Webinar #3 - SBA/PPP Related Questions and Answers [UPDATED!]

Questions answering during the webinar:

Q# Question Answer
1 Does that $100,000 include the retirement benefits and health insurance costs or just salary? $100,000 is only wages/salary. Retirement/health are on top of that.
2 When calculating payroll for PPP, is it only payroll for all employees or only Full-time employees ? All employees.
3 if employee takes unemployment do they still qualify for FFCRA? If they take unemployment do they count towards PPL salary (you have to pay as usual while on unemployment ?) Are they taking partial unemployment, i.e. a furlough, or have completely left your employ?
4 For #5 Kerin is talking about, would this not apply in Vermont to health care workers because VT is providing child care for essential workers? Because Kerin practices in VT, she's given us a VT specific set of content for us to post to the forum which might address this question!
5 Do we need to keep the same employees for the PPP loan or we are required to keep the same headcount? Example layoff poor performing employee, but hire a new person to keep the same headcount. Headcount.
6 Can on K-1 income be included in the PPP forgiveness (up to $100,000 per partner)? Or is it just for hourly/salaried employees? I believe that you can use partnership distributions...but the entire thing is still up in the air!
7 what if you have to fire someone due to lack of performance...how does that affect the PPP loan reimbursement I'm assuming if you fire them for performance (as opposed to lay them off for lack of work), then you'd hire someone to replace them. That would replenish your numbers, and you would still get the loan repaid.
8 Under the PPP loan, if an employee is furloughed, will that affect the forgiveness statute? If by furloughed you mean "not receiving wages from me," then yes. If you paid them 100% of wages this time last year, and 0-50% this year, then that will affect whether you get to the 75%+ threshold of "this year's wages compared to last year's wages"
9 Should employess (MD owners) earning > 100k reduce their monthly draws to $8333 in order to avoid borrowing morethan we need? If you end up borrowing too much PPP, just return the rest of the principal in 6 months. No harm no foul. I think a better reason to pay yourself less is to conserve cash during this uncertain time.
10 Does the EIDL loan need personal guarantee by the MDs? If you receive >$200,000, yes.
11 can malpractice insurance be covered by the forgivable loan? It is not a forgivable expense, but you can use it.
12 Can you pay office mortgage with PPP loan ? Mortgage INTEREST is a forgivable PPP expense. Principal can be paid with PPP but is not forgiveable.
13 For PPP, Can utilities include malpractice, EMR, medical supplies and vaccines??????????? No.
14 Can we apply for PPP with multiple banks? No. The attestation you sign says you won't seek or receive another loan.
15 does the PPP money only go to Full time employees? No. You may also use it for part time folks' salary.
16 our bank just turned our LOC application despite excellent guarantees told us we had to do it thru SBA loans Not surprised, but keep asking!
17 if we manage to get the PPP loan, then incase we lose one provider during the loan forgiveness period, will we have to pay back the entire money? Not the entire money. The amount of money you set aside to pay for that provider's salary for 2 months you can either a) repurpose to another approved purpose (someone else's salary/retirement/healht insurance) or b) repay it.
18 If we get the PPP loan can we furlough anyone? How long can the furlough last? See previous question/previous answer. You CAN furlough people with impunity, although if your COVID-quarter-wages falls below 75% of your this-time-last-year wages, some of your loan will not be forgiven.
19 The SBA PPP application requires you to acknowledge that you don't have other loans i.e. the disaster recovery loan. Is that your understanding that you cannot have bonth? That guidance has changed. The current application requires you to attest that you have no other PPP loans, not that you have no other loans, and that you have never defaulted on any SBA loan. https://www.sba.gov/sites/default/files/2020-03/Borrower%20Paycheck%20Protection%20Program%20Application_0.pdf
20 So to clarify, you can apply for both EIDL and PPP at the same time, correct? And you could receive both? That is correct.
21 Is there an expectation that the money will run out for the PPP loan so it will be first come first serve? Those coming late may lose out? That is correct. There is no way that $350B can cover 2 months of payroll for all small businesses in the US.
22 Is the first 10k in EIDL FORGIVEN???? That's what it looks like!
23 what “utililiites” count in the PPP loan application The basics: water, power, gas, phone, Internet.
24 If you get the PPP loan, use for payroll, but need more for payroll for some reason, I cannot use the EIDL??? The PPP and EIDL are not mutually exclusive. You may be apply for both and you may be awarded both.
25 It affects how much we request on the PPP. No one seems to really know the answer. Thank you! This looks like a partial question. You are awarded 2.5x of your average monthly payroll...
26 Can employees who we reduced hours for apply for unemployment and ct to draw salary on PPP Unemployment compensation doesn't count towards wages you pay that can be forgiven in a PPP loan.
27 What is the timetables for the loans? Can we apply for BOTH at the same time and then decline the EIDL if we get the PPP? Yes, although frankly, if you get both, I'd keep them both until you're sure you're out of the woods.
28 So to clarify, you can apply for both EIDL and PPP at the same time, correct? And you could receive both? Yes, but you can't "double-dip" (i.e., use it to pay for the same things 2x).
29 Do end of year bonuses count as wages? Yes.
30 can you get EIDL and PPP — I thought you could not but graph seems to show that you can Yes. This is one of those guidance items that changed!
31 In the cash flow, is there a deferral on tax payments? I read somewhere we can defer SS taxes but not Medicare? Yes. That's the Social Security deferral provision. https://www.akingump.com/en/experience/industries/national-security/covid-19-resource-center/cares-act-summary-tax.html
32 can we then get the 10K grant from the SBA and not have to pay back and also get PPP and have that be forgiven as well or are they mutually exclusive You can get the 10k disaster grant from the SBA. And you can get a PPP. They are not mutually exclusive.

Open Questions:

33 @Tanikqua, as long as you keep 90% of your employees, you should be ok. You can also hire and replace the person that left.
34 75% of the PPP money has to be spent on Payroll costs.
35 But if it is not forgiven and we have brought our employees back to full time from half time, we are covering that extra payroll cost.
36 Can partner MD salaries (not part of payroll, paid pre-tax as a monthly draw with quarterly distributions) be included up to %100k?
37 can PPP Loan be used to pay for vaccines/
38 Can we apply for PPP with multiple banks?
39 Can we include partner physician compensation (up to $100,000) in our "payroll" calculation for the PPP loan or just employed physicians?
40 We’re cutting staff hours due to lack of business but if the employer chooses to pay staff their regular hours even if they didn’t work them, will those hours still be forgivable under PPP
41 Can you roll the EIDL into a PPP?
42 I was told you have to spend the money in 8 weeks or you have to pay it back. Has to be used for payroll during that 8 weeks. 25% can be used for rent/other but still has to be used during that 8 weeks.
43 If you apply for the EIDL loan, do you have to use your line of credit first? If yes, how do you bridge expenses between line of credit and EIDL loan funds?
44 if you wait to get a PPP loan do we run the risk of it not being available?
45 is it important to get the PPP in as soon as possible?? What if my area will peak in 3 weeks and I need it more for 8 weeks after that..and then what if I wait and there is no more money left??
46 Is our eligibilty for the forgiven SBA loan adversely affected if some of our employee hours are cut? (Not furloughed but just cur back by between 25-75%)
47 We have applied for the EIDL loan. If we receive PPP funds, then the amount of the EIDL loan is reduced by the PPP loan amount, correct?
48 what if an employee quits or if you have to fire an employee for lack of performance, does this affect your PPP loan forgiveness
49 shouldn't we be going for an increase in our LOC in the mean time?
50 If a provider is moving in April ( planned since January) and we can not replace her until the summer or fall, how will that affect the forgiveness statute?
51 what if an employee quits...how does that affect the PPP load reimbursement?
52 Addendum to my question-if end up getting bought out by a hospital group can I still have the loan payback garnted if I have employees again from June till the end of the year
53 SBA: Is there any clarification on “employee and compensation levels are maintained.” Clause of the PPP? We dropped non-exempt staff down to 20 hours a week on 3/22. Are we obligated to maintain those 20 hours or bring them back 40 hours/week prior to all this?
54 Can this money be used to discharge loans for the practice, such as mortgage loans?
55 Is it true that if we are back to same full FTE status on 6/30/20 that we averaged in the preceding 12 months that we will get full forgiveness for the portion of the loan that went toward payroll, rent and utilities even if we do intermittent layoffs during the 8 week period?
56 While we are waiting for PPP application and funds, should we still be maintaining full employment to preserve the terms of forgiveness? This will get progressively harder!
57 When we apply for the loan, can we include the amount of distribution that goes to the docs, we are a pass through entity on get K-1’s, not W2 wages?
58 Would an employee who had to take a medical leave with a note from their doctor negatively affect the PPP loan forgiveness
59 (Background - Privately owned practice suburbs of Philadelphia, 3 physicians) We are thinking of reducing all docs to 75% of current salary and anything above the $100k will have to be paid back. Employees hours are really cut back but they’re still being paid regular hours for now. Should we continue that since it will be forgiven? Thoughts on paying the doctors the 75%?
60 What happens if you take the PPP loan and use it to float payroll x 8 weeks and then sometime after that 8 week mark have to close? Is the forgivable part of loan still forgiven b/c you stayed afloat and kept payroll going for those 8 weeks?
61 If we let a doctor go now (she was planning to move anyway), does that count as losing staff with regard to the PPP? The doctor salary is over 100K.
62 So to clarify, total payroll is to be higher than 75% regardless how it is dispersed to forgiven.
63 re. PPP- what if our payroll comes in at at least 75% but number of employees decreases due to replacing 2 part timers with one full timer?
64 Are funds from the PPP allowed to be used for Physician owner salaries?
65 Should we include contractual bonuses acrrused but not yet paid?
66 are physician owners included in the payroll calculation for PPP?
67 We have seen that payroll taxes and federal income taxes need to be deducted from your wages.
68 Does my 401k employer contribution for safe harbor and profit sharing count as part of the last 12 months wages?
69 What if any salary is included for owners under PPP calculation?
70 Do we have to subtract the state tax paid on income greater than $100,000 when we do the PPP calculation?
71 Paulie in your ppp calculation what is the “wages”. Is it gross wages? And does that not already include state tax?
72 Are 1099 wages included in the payroll cost?
73 Are people getting confirmation emails when they apply for an EIDL loan? We got a confirmation # but not an email. Not sure if we should reapply.
74 Are phones and internet considered utilities in this scenario?
75 Does the EIDL loan need personal guarantee by the MDs?
76 With decreased volumes physicians are using one of the three methods based on my discussions 1. Reduced employee salary to half , so they can still work but see less patients. 2. Keep salary same but work alternate day because we need less staff 3. Furlough Very few if any are using last choice! May be fear of loosing staff. Does any of these choices make our chances of Having our PPP Loan be not a forgiven loan?
77 Paulie in your ppp calculation what is the “wages”. Is it gross wages? And does that not already include state tax?
78 If I pay an employee who is out on the 80 hours sick leave, how does that affect use of PPP?
79 To qualify for max loan forgiveness what is being considered, FTEs or the employee head count ?
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A BUNCH of folks (questions 36, 39, 57, 64, 66, 69) want to know: are non-W-2 payments to owners (“K1,” or “draws”) considered in the “average monthly wages” class, and thus potentially forgivable costs?

My guess at this time, based on current guidance [please note caveats] , is: owner draws that are not salary (i.e. tax partnerships with K1 as opposed to corporations) are NOT considered in “average monthly salary” nor as PPP-forgiveness-approved-8-weeks money.

Here’s why I think that based on the original statute writing, and this source: https://home.treasury.gov/system/files/136/PPP–IFRN%20FINAL.pdf

  1. The guidance is written as EITHER/OR: You either: Group A: had employees for whom you paid salaries and payroll taxes or paid independent contractors, OR Group B: you are an individual who operates under sole proprietorship or an independent contractor.
  2. What qualifies as payroll costs: the guidance doesn’t say “employee salaries and owner draws.” It says:

Payroll costs consist of compensation to employees (whose principal place of residence is the United States) in the form of salary, wages, commissions, or similar compensation; cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips); payment for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirement; payment of state and local taxes assessed on compensation of employees; and for an independent contractor or sole proprietor, wage, commissions, income, or net earnings from self-employment or similar compensation.

This sure sounds like “Group A: blah blah ; and for independent contractors and sole proprietor , i.e. Group B, self-employment”

  1. Group A opened this past Friday; Group B opens at the end of this week (if there’s still money.)
  2. You can only apply for one PPP loan.

So putting all this together: you can get a PPP loan for employees, and ONLY employees, NOW, or wait a week and try INSTEAD to get one for the owners.

Now, all that said: many accountants/bankers/etc are interpreting it as all staff, including self-employed. And since the Feds now say “Bankers, you can just certify the loan amounts based on what the company shows you; you don’t have to independently audit the information.”

But between now and 8 weeks from now, the feds are going to write a lot more rules about what’s FORGIVABLE, including all those niggling questions about people on partial unemployment and on FFCRA leave and PTE/FTE and whatnot.

So what I THINK is going to happen is, the banks will certify whatever you show them (provided you apply in good faith), which will include owner draws, but what will ULTIMATELY be forgiveable will NOT include owner draws. They have 8 weeks, or more, to fine tune this.

In a way, I agree with this; this is the risk you take as a practice owner. The PPP wasn’t intended to help physician-owners; it was intended to keep your rank and file receptionist and LPN off unemployment, and health-insurance-covered.

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Thank you for all your good information!! Lynda

A bunch of people (question 40, 42, 46, 50, 51, 53, 55, 56, 58, 76, and 78) also asked questions of this type: What happens if my number of FTEs or total payroll falls below what it was during 2019 for the same period? Does this affect my loan forgiveness?

Yes, it does, because you’ll have less payroll to pay, and the loan was intended to primarily cover payroll expenses. Let’s go through the steps:

  1. Your average monthly payroll costs (wages, health insurance premiums, retirement, state taxes) for the 2019-2020 reference period was $100,000.

  2. That means you get $250,000 in PPP loan principal (2.5x monthly payroll costs.)

  3. But stuff happens due to COVID:

    • Wanda and Weeza, who normally each get $2000/month, quit and goes to be a COVID testing nurse.
    • Bertha, who normally gets $3000/month, has all kinds of medical issues and wants to be laid off; you do that.
    • Trina at $3000/usually takes care of her grandkids who are out of school; she wants to take eFMLA, which you permit…
    • Esmerelda, who normally gets $5000/month, gets furloughed on and off so you’re effectively paying her $2000/month (i.e. a net loss of $3000/month of wages)
    • By mutual agreement, you cut Dr. Dollars’ wages from $100,000 to $80,000 annualized, or $1666 less/month.
    • Everyone else in your practice gets the same wages they did before.
  4. So let’s compare your typical/pre-COVID wages to what you actually spend during the 8 week expensing period of the loan:

    • Prior to COVID, you paid $100,000 per month in payroll costs -> $200,000 in 8 weeks. (A month isn’t exactly four weeks, but for ease, let’s say it is.)
    • Between Feb and June 2020, you’re now $100,000/month minus Wanda (2k), Weeza (2k), Bertha (3k), Trina (3k), Esme ($3k), and Doc ($1.66k) -> $85,333/month -> $170,667 in 8 weeks.

If you had maintained your payroll (100% FTE and 100% of expenditures), all $200,000 of your payroll expenses would be forgiven. It was anticipated you’d use the remaining $50,000 of loan against mortgage interest/rent or utilities.

Now, however, you have $30,000 extra in loan money that you can’t use against an eligible expense (we’re assuming your rent and utilities haven’t been hiked in the interim.) You haven’t spent that $30,000 yet. Given that the goal of this program is supposed to be “free reimbursement of payroll,” and you didn’t spend that money on payroll, it’s not forgiven. You’ll have to repay it (again, at 1% over 2 years), but since you didn’t spend it, you can just repay it immediately without penalty. You only got the $30,000 “excess” by dint of copy/pasting last year against this year. You don’t get to keep this money; it’s now part of a loan; you have to repay it.

The real question, and one that the SBA has not yet issued detailed guidance on, is whether there is an additional reduction in forgiveness for loss of FTE and wages (strong suspicion: yes), and how much it is (no idea). Let’s say we have 20 staff to start with. Here, we’ve lost 4.6 FTEs and 15% of wages. SBA seems to indicate that they will reduce loan forgiveness, on a sliding scale, for any loss of FTE and/or any wage drop below 25% of what you paid staff the previous year (excluding cuts made to staff who made >$100k.)

How much - a percentage of the actual wages paid in the 8 week period, a percentage of the delta between original wages and actual wages? We still don’t know.

That said, here’s the worst case scenario. You get a PPP loan and all your staff quit. You apply for forgiveness on your rent & utilities, but your luck is so bad that the sliding scale created by the SBA means that NONE of your loan is forgiven. You convert the loan to repayment – and now you have a $250,000 loan at extremely low interest (1%) that can be repaid over 2 years. You will never get cash on better terms!

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And now, a bunch of miscellaneous SBA/PPP/EIDL Q&A:

37 can PPP Loan be used to pay for vaccines?

Vaccines are not a forgivable PPP expense.

38 Can we apply for PPP with multiple banks?

No. When you sign the application, you’re attesting you are only pursuing one.

41 Can you roll the EIDL into a PPP?

Depends on what you mean. Here’s some guidance (source: https://www.omm.com/resources/alerts-and-publications/alerts/sbas-paycheck-protection-program-and-economic-injury-disaster-loan-program/) which is clear as mud:

A borrower can also refinance an EIDL loan into a PPP loan. If an EIDL loan is used for payroll costs, the PPP loan must be must be used to refinance the EIDL loan. Proceeds from any advance up to US$10,000 on the EIDL loan will be deducted from the loan forgiveness amount on the PPP loan.

Then I found this: https://www.businessreport.com/business/sen-bill-cassidy-answers-questions-on-eidl-ppp-loan-programs

This makes a lot more logical sense, at least in terms of getting a 1% rate rather than 3.75%. The guidance doesn’t make sense in that most folks on this forum have already applied for both loans and have heard nothing yet on either one. Given the limited amount of money in the PPP bucket, “waiting to get the EIDL first” seems like incomplete advice.

43 If you apply for the EIDL loan, do you have to use your line of credit first? If yes, how do you bridge expenses between line of credit and EIDL loan funds?

No. In fact, use up your EIDL money first. You’re going to get it at 3.75%, which is much better than any commercial line of credit I’ve heard of.

44 if you wait to get a PPP loan do we run the risk of it not being available?
45 is it important to get the PPP in as soon as possible?? What if my area will peak in 3 weeks and I need it more for 8 weeks after that…and then what if I wait and there is no more money left??

Yes. There is not enough money in this bucket to fund everyone’s need. In fact, I would be surprised if the number of PPP loan applications in the system at present does not already exceed the $349 B allocated for same.

47 We have applied for the EIDL loan. If we receive PPP funds, then the amount of the EIDL loan is reduced by the PPP loan amount, correct?

I don’t see any guidance about the EIDL loan amount being reduced by fiat due to the presence of a PPP. If you get an EIDL grant ($10k advance), then your PPP forgiveness is automatically reduced by $10k. See #41.

49 shouldn’t we be going for an increase in our LOC in the mean time?

Yes. The PPP is not the answer to everything. IF you get lucky and get a PPP loan, it covers 8 weeks of payroll and a few months of rent. If you don’t get a PPP loan because millions of people got in before you, you definitely need a backup strategy.

52 Addendum to my question-if end up getting bought out by a hospital group can I still have the loan payback garnted if I have employees again from June till the end of the year

That depends if the buyout includes buying out your debts and assets. I don’t understand how you would still have employees if you’ve sold to a hospital; they would become the hospital employees. Good question for an attorney.

54 Can this money be used to discharge loans for the practice, such as mortgage loans?

I assume “this money” is the PPP loan. You may use this on loan interest, including mortgage interest. Loan principal is not a PPP-forgiven expense.

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UPDATED 04/15/20

A big thank you, please, to Main Street Vaccines, who stepped up to sponsor the expense of providing these answers.

We were able to track down a CPA firm to address the questions from the seminar and provide a thorough and long list of answers. I’ve provided the text below and Avizo Group PPC Answers - REVISED April 15.pdf (273.4 KB) will grab the document as a PDF.

This was a sponsored effort by some of our supporting vendor friends (details to follow).

Avizo Group, Inc. is a CPA consulting firm with over 30 years’ experience in assisting small business owners with their practice’s compliance and growth strategies. The following answers are provided in good faith with our current understanding of the CARES Act programs, as of April 10, 2020 with a revision on April 15th due to new regulations released on April 14th. Our website, www.avizogroup.com contains a page dedicated to providing free resources to assist with your understanding of coronavirus relief efforts. If you have any specific questions, need more advice, or want help with submitting for these loan programs, please reach out to our Coronavirus Task Force by emailing covid19@avizogroup.com.

Payment Protection Program: Application Process & Calculations

Can we apply for PPP with multiple banks?
No, you are only allowed one PPP loan, so you need to apply at one bank. If we wait to get a PPP loan, do we run the risk of it not being available? Is it important to get the PPP in as soon as possible? What if my area will peak in 3 weeks and I need it more for 8 weeks after that and then what if I wait and there is no more money left?? This is a first-come-first-served program. Although the program is open until June 30, 2020, we encourage you to apply as quickly as you can because there is a funding cap of $350 billion and lenders need time to process your loan, so waiting can potentially put you at risk for not receiving a loan. Treasury Secretary Steve Mnuchin says he will ask Congress for more funding if the current amount goes quickly, but this is not yet approved.

Can partner MD salaries (not part of payroll, paid pre-tax as a monthly draw with quarterly distributions) be included up to %100k?
Yes. Based on new guidance issued by the SBA on April 14, partner guaranteed payments can be included in the partnership’s calculation of qualified payroll.

Can we include partner physician compensation (up to $100,000) in our “payroll” calculation for the PPP loan or just employed physicians?
Yes. Based on new guidance issued by the SBA on April 14, if partner physician compensation is calculated as a guaranteed payment, you will include it in the PPP loan calculation of the practice.

What, if any, salary is included for owners under PPP calculation?
Owners that receive a salary included in the payroll of the practice, will include income up to $100,000 in the PPP calculation.

Are funds from the PPP allowed to be used for Physician owner salaries? Are physician owners included in the payroll calculation for PPP?
Yes. PPP funds can be used to pay owner salaries. An owner’s salary can be used in the calculation of the maximum loan amount up to the maximum per employee of $100,000, annualized.

When we apply for the loan, can we include the amount of distribution that goes to the doctors (we are a pass-through entity) on K-1’s, not W2 wages?
t depends on the type of entity. Based on new guidance issued by the SBA on April 14, payments treated as guaranteed payment or income subject to self-employment tax from an LLC or partnership are included in qualified payroll costs of the practice. Payments treated as draws from a partnership or distributions from an S-Corp do not qualify

Do we have to subtract the state tax paid on income greater than $100,000 when we do the PPP calculation? Is it gross wages? And does that not already include state tax?
Gross wages up to $100,000 are included in the PPP calculation. Gross wages include the net amount of pay the employee receives as well as all of the amounts withheld from their paycheck, including but not limited to state taxes withheld. State and local taxes paid directly by the employer do count as part of your payroll costs (i.e., state unemployment insurance).

To qualify for maximum loan forgiveness, what is being considered: FTEs or the employee head count?
The guidance is still a little unclear regarding the calculation of FTEs. In most instances a full-time equivalent is an employee that works a full work-week for the employer, normally 40 hours. If an employee works less than a full work-week, divide the number of hours worked by the number of hours in a full work- week to determine the fractional employee. (Employee works 24 hours of a 40 hour work week – 24/40 = .6 FTE)

Are 1099 wages included in the payroll cost?
No. Payments made to independent contractors are not part of your payroll costs for the PPP loan.

Does my 401k employer contribution for safe harbor and profit sharing count as part of the last 12 months wages?
Yes. The employer portion of retirement contributions are included in calculating qualified payroll costs.

Should we include contractual bonuses accrued but not yet paid?
No. Qualified wages only include amounts actually paid. When it comes to the PPP, your payroll will be
limited to the wages that you are taxed on. As an owner of a corporation, this should only be the amount you have paid yourself by running payroll. This will not be owner draws, distributions, or loans to shareholders, because none of those types of transactions are subject to payroll or self-employment tax .

We have seen that payroll taxes and federal income taxes need to be deducted from your wages.
The guidance released by the SBA on 4/2/2020 made this issue very unclear. However, further guidance issued on 4/8/2020 clarified this issue in their Frequently Asked Questions (Question #16). The definition of gross payroll includes the net amount paid to the employee plus any withholding. This amount is used for the calculation of both the loan amount and forgiveness. The amount that would not be included would be the employer’s share of any Federal taxes (1/2 FICA and Federal unemployment).

Payment Protection Program Fund Usage

Can PPP Loan be used to pay for vaccines?
No. PPP loan proceeds may not be used to pay for health benefits or supplies to be used on patients or the general public. However, included in the definition of “payroll costs” is a provision for employee benefits consisting of group health care coverage, including insurance premiums. By interpreting this to mean there are other group health care coverage items in addition to insurance premiums, if you are paying for health care items (vaccines, physicals, etc.) for employees, this would be included in your payroll costs.

Can this money be used to discharge loans for the practice, such as mortgage loans?
No, funds from a PPP loan may only be used to pay for interest on mortgage obligations incurred before February 15, 2020. Funds used for anything other than interest on mortgage obligations will not be forgiven.

Are phones and internet considered utilities in this scenario?
Yes. Payments on utilities, including electricity, gas, water, transportation, telephone, and Internet access for services that began before February 15, 2020 are included.

Payment Protection Program Forgiveness

We’re cutting staff hours due to lack of business but if the employer chooses to pay staff their regular hours even if they didn’t work them, will those hours still be forgivable under PPP?
Yes. The goal of the PPP loan is to keep paying employees. You will owe money if you do not maintain your staff and payroll.

  • Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount.
  • Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
  • Re-Hiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.

Is our eligibility for the forgiven SBA loan adversely affected if some of our employee hours are cut? (Not furloughed but just cut back by between 25-75%).
For the PPP loan, you will owe money if you do not maintain your staff and payroll. Your loan forgiveness will be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.

I was told you have to spend the money in 8 weeks, or you have to pay it back. Has to be used for payroll during that 8 weeks. 25% can be used for rent/other but still has to be used during that 8 weeks.
The forgiveness is calculated on how you spend the loan in the first 8 weeks. The loan proceeds should be used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8-week period after the loan is made; and employee and compensation levels should be maintained.

SBA: Is there any clarification on “employee and compensation levels are maintained.” Clause of the PPP? We dropped non-exempt staff down to 20 hours a week on 3/22. Are we obligated to maintain those 20 hours or bring them back 40 hours/week prior to all this?
Yes, to have this salary included in forgiveness, you need to maintain hours and salary. You have until June 30, 2020 to restore your full-time equivalent employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.

Is it true that if we are back to same full FTE status on 6/30/20 that we averaged in the preceding 12 months that we will get full forgiveness for the portion of the loan that went toward payroll, rent and utilities even if we do intermittent layoffs during the 8 week period?
Not more than 25% of the loan forgiveness amount may be attributable to nonpayroll costs. While the Act provides that borrowers are eligible for forgiveness in an amount equal to the sum of payroll costs and any payments of mortgage interest, rent, and utilities, the Administrator has determined that the non-payroll portion of the forgivable loan amount should be limited to effectuate the core purpose of the statute and ensure finite program resources are devoted primarily to payroll. You have until June 30, 2020 to restore your full-time equivalent employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.

While we are waiting for PPP application and funds, should we still be maintaining full employment to preserve the terms of forgiveness? This will get progressively harder!
No, if you need to temporarily release an employee, you may do so. There is flexibility in the program to allow businesses to hire new or returning employees by June 30 and still qualify under the head count requirements for forgiveness.

Would an employee who had to take a medical leave with a note from their doctor negatively affect the PPP loan forgiveness?
If the employee earned qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act, these costs are excluded from qualified payroll costs in calculating the maximum loan amount. If the employee personally took medical leave those wages would qualify as wages in calculating the maximum loan amount to be forgiven.

If I pay an employee who is out on the 80 hours sick leave, how does that affect use of PPP?
PPP loans covers payroll costs, including costs for employee vacation, parental, family, medical, and sick leave. However, the CARES Act excludes qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act (Public Law 116– 127).

What if an employee quits or if you have to fire an employee for lack of performance, does this affect your PPP loan forgiveness? What if an employee quits…how does that affect the PPP load reimbursement?
You would need to replace the employee who is fired or quits if you want the loan forgiveness. There are currently no caveats for these circumstances, so you need to try to maintain your previous headcount and salary levels.

If a provider is moving in April (planned since January) and we cannot replace her until the summer or fall, how will that affect the forgiveness statute? / If we let a doctor go now (she was planning to move anyway), does that count as losing staff with regard to the PPP? The doctor’s salary is over $100K.
You will need to include her salary (up to $100,000) in the loan application amount. Losing the doctor will affect the forgiveness amount if the employee is not replaced and if at least 75% is not spent for payroll. You can repurpose the amount that doesn’t go toward her pay to another approved purpose (while maintaining payroll levels), or you can hold on to the funds for emergencies and if you do not need it, just use it to pay back the principle when payments begin in 6 months.

If we end up getting bought out by a hospital group, can I still have the loan payback granted if I have employees again from June till the end of the year?
The 8-week period for forgiveness is through June 30, 2020. During the 8-week period starting from the disbursement of the loan proceeds, 75% of the PPP loan should be used for payroll and the other 25% can be used for qualifying payroll costs, utilities, rent and mortgage interest.

(Background - Privately owned practice suburbs of Philadelphia, 3 physicians) We are thinking of reducing all docs to 75% of current salary and anything above the $100k will have to be paid back. Employees hours are really cut back but they’re still being paid regular hours for now. Should we continue that since it will be forgiven? Thoughts on paying the doctors the 75%?
The purpose behind the program is to keep employees employed, not necessarily to keep them working. In order to maintain payroll and meet the 75% requirement for forgiveness, non-physician staff should maintain regular pay, whether working the full hours or not. Physicians do not benefit from any amount paid over $15,385 ($100,000 annually), so a cut in their pay is the best way to preserve cash. In some cases, it may even be necessary to increase pay for anyone under the $100,000/year gross wages in order to get up to 75%.

What happens if you take the PPP loan and use it to float payroll x 8 weeks and then sometime after that 8 week mark have to close? Is the forgivable part of loan still forgiven b/c you stayed afloat and kept payroll going for those 8 weeks?
Yes, the act allows for a maximum forgiveness of 8 weeks of approved costs. The remainder will be treated as a loan.

To clarify, total payroll is to be higher than 75% regardless how it is dispersed to forgiven.
Yes. Not more than 25% of the loan forgiveness amount may be attributable to nonpayroll costs. A loan amount 75% of which is equivalent to eight weeks of payroll (8 weeks / 2.5 months = 56 days / 76 days = 74 percent rounded up to 75 percent). A note to remember, payroll is annualized and anything over $100,000 is not included. $100,000 annualized amounts to $15,385 for the 8 weeks. Therefore, to qualify for forgiveness it may be beneficial to “reward” nonphysician employees in order to meet the 75% qualification for forgiveness.

Regarding PPP- what if our payroll comes in at least 75% but number of employees decreases due to replacing 2 part timers with one full timer?
There is flexibility in the program to allow businesses to hire new or returning employees by June 30 and still qualify under the head count requirements for forgiveness. To encourage businesses to rehire employees or restore wages, the amount of loan forgiveness will be determined without regard to reductions in the number of employees or reductions in wages that occurred during the period beginning Feb. 15, 2020, and ending on the date that is 30 days after the date of the enactment of the CARES Act, if the business eliminates the reduction no later than June 30, 2020. For example, if a business lays off 50 employees on March 31, 2020, and rehires all of them before June 30, 2020, those 50 employees will be deemed to have been employed for purposes of calculating the average number of FTEs during the eight-week period beginning on the date of loan origination.

With decreased volumes physicians are using one of the three methods based on my discussions 1. Reduced employee salary to half, so they can still work but see less patients. 2. Keep salary the same but work alternate day because we need less staff 3. Furlough Very few if any are using last choice! May be fear of losing staff. Does any of these choices make our chances of Having our PPP Loan be
not a forgiven loan?
Yes. The goal of the PPP loan is to keep paying employees their regular rate and hours (up to $100,000). You will owe money if you do not maintain your staff and payroll.

  • Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount.
  • Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
  • Re-Hiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.

EIDL & PPP

Can you roll the EIDL into a PPP? We have applied for the EIDL loan. If we receive PPP funds, then the amount of the EIDL loan is reduced by the PPP loan amount, correct?
If your EIDL loan was used for payroll costs, your PPP loan must be used to refinance your EIDL loan. Proceeds from any advance up to $10,000 on the EIDL loan will be deducted from the loan forgiveness amount on the PPP loan.

You can use the PPP funds to refinance an SBA EIDL loan made between January 31, 2020 and April 3, 2020. If you received an SBA EIDL loan from January 31, 2020 through April 3, 2020, you can apply for a PPP loan.

If your EIDL loan was not used for payroll costs, you may use both. It does not affect your eligibility for
a PPP loan.

If you apply for the EIDL loan, do you have to use your line of credit first? If yes, how do you bridge expenses between line of credit and EIDL loan funds?
No. Eligibility for the EIDL is based on the loss of revenue experienced as a result of the Covid-19 crisis and there is no requirement to exhaust other financing before applying. In addition, no personal guarantee is required for EIDLs under $200,000, and the loan can be made solely upon the applicant’s credit score.Initial advances of up to $10,000 can be issued within three days and need not be repaid.

Are people getting confirmation emails when they apply for an EIDL loan? We got a confirmation # but not an email. Not sure if we should reapply.
No, but you can check the status of your loan application by going to https://disasterloan.sba.gov/ela/ and clicking the green circle that says “Check Application Status” – you will log-in with the username and password you set when applying. Here is a guide for the application process.

Does the EIDL loan need personal guarantee by the MDs?
Yes. This is a typical SBA program in that it typically does require a personal guarantee for loan amounts over $200,000.

Shouldn’t we be going for an increase in our LOC in the meantime?
Although that decision is unique to each practice, obtaining additional sources of funds during these uncertain economic times should be considered. The processing time for the EIDL is 6-8 weeks as stated by the SBA, so any additional funds available for operation during that time period should be considered.

The information provided is based on our research and understanding coronavirus relief efforts including The Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act as of April 15, 2020. In addition to contacting our Coronavirus Task Force, you are welcome to direct questions and clarifications directly to Earl Blackmon, a shareholder and strategic consultant with specialized expertise in physician consulting. Earl can be reached at eblackmon@avizogroup.com or by calling our office at 251-928-2443.

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