Many Texas physicians have reached out to the Texas Medical Association with questions about long-term, low-interest, forgivable emergency loans through the Small Business Administration (SBA).
One option that could help your practice’s valuable staff is the Paycheck Protection Program (PPP), a new program to bridge payroll expenses through June 30. The program provides access to $350 billion for businesses with 500 or fewer employees.
Friday, April 3, was the opening day for businesses to submit a loan application, but many banks are still preparing for an expected deluge of applications. Independent contractors and self-employed people can apply starting Friday, April 10.
If you are applying for a loan, TMA has created a checklist of the information and documents lenders, including the Paycheck Protection Program, most commonly request for a loan application.
Note: PPP loans are not limited to the health care industry and there is a lending cap, so TMA encourages you to submit an application as soon as possible if you plan to apply.
How Much is Available?
The maximum loan amount is 2.5 times your average monthly payroll costs for the prior year, up to $10 million.
What are the Terms?
This loan has a maturity of two years and an interest rate of 1%. Also, loan payments will be deferred for six months.
This Loan is Forgivable?
Yes, you read that correctly. The loan will be fully forgiven if the funds are used for payroll, interest on mortgages, rent, and utilities. Forgiveness is based on maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease. Also, keep in mind that no more than 25% of the forgiven amount may be for non-payroll costs. For some physicians, we know that rent may exceed payroll costs.
Start with Your Bank
Not every lender is participating in the program, and some are restricting applications to current customers, so it is best to start with your local bank. Moreover, several bankers TMA has spoken to warned against using the sample application form on the SBA website. For optimal processing, use the application posted on your lender’s website.
Data Needed for the Application
The application process is somewhat tedious, but at least one physician told TMA her accountant prepared the necessary documents. Examples of data required include: 1) detailed payroll documentation for the previous year, including IRS Form 941, or 944 for most businesses; 2) entity documents including Articles of Incorporation or Organization, Bylaws, and Partnership Agreements likely will be needed as well.
If you have more questions about your practice’s finances, the TMA COVID-19 Task Force has created a Frequently Asked Questions (FAQ) to help guide you through these uncertain times.
Find additional COVID-19 relief options on the U.S. Small Business Administration website and on the practice viability section of the TMA COVID-19 Resource Center.