Unofficial GUIDE to the CARES Act

With most elective surgery cancelled for at least the next month and office visits significantly limited, some tough decisions lie ahead for those of us who both make a living and support a staff by treating patients.  Whether you are a surgeon in private practice or a 1099 device representative the reality is the same: 

Fewer Patients = Less Revenue. 

The goal of this post is simple, review the government programs available to help bridge between now and when it is safe to get back to work. Feedback from many business owners has told us that these programs are overloaded and even a “disaster” in some cases. Starting with your own bank is your best bet. Larger National banks, such as Chase, have been unresponsive in some cases. If this is the case for you, this is an opportunity to start a relationship with a local community bank who will provide individual attention for you now and long term.

We have summarized the 2 main components of the CARES ACT below and have provided relevant links to applications, portals, and other resources.  

For complete details on the Coronavirus Aid, Relief, and Economic Security (CARES) Act click the PDF here: The Small Business Owner’s Guide to the CARES Act

Summary

There are two key SBA small-business relief:

  • Paycheck Protection Program (PPP) – FORGIVABLE LOANS  (UP to 8 WEEKS)
  • Economic Injury Disaster Loans (EIDL) – LOW-INTEREST LOANS (DEFFERABLE)

You can participate in BOTH, but there are restrictions, see below for more info. 

Paycheck Protection Program (PPP) – up to $10m loan, of which up to 8 weeks are forgivable if you meet certain milestones on maintaining your payroll. No SBA fees, and at least six months of deferral with maximum deferrals of up to a year.

Lenders began processing loan applications on April 3, 2020 and on April 10, 2020 for Independent Contractors.

APPLICATION FORM and PPP WEBSITE

  1. Criteria -SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities.
  2. Eligibility – This program is for any small business with less than 500 employees including sole proprietorships, independent contractors and self-employed persons.
  3. Loan Size – Loan is equal to 250% of your average monthly payroll costs. Most applicants will use the average monthly payroll for 2019, excluding costs over $100,000 on an annualized basis for each employee.
  4. Loan Terms – For any amounts not forgiven, the maximum term is 10 years, the maximum interest rate is 4 percent, zero loan fees, zero prepayment fee.
  5. Lenders – You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union.
    1. LOCAL SBA FINDER
    2. 100 MOST ACTIVE SBA 7(a) LENDERS

What to have ready for PPP?

  1. APPLICATION FORM 
  2. FIND A LENDER
  3. Have documentation proving revenue and expenses prior to February 15th, 2020
  4. KEY DOCUMENTS
    • EIN or TIN number
    • 2017 and 2018 taxes
    • 2019 taxes- if not complete yet, 2019 Profit and loss broken down by month will work
  5. VERIFICATION DOCUMENTS
    • Full-time equivalent employees on payroll 
    • Dollar amounts of payroll costs
    • Covered mortgage interest payments
    • Covered rent payments
    • Covered utilities for the eight week period starting when you get this loan
  6. Stay in contact with your local SBA office 

How is loan forgiveness calculated? 

You must apply through your lender for forgiveness on your loan. In this application, you must include: 

  1. Documentation verifying the number of employees on payroll and pay rates, including IRS payroll tax filings and State income, payroll and unemployment insurance filings. 
  2. Documentation verifying payments on covered mortgage obligations, lease obligations, and utilities. 
  3. Certification from a representative of your business or organization that is authorized to certify that the documentation provided is true and that the amount that is being forgiven was used in accordance with the program’s guidelines for use.

Economic Injury Disaster Loan (EIDL) & Grants – EIDLs are lower interest loans of up to $2 million, with principal and interest deferment at the Administrator’s discretion, that are available to pay for expenses that could have been met had the disaster not occurred, including payroll and other operating expenses.

  1. EIDL APPLICATION – LIVE NOW
  1. You can receive a $10k cash advance within 3 days of applying
    1. “the $10k advance does not need to be repaid under any circumstance, and may be used to keep employees on payroll, to pay for sick leave, meet increased production costs due to supply chain disruptions, or pay business obligations, including debts, rent and mortgage payments.”
  2. Eligibility -Those eligible are the following with 500 or fewer employees:
    1. Sole proprietorships, with or without employees
    2. Independent contractors
    3. Cooperatives and employee owned businesses
  3. Loan Terms:
    1. Up to $2m
    2. Payback period = 15-30 years 
    3. Interest rate = 3.75% 

Can I Do Both The PPP and EIDL Programs? 

Whether you’ve already received an EIDL unrelated to COVID-19 or you receive a COVID19 related EIDL and/or Emergency Grant between January 31, 2020 and June 30, 2020, you may also apply for a PPP loan.

If you ultimately receive a PPP loan or refinance an EIDL into a PPP loan, any advance amount received under the Emergency Economic Injury Grant Program would be subtracted from the amount forgiven in the PPP. However, you cannot use your EIDL for the same purpose as your PPP loan. For example, if you use your EIDL to cover payroll for certain workers in April, you cannot use PPP for payroll for those same workers in April, although you could use it for payroll in March or for different workers in April.

Can I get more than one PPP loan?

No, an entity is limited to one PPP loan. Each loan will be registered under a Taxpayer Identification Number (TIN) at SBA to prevent multiple loans to the same entity.