January 12, 2021
On December 21, 2020, the 116th Congress adopted a $900 billion COVID-19 relief package. The legislation allocates an additional $284 billion in funding for small businesses—including physician practices—through the Small Business Administration (SBA) Paycheck Protection Program (PPP). 501©(6) non-profit organizations, such as the California Medical Association (CMA) and the county medical societies, may be eligible as well. The PPP loans are forgivable if borrowers meet certain criteria.
CMA urged Congress to provide this additional funding to sustain the financial viability of physician practices through the pandemic. Overall, this is great news to help physician practices with 300 or fewer employees.
The implementing regulations were published on January 6, 2021. However, the SBA has not released the new PPP application form yet. Applications are due March 31, 2021.
As with the first round of PPP loans, funds are limited. CMA believes that this second draw of funding will go quickly and urges all physicians to compile your documentation and contact your lending institution now, so that you are ready to apply as soon as the application form is out. The first round of PPP funding was depleted within two weeks in 2020.
The guidelines for the program and this second draw are essentially the same as the first round, but there are some improvements and changes in the process, including:
- For the first two days when the PPP application process opens, SBA will only accept applications from community lending institutions in underserved communities or minority-owned businesses.
- New simplified application process for loans under $150,000.
- The second draw loans are limited to businesses with 300 or fewer employees, who have been hardest hit by the pandemic.
- Applicants must demonstrate a revenue reduction of 25% in any quarter in 2020 as compared to that same quarter in 2019. However, you don’t need to submit this documentation when applying for a loan. This information is only needed when applying for loan forgiveness.
- Practices that received loans from the PPP program last year are eligible to apply for the second draw. However, they must have used the full amount of the first PPP loan, or plan to use it before the second draw.
- Businesses may use the same 2019 payroll figures to reapply for the second draw, which will make the process easier.
- The maximum amount of the loan is 2.5 months of your average monthly payroll costs or $2 million, whichever is less.
- Expands the allowable and forgivable uses of PPP loans and the types of expenses that can be counted as payroll costs.
- Some 501©(6) non-profit organizations are eligible for the second draw of funding under certain conditions, as well as critical access hospitals
Congress also repealed the requirement to deduct any SBA Economic Impact Disaster Loan (EIDL) advances from the PPP forgiveness amount and specified that forgiven PPP loans will not be considered taxable income. It also clarified that deductions are allowed for expenses paid with proceeds of a forgiven PPP loan, effective as of the date of enactment of the CARES Act and applicable to subsequent PPP loans.
In addition to the PPP funds, Congress allocated an additional $20 billion for EIDL advance grants for businesses with 50 or fewer employees.
CMA will provide updated information as it becomes available. You can also check the SBA website for updates.
Click here for an overview of the original program and the new changes from Forbes.