The COVID-19 crisis has negatively impacted small business owners in the retail and service industries. But other small businesses, like private practices, are hurting too.
Unless you offer primary care, there’s a strong chance that your practice has seen a decline in appointments and income over the past month. Student Loan Planner’s recent coronavirus survey revealed that dentists are facing a serious financial crisis right now. But other private owners, like chiropractors, optometrists, veterinarians, and physical therapists could be struggling too.
Fortunately, the CARES Act introduced a few small business relief and stimulus programs that could help you get through this difficult time. Keep reading our guide to coronavirus relief for private practice and small business owners to learn about your options.
Note: On Thursday, April 16, the SBA announced that it was no longer accepting new applications for the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) Program because available funding had been exhausted. Currently, the Treasury Department and SBA are urging Congress to appropriate more funds for these programs.
Paycheck Protection Program (PPP)
The most publicized (and beleaguered) small business relief program included in the CARES Act is the Paycheck Protection Program (PPP). With PPP, private practices and small businesses can pay up to eight weeks of their payroll costs.
The maximum that business owners can borrow is 250% of their monthly payroll costs or $10 million, whichever is less. PPP loans come with a maturity date of 2 years and a remarkably low interest rate of only 1%. Payments are also deferred for 6 months and lenders cannot charge origination fees.
Who is eligible for the Paycheck Protection Program (PPP)?
Any private practice or small business owners who meet the SBA size standards and have less than 500 employees can apply for PPP. You’ll also need to show that your business was in operation by February 15, 2020.
In addition to businesses, 501(c)(3) nonprofits, veterans organizations, and tribal organizations can apply as well. Even independent contractors, self-employed individuals, and sole proprietors are eligible for the program.
However, that allowance also creates its own set of problems. Because they can technically apply for PPP on their own, small business owners cannot include payments made to independent contractors in their PPP monthly payroll calculations.
How much of the PPP loan is forgivable?
PPP loans can be fully forgiven as long as the money is used toward qualifying expenses. Those expenses include payroll, mortgage interest and utilities. To qualify for forgiveness, at least 75% of the funds must be used toward payroll costs.
Forgiveness eligibility is also dependent on the business owner keeping his staff employed at their regular pay. But if payroll costs decrease by more than 25% during the eight-week period, the amount of forgiveness will also be reduced.
For example, let’s say that you typically make $20,000 in monthly payroll payments at your private practice. In this case, you could borrow up to $50,000 ($20,000 x 2.5 = $50,000), all of which could be forgiven. If you lay off a lot of your staff and payroll costs decline to $10,000 per month (a 50% reduction), however, your forgiveness will also be reduced.
How do small business owners apply for a PPP loan?
Small business owners can apply for the Paycheck Protection Program with any existing SBA 7(a) loan lender or any participating federally insured depository institution, federally insured credit union, or Farm Credit System institution.
The U.S. Treasury says that more approved lenders will be added to the program over time. To see the current list of lenders, you can use this tool from SBA.gov. The SBA has also provided a downloadable form that you can use to apply with an eligible lender.
Economic Injury Disaster Loan (EIDL)
The Economic Injury Disaster Loan (EIDL) program is a pre-existing SBA loan program that has been expanded to cover businesses that have been negatively affected by COVID-19.
Unlike PPP loans, small business and private practice owners aren’t limited to using EIDL funds on payroll, utilities, and mortgage interest. EIDL funds can also be used to repay debts or any bills that may be difficult to pay due to the effects of the coronavirus.
The maximum amount that business owners can borrow with an EIDL loan is $2 million. The interest rate for businesses is 3.75% and 2.75% for nonprofits.
Repayment terms will vary depending on the business owner’s needs but can extend for a maximum of 30 years. Payments are also automatically deferred for a full year.
Who is eligible for the Economic Injury Disaster Loan (EIDL) program?
Both small businesses and nonprofits are eligible to apply as long as they meet the SBA size standards and have less than 500 employees. And, as with the PPP program, sole proprietors, independent contractors and self-employed individuals are eligible to apply for the EIDL loan.
How much of the EIDL loan is forgivable?
When filling out the EIDL application, business owners can also apply for a cash advance of up to $10,000. The SBA says that the EIDL cash advance funds will be made available within days of a successful application and they do not need to be repaid.
The remainder of the EIDL loan, however, is not forgivable. And it should be pointed out that the cash advance is limited to $1,000 per employee. So if maximizing forgiveness is your main objective, you’ll probably want to opt for PPP instead.
How do small business owners apply for an EIDL loan?
You can apply for a COVID-19 Economic Injury Disaster Loan and loan advance directly at SBA.gov. The SBA estimates that it will take the average business owner a little over two hours to complete the online application. Click here to start your EIDL application at SBA.gov.
Employee Retention Credit
The Employee Retention Credit is a refundable tax credit designed to encourage private practice owners and small business owners to keep paying their employees. With this credit, business owners can reduce their tax liability by up to $10,000.
Who is eligible for the Employee Retention Credit?
Any small business owners are eligible to claim the Employee Retention Credit regardless of size. State and local governments and businesses that have taken out small business loans are not eligible for the credit, however. This means that you cannot combine the Employee Retention Credit with the PPP or EIDL programs.
To qualify, your business operations will need to have been partially or completely suspended due to the coronavirus. Or your gross revenue must be at least 50% lower than the comparable 2019 quarter.
What is the maximum credit that small business owners can receive?
Business owners can claim up to 50% of qualifying wages paid to employees up to the $10,000 maximum. Both cash payments and a portion of benefits payments can qualify for the credit.
It’s important to point out that if you have over 100 employees, you can only claim the credit for wages that you paid to employees who did not work during the quarter. But businesses with less than 100 employees can claim the Employee Retention Credit for all wages paid to employees, regardless of whether they worked or not.
How do small business owners claim the Employee Retention Credit?
One of the best parts about the Employee Retention Credit for private practice owners is that you don’t have to wait till you file your 2020 tax return for it to benefit your bottom line.
Business owners can be immediately reimbursed for the credit by simply reducing your next quarterly estimated payment. Or you can request an advance credit with the IRS by using Form 7200, Advance of Employer Credits Due To COVID-19.
SBA Debt Relief and SBA Express Bridge Loans
Do you already have an existing SBA loan or a relationship with an SBA Express Lender? If so, there are two additional relief options that you can take advantage of.
First, the SBA has decided to give debt relief to its existing 7(a), 504, and microloan borrowers by paying their principal, interest, and fees for six months. And they will also pay up to six months of principal, interest, and fees for any new 7(a), 504, or microloan borrowers who take out their loans before September 27, 2020.
If you have an existing relationship with an SBA Express Lender, you can also apply for an SBA Express Bridge Loan. With these loans, you can access up to $25,000 with fast turnaround time. An Express Bridge Loan could help you bridge the funding gap until you’re able to get a decision on your EIDL application.
More resources for private practice and small business owners
If you’re looking for more information about the coronavirus relief that’s available to you as a small business owner, check out the SBA’s Coronavirus (COVID-19): Small Business Guidance & Loan Resources guide.
Also, remember, that the SBA has 68 District Offices as well as many local CORE offices, Women’s Business Centers, Small Business Development Centers and Veterans Business Outreach Centers.
These local offices may be your best resource for learning about relief that could be exclusively offered to your area’s small businesses. To find a small business information center near you, check out the SBA’s local assistance directory.