• Small Business Administration Assistance for Family Physicians During COVID-19

    Coronavirus banner

    Updated January 4, 2021

    The CARES Act established new Small Business Administration (SBA) programs to address the COVID-19 outbreak. Find them below.

    Economic Injury Disaster Loan and Loan Advance

    New: EIDL Replenished The Emergency COVID Relief Act of 2020 includes $20 billion for new Economic Injury Disaster Loans to assist businesses that were hardest hit by the economic impacts of the coronavirus. The EIDL program has been in existence for many years to provide loans to businesses that have suffered from federally declared disasters. EIDL loans must be paid back with interest and come with significant requirements. Of importance, in the original legislation an EIDL loan reduced your PPP loan forgiveness; this is no longer true and recipients of an EIDL loan may now go back and request forgiveness for the original EIDL loan amount. Physicians should speak with their advisers before taking out an EIDL loan because PPP loans are preferable for most businesses.

    Paycheck Protection Program

    Updated March 30, 2021

    PPP Program Extended

    The Paycheck Protection Program (PPP) application period, which was scheduled to expire on March 31, 2021, has been extended through May 31, 2021. In addition, the Small Business Administration has been given an extra month (i.e., from June 1 until June 30) to process applications after the program closes. Any business with fewer than 500 employees can apply for a first-time loan, and any business that already received a PPP loan can apply for a second loan if it employs fewer than 300 workers.

    PPP Revisions

    Recent reforms to the PPP plan, described in this White House fact sheet, may affect physician practices. Beginning Wed., Feb. 24, 2021, a 14-day period is established during which only businesses with fewer than 20 employees can apply for PPP relief. The method for calculating PPP loans will also be revised for sole proprietors, independent contractors, and self-employed individuals to increase the dollar amount of loan eligibility. In addition, PPP loans will be opened to small business with prior non-fraud felony convictions, small-business owners who are delinquent on federal debt including student loans, and noncitizen small-business owners who are lawful U.S. residents.

    New: Additional Funding and Changes to the Paycheck Protection Program – Apply Now

    The Emergency COVID Relief Act of 2020 has added $284.6 billion in funds to the PPP. Eligible physicians should consult with their local lenders and prepare now to apply for a PPP loan if needed. The new legislation also clarifies that expenses paid using forgiven PPP loans ARE tax deductible, a question that has raised considerable concern recently due to some IRS notices.

    The popular PPP program provides distressed small businesses with forgivable loans that can be used to cover essential costs such as payroll and rent. Businesses that already received a PPP loan are eligible to apply for a second one under the new terms. Some of the new funds are targeted to entities that serve very small businesses and those in underserved and minority communities. Public companies are not allowed to participate.

    Loans under this second round of funding are capped at $2 million per borrower, and borrowers must wait at least 90 days between loans.

    Both new and old borrowers may apply for a PPP loan if they meet the requirements of an “eligible entity” and also meet the “Necessity Test.”

    An “eligible recipient” is defined as “any business concern, nonprofit organization, housing cooperative, veteran’s organization, Tribal business concern, eligible self-employed individual, sole proprietor, independent contractor, or small agricultural cooperative” that

    1. employs not more than 300 employees;
    2. has or will use the full amount of their first PPP loan; and
    3. had gross receipts during one quarter of 2020 that demonstrate not less than a 25% reduction from the gross receipts of the entity during the same quarter in 2019.

    To meet the “Necessity Test,” eligible recipients will still need to certify, under penalty of perjury, that the loan is “necessary to support the ongoing operations of the applicant.” According to experts, it may be hard for businesses that have survived one or two hard quarters but are now making ends meet to certify that the loan is “necessary” for the ongoing operation of the business, even though the business could reasonably argue that they need the loan. While the SBA has stated that it will not question the necessity issue for those whose loans did not exceed $2 million, applicants should be cautious: Recipients will be made public, and the IRS, the Department of Justice, and/or whistleblowers could pose a challenge. So don’t take out a new PPP loan if you don’t need it.

    Businesses that were not in operation as of Feb 15, 2020, are not eligible, nor are businesses with 20% or more ownership by a “Chinese entity.” There are special provisions for new and seasonal businesses and businesses with more than one physical location. Also, the new legislations allows borrowers in bankruptcy to apply for a PPP loan and specifies how the loan proceeds will be handled.

    PPP borrowers can select a covered period that begins the day the borrower receives the funds and can be as short as eight weeks and as long as 24 weeks. Once the borrower spends the money, the borrower can apply for forgiveness. The first and second loans will have different covered periods because they began on different dates.

    Additional expenses will also count toward forgiveness, including costs of conducting virtual business, property damage due to unrest, supplier costs, and personal protective equipment and safety costs—all due to COVID-19. 

    Loan Forgiveness Application

    Borrowers who received less than $150,000 in PPP loans during the first round will have to submit a one-page simplified application for forgiveness, but all of the same rules apply and applicants must retain documentation substantiating that they meet all requirements.

    Borrowers are allowed to go back and amend their original PPP application if the new act allows a greater amount than the original loan. Also, applicants that returned their original PPP loan may re-apply.

    Other provisions of the original PPP loans still apply. More information is posted and will be updated on the Small Business Association PPP web page within 17 days.

    Physicians should consult their CPA, financial, and legal advisers for a thorough understanding of the PPP loan program.

    Work with your lender that is servicing the loan. Additional resources include: