Another Important Update on the EIDL and PPP Loans
We continue to keep our ears to the ground. New information is coming out daily and we want to keep you informed. PracticeCFO created a COVID task force three weeks ago and we meet 2-3 times a week. On this task force are each of our five CFOs, as well as our director of accounting. These global emails summarize our collective understanding and advice. We’ve also been in contact with most/all of you regarding your own personal situation. We hope this support has been helpful through this unusual period.
- The EIDL program was only funded with 17B compared with the $350B of PPP stimulus. If you don’t receive the grant or approval in the next two-three business days, it’s likely it will not come at all. Especially since many people were offered loan amounts in the hundreds of thousands. We are seeing many of our client now receiving the grant money of up to $10,000 and approval on loan amounts.
- We continue to see most people receive $1,000 per employee for the grant. But the amount of EID loan approval is varying widely.
- We’ve been seeing a lot of approvals, but very little circulation yet. We expect next week many doctors will begin to see the funds.
- As of today, Friday, April 17th, we are reiterating that we believe every one that hasn’t already filed for the PPP loan should do so now. Here’s our reasoning:
- The initial funding of $350B ran out yesterday, only 13 days after the application window opened on April 3rd.
- If congress approves the next round of funding of $250B, which we hope/expect will happen early next week, this will likely be gone within a week. It’s possible the existing applications already in process, but not yet approved, could consume that $250B. We don’t know exactly.
- Many doctors had decided to submit their PPP applications to better coincide the receipt of funds with the reopening of their office. The goal was to increase the amount of loan forgiveness. This was sound logic. However, only recently congress posted the final CARES Act bill on their website. The wording was updated to state that when calculating the FTE for purposes of forgiveness, “the average number of full-time equivalent (FTE) employees shall be determined by calculating the average number of full-time equivalent employees for each pay period falling within a month.” Our interpretation of this is that you can use the last four weeks of the eight-week forgiveness period to calculate your FTE employees. Example: You receive the PPP loan on Monday April 27th. You’re able to resume operations four weeks later on Monday May 25th. If your staff are fully employed relative to the 2019 covered period from May 25th through June 22nd (i.e. the last four weeks), then your FTE ratio will be 100%. The challenge then become how do you expend 75% of the loan on payroll within the last four week since 75% of the loan equals 1.9 months of your standard payroll (2.5 X 75%). There are a number of “payroll costs” that you can front load during those last four weeks. We’ll be providing more details to you in the future on this. Additionally, we expect further clarification on this from the Treasury or SBA in the future.
- If your bank has now denied your PPP application due to the exhaustion of stimulus funds, we recommend you stay in contact with them so they are ready to resubmit immediately upon congress approving additional funds for the PPP program. If your bank won’t do the PPP loan, there are various Fintech companies which might (and I emphasize might). To name a few:
- We don’t recommend you use the PPP loan to pay your staff while they’re at home not actually working. We’d rather you keep that money untouched in your business checking account and simply repay it once we get through this since the amount of loan forgiveness may be limited. Many of your staff will earn more by remaining on unemployment over the next few weeks. Over this past weekend, CA was set up to administer the extra $600/week in state unemployment. Many of your staff will receive over $1,000/week.
- We do not recommend you set up a new checking account for this. We’ll be able to track the spending of the EIDL and PPP loan as needed.
- Keep in mind enforcement and audits on loan forgiveness will be low for the following reasons. This does not mean you should be dishonest, but it does mean we can interpret ambiguous areas in your favor.
- Banks do not want these loans on their books. At 1%, they earn very little and these loans count toward their lending caps. They want the loans forgiven as much as you do.
- The government sent the PPP stimulus out not expecting to get it back.
- If there are subsequent audits on loan forgiveness applications, it will likely be for the larger companies that had millions in PPP loans, not $100,000.
- As well help you complete the loan forgiveness application, we intend to somewhat aggressive in our interpretation of the law (which is very vague in some respects).
- Don’t forget about our COVID resource center here: https://www.practicecfo.com/covid-resource-center-for-dentists/