In addition to partnering with DrFirst as a telehealth option for members and successfully advocating with the governor on various fronts, ISMA is working to inform members about the Small Business Administration’s just-announced Paycheck Protection Program (PPP).
We asked Mark Ingold, MBA, ISMA vice president of finance, to explain the new, forgivable loans being offered to physicians and other business owners with up to 500 employees to cover payroll expenses.
Why is the PPP so significant?
Cash flow. All businesses, including physician practices, need revenue coming in to be able to operate the business and pay employees, suppliers and overhead costs. The COVID-19 crisis has interrupted everything, including cash flow. This program could be a game-changer. This loan is fully forgiven if conditions are met.
Fully forgiven. You mean a practice would not have to pay back any of the loan?
Correct. This could be a lifeline for practices that otherwise are looking at closing due to this significant interruption in patient visits, procedures and revenue.
Given the name of the program, is the intent to save jobs?
Yes, much of the act involves maintaining the jobs of employees in all industries. To be forgiven, it’s expected that 75% of the loan amount is to be used to cover salaries, wages and employee benefits over the eight-week period after the loan is made. The remaining amount can be used for other business expenses.
Are there limits on the amount of salaries covered?
Yes, annual salaries of up to $100,000 during the loan program period are covered. Those who earn more than that amount would be eligible up to that limit. So, for ISMA member practices, it would cover most employee payroll and likely some of the physician salaries.
What if a practice has already laid off staff?
Staff would need to be hired back and employment levels maintained during the term of the loan. This will all need to be documented as part of the application process.
Should members contact the Small Business Administration to apply?
Based on what we know now, members should call their local bank or credit union first. Only SBA approved lenders, which include most banks, will have the applications and be able to process the loans. Your accountant or attorney may be able to assist but, for most practices, their bank is all they need.
What can I do to make the application process faster?
Additional documents may be needed, but be sure to have these on hand when you begin the application process:
When does this program start and end?
- 2019 and 2020 year-to-date monthly profit and loss statement.
- 2019 and 2020 year-to-date payroll reports.
- State income, payroll and unemployment insurance filings.
- TAX ID/EIN and complete ownership information.
- 1099s for 2019 employees and independent contractors that would otherwise be an employee of your business. Do not include 1099s for services.
- For health care costs, all health insurance premiums paid by the business owner under a group health plan.
- Your company retirement plan funding paid for by the company
Details were announced a few days ago, and the program started today, Friday, April 3, and runs through the end of June. Demand is anticipated to be very strong, so practices should begin the application as soon as possible
before there are delays in getting the loans processed by lenders or the funds run out. Initial news reports suggest the funding may run out within the first week and banks, credit unions and the SBA could be overwhelmed at first.
Do borrowers pay a fee to the bank, and what are the loan terms?
No, the lenders cannot charge borrowers fees for this program. All loans have a two-year term, and the interest rate is fixed at 1.0% for all loans. Payments are deferred for six months, and there are no prepayment penalties.
Is this only for small employers?
The program covers business of up to 500 employees. Larger employers would have access to other stimulus programs.
Please refer to the ISMA COVID-19 Resource page
or ISMA’s special alert email to members Wednesday, April 1, for additional information on this program.
Also: Watch for a survey from ISMA next week to gauge the business impact on your practice from the COVID‐19 crisis.