Protection Program loans, a COVID-19 specific
EIDL
is a $10 billion fund (of the $377 billion allotted for Small Businesses) meant to provide emergency cash advances for companies of up to $10,000 (you can receive up to $2 million). Eligibility requirements can be found in the
SBA application form found here
.

3. Individuals — $560 Billion

If you’re a living, breathing human being in the United States, and your yearly income does not exceed $75,000 a year,
you’ll receive $1,200
. If you make between $75k and $99k, you’ll receive a portion of $1,200 that degrades the closer you get to $99k (if you make more than $99k a year, the government assumes you would scoff at a $1,200 one-time check anyway).
Based on median salaries in construction
, the Individuals subsection will mostly relieve construction trades workers, i.e., first-line supervisors, electricians, structural iron and steel workers, equipment engineers, carpenters, etc., whose compensations range from 46k-78k. Couples filing jointly receive $2,400 with $500 a pop for each child (strategically enough for a new Switch and
Animal Crossing: New Horizons
).
CARES
While we traverse the still-murky waters of COVID-19, with
many construction firms
still wondering the definition of “essential,” the CARES Act provides a welcomed respite, however slight. $2.2 trillion is both gargantuan yet contrastingly paltry because it only buys the construction industry eight weeks. So for now, we wait. We FaceTime family, we bingewatch
Tiger King
, we wonder if it’s worth putting on pants, we decide to put on pants and go on a quarantine walk—the solace, of course, coming from realizing that all those little squares on Zoom are filled with people thinking your same thoughts. The U.S. construction industry generates $1.3 trillion worth of structures each year and
employs 11 million people
; it’s simply too big to topple.