Below, you will find a detailed summary of the major relief programs provided through the $2T stimulus package, as well as assistance from the ADA and other governing bodies.
In summary, our recommendation would be the following:
Apply for the Economic Injury Disaster Loan (EIDL) as soon as possible, to get access to the (up to) $10,000 grant
Apply for the SBA Paycheck Protection Program and utilize the loan forgiveness period of 8 weeks to cover immediate costs
Please see below for more detailed information.
CARES Act Overview for Dentists
New Small Business Administration (SBA) financing options, designed to be lightweight to create fast working capital for practice owners
Removal of penalty for withdrawals from retirement vehicles on amounts up to $100K
Deferral of payments for federal student loans and SBA loans for up to 6 months
Deferral of federal income tax payments until July 15, 2020 (State dependent)
Deferral of payment of the employer’s share of social security tax through the end of year
Eligibility for credits against payroll taxes through the end of year, equal to 50% of qualified wages
Small Business Administration (SBA) Loan Options
A new SBA Loan called the Paycheck Protection Program (PPP) was released to encourage employers to keep staff employed, and includes forgiveness potential
Two loan types (EIDL and 7(a) Express) were modified to be more lightweight with less approvals, meaning a quicker time to receive funds
New guidance is permitting you to stop paying on current SBA Loans for 6 months. We’d recommend getting in touch with your loan providers to discuss this option if you haven’t yet.
There are several loan types available from the SBA including: 7(a) Loans, Community Development Corporation/504 loans, CAPlines, Export Loans, Microloans, and Disaster loans. More information can be found at the SBA website.
For the purposes of our guidance, we’ll be diving deeper into 3 specific loans:
Application: You can find the application to this loan at the SBA website linked here.
Eligibility: Dental practices that employ no more than 500 employees, sole proprietors, independent contractors and eligible self-employed individuals. Your business must have been operating as of January 31, 2020.
Max Loan Amount: $2 million
Interest Rate: 3.75%
Use of Proceeds: Fixed Debt repayment, payroll, accounts payable, mortgage or rent, and other overhead expenses
Term: Up to 30 years
Personal Guarantee: May be required if loan is more than $200,000
Collateral: May be required for loans that exceed $25,000
First 1,000,000 applicants get a grant that does not have to be repaid of $10,000. These funds are available within 3 days, and you can keep this even if your loan is denied.
The rest of the loan may take 3-6 months before the funds are available
[UPDATE] Feedback from Doctors on the Process (Last updated: April 23, 2020)
No funds have been received yet. It’s taking longer than expected to process these loans
The SBA (Small Business Administration), has stated that the $10,000 grant will be capped at $10,000, but is $1,000 per employee employed pre-disaster. Therefore, if your dental office consisted of 5 staff, your grant amount would be $5,000.
The max loan amount may be much less than $2 million due to the volume of loan requests
You can apply through any existing SBA 7(a) lender, federally insured depository institution or credit union, and Farm Credit System institutions that are participating
Please consult with your local lender as to whether they are participating in the PPP program
Lenders may begin processing applications as soon as April 3, 2020
A list of the most active approved lenders can be found here. A full list of lenders can be found here.
Eligibility: Dental businesses that employ no more than 500 employees, sole proprietors, independent contractors and eligible self-employed individuals. Must have been operating on February 15, 2020 and have paid employees or contractors.
Max Loan Amount: 2.5 times the employer’s average monthly payroll costs for the trailing 12 month period, up to $10 million. This includes: wages, tips, family medical leave, health benefits, retirement, state and local taxes.
Interest Rate:0.5% 1% (increased as of April 13, 2020)
Use of Proceeds: Payroll, salaries, mortgage payments, rent, utilities, and interest on debt incurred before Feb 15, 2020
Term: 10 years
No personal guarantee or collateral required
Turnaround Time: 2 weeks
Deferment: 6 months to one year
Any payments made for payroll, mortgage interest, rent, or utilities made within 8 weeks of the origination date of the loan can be forgiven. This means business owners will not have to pay the government back the full principal amount borrowed. Documentation of expenses will be required for a loan forgiveness application, and a decision on the forgiveness application will be made within 60 days of submission.
The amount of loan forgiveness can be reduced if the employer reduces the number of employees as compared to the prior year, or has reduced their payroll by more than 25% as of the last calendar quarter.
Currently, guidance around this is ambiguous, so we recommend watching for released guidance around this point
For payments to payroll, the salary cap is set at $100,000 for employees with salaries in excess of $100,000. Compensation amounts for payments over $100,000 will not be forgiven.
Forgiven amounts will be excluded from taxable income on 2020 tax returns.
[UPDATE] Changes to the PPP Loan (Last updated April 23, 2020)
Employers can no longer include independent contractor or sole proprietor pay in calculating payroll costs, but they are eligible for their own, separate, PPP loans
There is no required update to your application if you applied before April 7th
The interest rate has been increased from 0.5% to 1%
Lenders must disburse proceeds within 10 days of approval, which begins the 8 week forgiveness calculation period
Application: Apply at any SBA 7(a) approved lender. A list of the most active approved lenders can be found here. A full list of lenders can be found here. You must apply at the approved lender, and also fill out an SBA Form 1919, which the lender will provide.
Eligibility: Determined by the lender
Max Loan Amount: $1 million (increased from $350,000)
Interest Rate: Negotiable
Use of Proceeds: Short and long term working capital, purchasing real estate, purchasing equipment, acquiring a business, etc.
Term: Up to 7 years, with extension possibilities
Deferment: Up to 6 months
Personal Guarantee: Not required
Collateral: May be required for loans exceeding $25,000
Turnaround Time: 36 hours
[UPDATE] Changes to the Express Loan (Last updated: April 23, 2020)
To further expedite funding options, the SBA has authorized a temporary 7(a) Express loan called the SBA Express Bridge Loan
To quality, you must have a pre-existing relationship with your SBA lender
The max loan is $25,000
Interest rate: Prime + 6.5%
Turnaround time: 36 hours
Our recommendation on the above loans is to apply for the Economic Injury Disaster Loan (EIDL) as soon as possible to see if you can access the $10,000 grant. We recommend you also apply for the Paycheck Protection Program and use the forgiveness rules within the first 8 weeks. The ADA has also released guidance that states that you are eligible for the EIDL and PPP Loans in parallel, which can be found here.
We recommend acting immediately so that you can access the $10,000 grant, and also receive funds from whatever loan option you proceed with quickly to create liquidity for your practice.
Payroll Tax Deferral
Effective immediately, you can withhold payments to your payroll provider for the employer side of social security taxes. There is no application process or approval required. Your payroll provider may state they are waiting for guidance, but it is not necessary.
This has no impact on your ability to get an SBA loan, but if the loan is received and forgiven, you cannot defer taxes further.
Our recommendation is to defer payroll taxes effective immediately, and apply for the PPP Loan. If the PPP Loan is approved, you can pay the deferred payroll taxes with interest, but without penalties, and then receive the funds from the PPP Loan.
ADA Foundation Assistance Grant Program
The American Dental Association has also released a Charitable Assistance Grant Program for Dentists. This is a needs-based program designed to assist dentists with meeting emergency living needs and daily living expenses.
Information and application details can be found here.
We recommend thoroughly reviewing the requirements for this and submitting an application as soon as possible.
State-Specific Loan and Relief Options
We’ve also compiled a list of state-specific loan and relief options which can be found below.
Lastly, we’ve found a helpful state-by-state tax guidance resource from PwC that’s linked here.
We hope this guidance has been helpful. We’ll continue to update this page as the government releases information around any relief or funding efforts. Please always feel free to get in touch with us at firstname.lastname@example.org if you have any questions. We’re here to help all of our practice partners through this difficult time.