COVID-19: PPP Replenishment Fund Likely to be Swallowed Whole by the Application Backlog
by Adolfo Pesquera
The $322 billion in Paycheck Protection Program replenishment funds will likely only cover the backlog of applications that could not be addressed by lenders in the first round, according to a Dallas-based construction industry spokesman.
During a Friday morning webinar conversation channeled through the Associated General Contractors of America, John H. Martinez, president of the Regional Hispanic Contractors Association discussed his findings relating to the PPP application process.
Citing a Stanford University study, Hernandez said minority businesses are more likely to be bankable if they are associated with a local chamber of commerce and have maintained a relationship with bankers.
“The banks were working first on the backlog of (PPP) applications they had and were not taking on any new clients. Having that relationship before COVID-19 and after is critical. We see the relevancy now,” Hernandez said.
Bankers that have had relationships with RHCA members in Dallas worked with them quickly, he said. Hernandez also noticed that businesses in the Midwest had a larger per capita success rate in getting PPP loans, and he opined that this was because many of these loans were generated in small communities where the banker would know the clients very well.
“If you don’t have a relationship now, it may be too late,” he said, referring to securing a PPP loan. “But it’s never too late to start having good banking relationships. Most banks are telling us they’re anticipating the money will run out just from the backlog.”
However, there are other loans available. They do not have grant-like forgivable provisions, but interest rates are very low, he said.
Hernandez’s comments came during a Q&A that followed an AGC and National Hispanic Contractors Association joint presentation that included the AGC’s results of their fifth COVID-19 survey of the construction industry.
Ken Simonson, the AGC’s chief economist, said more and more contractors are being informed that project owners are cancelling projects scheduled to start in late April, May and into June.
“We’re still seeing about half the firms saying that they have a problem getting deliveries of materials or equipment. There’s also still a large percentage of firms that say the supplies of personal protective equipment are difficult to come by,” Simonson said.
The good news is that the construction industry carved out the largest share of PPP loans in the first tranche. VBX reported this earlier in the week.
In addition, an increasing number of firms brought back employees, “as about one-fifth of firms have been able to win additional work, whether it’s for building medical facilities, other types of buildings or accelerated work on highway projects,” he said.
Going forward, the industry needs to see more legislation to put money into highway programs, other infrastructure, and also to make state and local governments whole so that they can continue to fund projects that are necessary.
Simonson speculated that contractors will do everything in their power to keep employees on payroll because of their experience with the last recession. From 2006-2011, the industry lost over 2 million workers and it never really recovered from the labor shortage.
Looking forward at the various market sectors, he said single family construction is in a slump but should come back once home buyers feel comfortable visiting properties; the multifamily market will come back more slowly, however.
He saw the hotel market split into two tracks, with high end properties languishing and economy hotels doing relatively well. He cited the weekly data produced by Smith Travel Research.
Occupancy at luxury hotels plummeted to near zero, but economy hotels are experiencing a much smaller decline. What has helped them, ironically, has been social effects of the pandemic. Essential workers avoiding risk to family are using them, as are people stranded away from home and roommates who are self-isolating to protect their roommate.
What follows is a two-week comparison of construction industry responses based a data from the NHCA and AGC of America:
Adolfo Pesquera (Reporter/Editor) is a veteran news journalist. He has worked for Hearst Corp., American Lawyer Media, News Corp and Freedom Communications. His work has been published in newspapers and magazines across the USA. He is a journalism graduate of UT-RGV. He writes, edits and creates digital pages for VBX.