PPP and the Home Building Industry: Impact of Policies and Regulations

As things appear to be getting back to “normal” for the home building industry, it is important to understand how the U.S. government’s activities and responses over the last few months may impact our companies from an accounting perspective.

In a recent webinar, COVID-19: Impact of Policies and Regulations on the Home Building Industry, Steve Hays and Matt Beerbower, with RubinBrown, explored legislation and economic assistance available to the home building industry, suggestions on managing cashflows and using scenario analysis, and took s peak at what the new normal may look like for home builders going forward.

Read the highlights from the webinar below or watch the complete webinar on-demand.

Legislative and other economic assistance available

Paycheck Protection Program Loans were part of the CARES Act passed in March of this year with the intention of assisting small businesses in response to the economic uncertainty brought on by COVID-19. Now that a few months have passed, the webinar focused on questions around forgiveness of these loans.

• The section associated with Loan Forgiveness can be found in Section 1106 of the Cares Act, as modified by the PPP Flexibility Act “If used for intended purposes, the first 24 weeks of certain payments shall be eligible for forgiveness on a tax-free basis.”

• There are two categories of payments covered: payroll and non-payroll costs. Payroll costs are defined under Section 7(a)(36). Non-payroll costs include the following:
  • Interest on a mortgage on real or personal property incurred before February 15, 2020
  • Rent for a lease in force before February 15, 2020
  • Certain utilities (electricity, gas, water, transportation, telephone, or internet access) for which service started before February 15, 2020
• It’s important to note that no more than 40% of the forgiven amount can be for non-payroll purposes.
• The call for enhanced transparency has resulted in all loans greater than $150,000 being made public.
• There are still a few unknowns including items such as how to calculate average full-time equivalents (FTEs), what the SBA will look at and their process for review, and will interest on the forgiveness truly be forgiven, as well.

The webinar also included further detailed information about the SBA review, form 3508EZ, tax regulations and relief, financial accounting rules and relief, and credits available. Watch the recording for more information about these areas.

Managing Cash Flows

Cash is king! Managing cash flows is always important but may become more important than ever.

If you don’t have a plan now, you may want to consider using scenario planning to look at areas such as social, economic, political, and technological.

Some steps you can take when planning scenarios:

1. Layout scope, issues, and time horizon
2. Define key drivers
3. Collect and analyze data
4. Develop scenarios
5. Apply scenarios
6. Maintain and Update

There are various ways to analyze your business including cash burn analysis, sensitivity analysis (Monte Carlo simulations), and enterprise risk management just to name a few.

What business may look like after COVID-19

The pandemic has caused businesses to change how they work now—the interaction with customers, employees, and the way they do business—and may result in changes that last beyond COVID-19:

• Use of technology will be a big part of business: Doing more meetings remotely, increased social media, and the importance of CyberSecurity. Now more than ever it’s important to keep your guard up!
• Less People/Higher Productivity: People are working remotely and there is more flexibility in work schedules that suits individuals.
• Space Requirements: People are rethinking their office space--likely less than more office space will be needed.
• Economic Outlook: Home building market is strong. Seize the moment and be as profitable as possible.

Watch the webinar recording for more information, and sign up for the RubinBrown newsletter to stay up to date on changes in policy.

The webinar is intended to give you an overview of issues and things to consider as you learn more about government regulations and how they apply to you. Make sure to talk to your accountant or another professional to get a deeper understanding of the specific regulation as it applies to your business.