Fluent in Practice Management

We are glad to hear that clients are starting to receive money from the SBA or learning that you will soon receive money.  We also know you have questions about what to do next.  What follows are updates regarding the EIDL and PPP loans along with links to an informative webinar and helpful spreadsheet.

EIDL Grant

There are two parts to the Economic Injury Disaster Loan (EIDL) program: the EIDL grant of up to $10,000 and the EIDL loan.  We will first cover the EIDL grant.

The grant will be deposited in the account listed on the SBA application for an amount up to $10,000.  The final amount of the grant is determined by the number of employees you have.  The SBA provides $1,000 per employee up to the maximum $10,000 grant.

There will be no other notification from the SBA regarding the grant, and receipt of the grant does not mean you were approved for the bigger EIDL loan.  You do not need a separate bank account for the EIDL grant (you will need separate accounts for the main EIDL loan and PPP loan).  We recommend that you use the grant money to pay for operating expenses excluding payroll, rent, and utilities.  For example, if you need to pay the business credit card, 2019 accrued retirement, dental supplies, lab expense, or professional fees.

The EIDL grant is forgivable.  However, if you also receive money from the PPP loan, the amount of forgiveness you receive on the PPP loan is reduced by the amount of the EIDL grant.

EIDL Loan

The SBA will notify you when you are approved for the EIDL loan.  After receiving notification, you will need to decide how much to borrow.  For some clients who have plenty of cash reserves or who have been able to see enough patients to maintain steady cash flow, no additional funding may be needed.  These clients may just use the EIDL grant only and not request additional money from the EIDL loan.  Most clients, however, will request funds from the EIDL loan.  We recommend the following to help with your decision on the EIDL loan:

• Be conservative and request more than you think you may need.  Remember, you can pay back any unused funds.
• Estimate your practice will be closed until at least July 15^th to be conservative and to account for this time of uncertainty.  While we hope you will be seeing patients sooner than expected, we also want to plan for the unknown.
• If you applied for the PPP loan, assume you will receive the PPP loan for payroll, health insurance, retirement, rent, utilities, and mortgage interest.  The EIDL loan will pay for other operating expenses until the PPP loan has been depleted.  After the PPP loan has been depleted, the EIDL loan can cover similar expenses as the PPP loan.
• Determine your other operating expenses between now and July 15^th.  This is how much to request along with an additional buffer.
• We know it can make you nervous to request more money than what you may need.  Let’s keep this in perspective by assuming you borrow $250,000.  The practice reopens sooner than expected, production and collections are strong, and you only need to use $100,000 from the loan.  This allows you to pay back the unused $150,000 several months later.  The cost for holding on to the additional $150,000 is just $500 per month in interest.  We believe the interest expense is worth it considering all of the unknowns in front of us.
• Please keep in mind that the EIDL loan has a low interest rate of 3.75% and a payback period of 30 years.  This make it a great loan for working capital.

We strongly recommend that you to set up a separate checking account for the EIDL loan.  The separate account will make it much easier to track how the proceeds are used.

PPP Loan

The Paycheck Protection Program (PPP) loan provides loan forgiveness, which is a very attractive feature of the program.  Unfortunately, we are still waiting for guidance regarding how to maximize loan forgiveness.  Therefore, we recommend the following for the PPP loan:

• Set up a separate checking account for the PPP loan.  It will be very important to clearly show how loan proceeds are used during the forgiveness period, and this is much easier if the money is in a separate account.
• If you can hold off on using the loan proceeds, we encourage you to leave the money in the separate account until further guidance is issued about the forgiveness period.  We expect guidelines to be issued no later than April 27^th.
• If you absolutely need to use the money right now, we recommend you use it to pay rent, utilities, and payroll of those currently working.
• We still recommend that you keep you staff on unemployment until you need them to return to work.

If you are not able to receive as much loan forgiveness as originally hoped, please keep in mind the PPP loan provides very inexpensive working capital (at 1% interest).  In addition, if you borrow more than you need, you can pay back the unused money (just like with the EIDL loan).

Webinar for EIDL and PPP Loans

Our ADCPA colleagues at Rosen and Associates have put together an extremely well-made webinar that steps through the EIDL and PPP loans.  We highly recommend that you watch the webinar to learn more about both loans.

https://zoom.us/rec/share/3utPK6Oq7z5Iabf10GH5CowuQa7MX6a8hiUcrKJcnUea-LDiJtkJYjAhIRLvIldf

The Access Password: M8$0fzK7

EIDL versus PPP Loan

We have a spreadsheet that shows the interplay of the two loans and how to use loan proceeds to pay for expenses.  For example, during the eight-week forgiveness period, you will use the PPP loan to cover payroll, rent, and utilities.  The EIDL loan can cover loan payments, professional fees, and other operating expenses (after the eight-week period, it can also pay for payroll, rent, and utilities). Here is a link to the speadsheet –  COVID-19-PPP-Expense-Tracker-4-16-2020-Fluence

We will continue to keep you updated regarding the EIDL and PPP loans.  Please stay safe and healthy.