COVID-19 Explanation of Financial Resources Available

There are two loan programs available: (1) the CARES Act Paycheck Protection Program (PPP) and the SBA Economic Injury Disaster Loan (EIDL) program. 

In my mind, all members should apply for the CARES Act Paycheck Protection Program (PPP, S1102) even if they have the personal resources to tide themselves over temporarily.  Members may also want to consider applying for the Pandemic Unemployment Insurance (S2102 under the "Relief for Workers Affected by the Coronavirus Act").

The Paycheck Protection Program

It is my understanding that the Paycheck Protection Program provides a low interest loan, a "covered loan," to pay for payroll, mortgage interest (not the principal on a mortgage) or rent, and utilities (but not lost profit) for the "covered period" - from February 15, 2020 through June 30, 2020 [I think Congress was being optimistic here, and will likely have to extend the covered period in the future.]  In theory, up to $10M can be borrowed but this is likely for larger employers with going concerns and up to 500 employees.

"But I don't have the resources to pay my employees while my office is shut so I laid off my employees."  It depends on whether you want your employees back or not.  It is my understanding that a member could "furlough" his or her employees -- basically lay the employees off temporarily but technically they would still be employees of the practice that can be recalled to work when circumstances improve, or the doctor can "lay off" the employees which throws the employee out of work more permanently and forces the employee to look elsewhere for work.  Under either scenario, it is my understanding that the employee can apply for unemployment assistance.

In addition to some rather larger employers -- employers with less than 500 employees, this loan is also available to sole proprietors, independent contractors, and the self-employed. Unlike the SBA Economic Injury Disaster Loan (EIDL) program, the PPP loan is available from commercial lenders rather than solely through the SBA.  The program will still be overseen by the SBA, after all the PPP program modified the Small Business Administration Act, but by going through commercial lenders it should expand the immediacy and availability of the program significantly.

Now, it’s going to be a hassle applying for the PPP loan because it will involve paperwork and the hassle of keeping scrupulous track of everything.  In addition, the system is going to be jammed because of the volume of applicants.  In addition, in my mind, the PPP loan only covers the covered period -- Feb 15 - June 30.  If you want your employees back when you reopen and the economy wakes up -- you furlough your employees so they can apply for unemployment assistance; apply for the loan and when the loan is approved you can bring your employees back and begin paying your employees with the loan whether or not there is work to be done (especially if everything is still locked down) [However, it would be a great time to have them come in to completely disinfect the office, repaint it if necessary, and otherwise make those modifications to the operation that the doctor has been putting off].

The benefit to furloughed employees is that it takes them off unemployment insurance (even if temporarily) and preserves their unemployment benefits if they have to go back on unemployment later.  In addition, up to 8 weeks of the PPP loan are forgivable by the federal government (CARES Act S1106).  Under S1106 the administrator of the SBA will pay the commercial lender for up to 8 weeks of PPP loan payments on behalf of the doctor's office.  This has the effect of reducing the principal balance on the loan.

Application fees are waived; no personal guarantees nor collateral are required; and a negative credit history will not affect the ability to apply for and secure a loan. (SBA 15 USC 636(a)(2)(A)(i)(F)(36)(H),(I))  The maximum chargeable interest on the PPP loan is 4% and its payable over ten (10) years. (SBA 15 USC 636(a)(2)(A)(i)(F)(36)(K),(L))  The law does permit a loan to be deferred.  It allows an impacted borrower to defer payment of principal and interest for 6 months to a year. (SBA 15 USC 636(a)(2)(A)(i)(F)(36)(M)(ii)(II)).  Finally, there is "no prepayment penalty." (SBA 15 USC 636(a)(2)(A)(i)(F)(36)(R)).  In this sense, the PPP acts like a bridge loan to get the doctor's office through this lean period, and if the doctor can pay back the balance on the principal after the 8 weeks of the original loan are forgiven, in my mind, at least theoretically, it should not cost anything to borrower to borrow the monies.

Individuals cannot apply for both the CARES Act PPP loan and an SBA EIDL loan at the same time.  However, if someone has already obtained a disaster assistance loan from the SBA, they can still apply for a PPP for payroll or they can convert the SBA EIDL into a PPP.  Just cannot apply to both for the same purposes - no duplication (SBA 15 USC 636(a)(2)(A)(i)(F)(36)(Q)).

The Empire State Development Corporation provides guidance for the PPP program.

In addition, under Subdivision A of the CARES Act, an eligible employer - an employer who "was carrying on a trade or business during calendar year 2020", who "fully or partially suspended during the calendar quarter due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to the coronavirus disease 2019" and who suffered a significant decline of 50% or more in gross receipts for the first quarter following December 31, 2019 compared to the same quarter a year earlier, (S2103(c)(2)(i)) is "allowed as a credit against applicable employment taxes for each calendar quarter an amount equal to 50 percent of the qualified wages with respect to each employee of such employer for such calendar quarter (S2103(a)).  This provision ends if gross receipts are 80% of a normal quarter in an normal year. (S2103(c)(2)(ii))

Payroll taxes may also be delayed pursuant to S2102.

The application for the PPP is available online. Additional information on the PPP is available from the U.S. Treasury Department.

Pandemic Unemployment Insurance

The Pandemic Unemployment Insurance (PUI) is found at S2102 of the CARES Act under the banner of the "Relief for Workers Affected by Coronavirus Act" (RWACA)

The PUI covers just about everyone, even self-employed individuals (S2102(3)(A)(ii)(ll)) and individuals whose "place of employment is closed as a direct result of the COVID–19 public health emergency" (S2102(3)(A)(ii)(jj)). Importantly, PUI will not be provided to persons who "has the ability to telework with pay" (S2101(3)(B), which could mean no telehealth/telemedicine income.  It is also not available for persons who are on paid sick leave or other paid leave of absence.  An individual can collect regular unemployment assistance.  It I read the law correctly, it appears the PUI expands and extends unemployment by an additional 39 weeks. (S2102(c)(2)).

The rest of S2102 is devoted to the administration of the program between the federal and state governments.

State unemployment compensation is increased by $600 per week by virtue of the Federal Pandemic Unemployment Compensation program (S2104(b)(2)).

New York state had already waived the one week waiting period to declare unemployment.  The CARES Act waives the 7-day waiting period as well.

CARES Act modification of the SBA EIDL program

The CARES Act also modified portions of the SBA EIDL program as the alternative disaster relief program.  Unlike the CARES Act, relief or $2M if available under EIDL program but the interest rate is less - 3.75%.

The CARES Act waives certain requirements that ordinarily would be required under the EIDL -- such as personal guarantees, or the submission of previous tax returns or a tax transcript.  Rather, an EDIL loan is available based on a persons credit score (S1110(c), (d)).

The borrower can ask the SBA administrator for an emergency grant of not more than $10K pending approval of their EIDL application and the SBA administrator must make the advancement within three days of receiving the application for the EIDL loan.  Keep in mind, however, that this loan will be from and through the SBA, not commercial banks.  Because the system is overloaded, Bonadio recommends that clients mail their EIDL applications to the SBA headquarters in Fort Worth, TX.

  • Applicants may apply online using the Electronic Loan Application (ELA) via SBA’s secure website.
  • Paper loan applications can be downloaded from Completed applications should be mailed to:
    U.S. Small Business Administration
    Processing and Disbursement Center
    14925 Kingsport Road
    Fort Worth, TX 76155
  • Disaster loan information and application forms may also be obtained by calling the SBA’s Customer Service Center at 800-659-2955 (800-877-8339 for the deaf and hard-of-hearing) or by sending an email to [email protected].
The In's and the Out's of the EIDL will be forthcoming. Our best to all during this difficult time.
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