The CARES Act was signed it into law by the President, following Congress’ swift action on the massive coronavirus relief bill. The following information via the National Federation of Independent Business (NFIB) provides a few key highlights related to the new loan program which will be available to physician practices.
It is expected that most small businesses will be interested in this opportunity—if your physician practice is looking to take advantage of the small business loan, you should get in contact with your financial institution as soon as possible.
Podcast: What Kansas Physicians Need to Know about the CARES Act
This 10-minute discussion with Dan Murray, Kansas State Director of the National Federation of Independent Business, provides a succinct outline of what physician practices need to be aware of in considering whether to apply for relief under the CARES Act. This is a time-sensitive federal program, so we hope you will take a few minutes to familiarize yourself with its provisions.
→ Listen to the podcast episode in the player above, or click here to load the mp3 file. You may also subscribe and listen to the KMS podcast via:
→ Download the SBA Payroll Protection Program Loan Application (pdf)
→ View information on the SBA $10,000 advance forgivable loan program
Payroll Protection Program (PPP) Loans
Secretary of the Treasury Steven Mnuchin announced the Payroll Protection Program (PPP) would be in place by Friday, April 3. Loans are available through June 30, 2020.
It appears that the loans provided through the PPP are very beneficial to businesses, including physician practices. They are meant to be used primarily for covering payroll costs. If they are used for that purpose, most of the funds will NOT have to be repaid. Any amount of loan proceeds not used for specific expenses allowed under the program will have to be repaid. The debt forgiveness will also be limited if you do not maintain your employee count or maintain payroll costs.
You will be required to sign, among other things, a certification that: "The uncertainty of current economic conditions make necessary the loan request to support the ongoing operations and that the funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments."
We expect most businesses will want to participate in this loan program. Loans will be processed by banks and other lending institutions via the Small Business Administration (SBA).
We are waiting on guidance about what paperwork will be required for the application process. To be fully prepared, we recommend you start gathering payroll information to calculate your maximum loan amount.
You will need information for the last year prior to the loan. Fox example, right now that period would be 4/1/2019-3/31/2020. What you need:
- Payroll costs
- Company group health insurance costs
- Company retirement plan costs
It’s unclear what additional information may be needed, but we should have more information in the next week or so.
Note: Your local banker is probably going to be overwhelmed by businesses applying for this new, widely available program. The best thing you can do to assist in the process is to have everything ready and organized. There is a lot to consider on how to calculate your maximum loan amount and the maximum forgiveness portion. You should contact your accountant or financial advisor right away for assistance in preparing the necessary financial information you will need for this process.
- Overriding criteria: This is for small businesses only, which include:
- Businesses—including physician practices—with 500 or fewer employees.
- Self-employed individuals (sole proprietors and independent contractors).
- $349 billion in funds for loans to small businesses.
- Be prepared to act quickly – we strongly urge you to reach out to your banker or lender right away, even this weekend.
- You will work with your banker on this loan process.
- Loan are only available thru 6/30/2020.
- Loan applications will be processed through banks via the SBA loan program.
- Amount of loan is based on an average monthly payroll cost (includes wages, company paid health insurance, company retirement plan, state unemployment taxes) calculation for the one year period prior to your loan date (i.e. 4/1/19-3/31/20).
- Loan amount available is 2.5 times your average monthly payroll cost up to $10 million.
- A portion of loan may NOT have to be repaid based on the amount you spend for payroll costs, rent, and utilities during the eight weeks immediately after you get your loan.
- Forgiven portion of the loan is NOT taxable.
- Forgiveness portion is subject to limitation based on employee retention and compensation level.
- PPP interest rates shall not exceed 4%.
- PPP loan maturity is 10 years.
- There is no personal/individual guarantee on the loan.
- SBA guarantees 100% of the loan.
The PPP may be used for the following costs incurred between February 15, 2020 and June 30, 2020.
- Payroll costs, which includes salary or wages, family and sick leave, allowance for dismissal or separation, health care benefits, retirement benefits, payment of state and local taxes assessed on the compensation of an employee, and the sum of payments to an independent contractor. NOT included: sick or family leave where a payroll tax credit is already claimed, salaries in excess of $100,000, and compensation of employees outside of the U.S.
- Payments on a mortgage obligation.
- Rent or lease payments.
- Interest on any other debt obligations that were incurred before February 15, 2020.
- Before the CARES Act, unemployment seemed like the last resort. Now under the new legislation, it may be the best option in many cases.
- There is a $600 per week unemployment benefit created by the CARES Act that will be in addition to the state unemployment weekly benefit. More details to come.
- It is true that an employee may be earning more on unemployment than they made working in some cases.
- Unemployment Insurance and COVID-19: FAQ from the Kansas Department of Labor.
- Laid off employees can use a benefits calculator and apply for benefits at www.getkansasbenefits.gov.
Families First Coronavirus Respose Act (FFCRA)
- The provisions of FFCRA will apply from April 1, 2020 through December 31, 2020.
- A summary of the paid leave that employers generally must provide employees.
This information was provided courtesty of the National Federation of Independent Business.
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