Coronavirus relief for small business: What ECPs need to know
A rare and unprecedented event echoed across the U.S. in early 2020: Congress came together to pass bipartisan legislation—in pursuit of coronavirus relief for small businesses and other sectors of the economy.
Of course, the coronavirus pandemic is the other black swan event we’re facing at the start of the new decade. This health crisis is forcing small businesses across the country to shut down for the foreseeable future. Many of them are medical practices and more still are eye care professionals such as opticians and optometrists.
The CARES Act overview: What’s in it?
The CARES Act is the third coronavirus relief bill passed. It is part of an effort by the federal government to relieve the sudden and substantial economic impact of the rapidly spreading pandemic. This includes ECPs, who were advised to cancel all non-emergency visits to help mitigate the spread of COVID-19.
This legislation is significant for ECPs because within the $2 trillion stimulus it provides is $377 billion in relief for small businesses. For practices, the highlights of the CARES act are the grants and emergency Small Business Association loans allocated to keep SMBs afloat as much of the country remains locked down.
While other acts by Congress and the Department of Health and Human Services have loosened up rules making it easier for ECPs to provide telehealth services, that still may not be enough to float practices through the public health crisis.
The coronavirus relief package details for ECPs
That’s a big number but what does it mean for the practices hurting from Queens to Colorado to California and everywhere in between? It offers them assistance via a few routes.
What does the CARES Act do for small businesses?
The CARES Act offers coronavirus aid to businesses with fewer than 500 employees:
Emergency grants: $10 billion in grants of up to $10,000 to cover immediate operating costs.
Relief for existing loans: $17 billion allocated to fund up to six months of payments for businesses already using SBA loans.
Forgivable loans: A $350 billion fund for loans of up to $10 million per business.
Coronavirus relief bill details: Optician and optometry practice loan opportunities
Let’s drill down into each of the COVID-19 grant and loan programs that were made available to small businesses through the CARES Act.
Economic Injury Disaster Loans and Loan Advance
These $10,000 loan advances do not have to be repaid and are being made available to assist small businesses such as ECPs with immediate operating expenses. In order to qualify for a COVID-19 Economic Injury Disaster Loan your practice should meet one of the following criteria:
Have 500 or fewer employees.
Operate as an independent contractor or a sole proprietorship—with or without employees.
Operate as a private non-profit organization that is a non-governmental agency or as a tax-exempt entity under sections 501(c),(d), or (e).
Have 500 or fewer employees and operate as a tribal small business concern as described in 15 U.S.C. 657a(b)(2)(C).
Apply for Economic Injury Disaster Loans and Loan Advance
You can click here to apply for a COVID-19 Economic Injury Disaster Loan. Loans will be made available within three days for qualifying applicants.
Up to $2 million in working capital loans will be accessible to small businesses through this program. The loans—as opposed to the loan advance—will have to be repaid. Loans will be furnished at a rate of 3.75%.
SBA Debt Relief
Paying off debt can be particularly challenging at this time. The coronavirus relief act will include provisions that assist small businesses in paying off loans. The SBA will help in the following ways:
The SBA will cover the principal and interest of new 7(a) loans issued prior to September 27, 2020.
The SBA will pay the principal and interest of current 7(a) loans for a period of six months.
Paycheck Protection Program
This is the coronavirus relief money many businesses were waiting for: The section of the CARES Act bill that provides forgivable loans to help cover payroll and related expenses. We’ll dive into these loans more below, but here’s a primer on this aspect of the stimulus package.
This loan program was designed to assist small businesses, veterans organizations, tribal businesses and eligible nonprofit organizations with staff retention and related costs. Under this emergency arrangement:
Loans of up to $10 million will be made available to eligible recipients. The loan amount will be based on your recent payroll.
Loan payments will be deferred for six months.
SBA will forgive the allocation of the loan used to cover the first 8 weeks of payroll and certain other expenses following loan origination.
How to apply for a coronavirus relief loan
This loan program is accessible through any existing SBA 7(a) lender, as well as through any participating federally insured depository institution, federally insured credit union or Farm Credit System institution. Other lenders will be made available as they apply for participation and are approved. Applications for loans will start processing as soon as April 3.
The CARES Act: Who qualifies for forgivable loans?
The aspect of the CARES Act that is most applicable to the majority of ECPs will be the forgivable loans. There will be no review of borrowers’ abilities to repay these loans. The SBA 7(a) loans under the Paycheck Protection Program will be made available to practices that meet the following criteria:
Your practice must have fewer than 500 employees; employees should have been paid salary and payroll tax or hired on as independent contractors.
Your practice must have been in operation on February 15, 2020.
You should use the loan proceeds to retain employees, maintain payroll and pay off outstanding debt.
You should be able to prove your practice was considerably impacted by the coronavirus and related public health restrictions.
Coronavirus relief loan details for ECPs
ECPs across the country have faced harrowing decisions about whether to continue paying employees or let their staff go so that they can collect unemployment. It’s a difficult choice to make and the right judgment depends on each practice’s unique situation. The Paycheck Protection Program is designed to ensure small business owners don’t have to make these decisions.
Protections were built into the loan program to ensure the funds are used to maintain payroll and similar obligations. Loans under the arrangement will be completely forgiven if the proceeds are used for payroll costs, interest on mortgages, rent or utilities. At least 75% should be used on payroll to ensure full forgiveness. Additionally, all fees on these loans will be waived.
However, if a practice’s full-time headcount decreases, or if salaries or wages drop then loan forgiveness will be diminished.
Can I apply for CARES Act if I let employees go?
Many practice owners made the decision to let staff go so that they could collect unemployment benefits, rather than reduce employee hours—and thus their wages—or risk their practices’ financial stability.
There’s nothing wrong with doing what is best for your staff and your practice, but does that mean you’re no longer eligible for coronavirus relief loans?
Businesses can rehire staff to qualify for CARES Act
If you rehire employees who were let go “during the period beginning on February 15, 2020, and ending on the date that is 30 days after” the enactment of the CARES Act your practice will not be disadvantaged for laying off staff in response to the coronavirus restrictions.
If you’re a practice owner who let staff go to give them access to unemployment benefits and help keep your business afloat, begin the process of rehiring those individuals in order to ensure loan forgiveness under the Paycheck Protection Program. Make sure that not only are you rehiring those employees, but that you’re bringing them back at the same wages they were earning previously.
CARES Act details on SBA 7(a) loans
The covered period for the Paycheck Protection Program emergency relief loans begins February 15, 2020, and ends December 31, 2020. Their are two possible loan amounts:
A maximum loan of $10 million.
Or the practice’s average total monthly payroll costs over the 12 months prior to the loan origination date multiplied by 2.5.
Under this loan program payroll costs include salaries, sick leave, state and local payroll tax payments, and insurance premium costs. The wages for any employee earning $100,000 or more annually cannot be included in the loan calculation.
Getting a CARES Act coronavirus relief loan for your practice
If you’re eligible for a coronavirus relief loan reach out to your local lender to ascertain whether they’re certified to furnish 7(a) loans under the emergency program. If you qualify for a loan you can begin working that into your updated practice budget for the coming months.
If you qualify for forgivable loan proceeds to maintain your payroll, what other aspects of your coronavirus lockdown business plan can you attend to? With one big concern off the plate it’s time to start looking at other aspects of your practice that may need attention such as your billing cycle and accounts receivable health or taking advantage of unprecedented access to telehealth.
We'll get through this together, and when it's over ECPs will be a vital piece of the country's recovery back to normal. The CARES Act will help practices across the country ensure their doors are open when that time comes.