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PPP Loans in 2021: What Your Practice Needs to Know

Posted on Mar 04, 2021 by Samantha Novick

    GettyImages-918315214The government's Paycheck Protection Program (PPP) helped more than 5 million businesses stay afloat last year. Now, the program is back in 2021 to give first-timers and second-drawers forgivable financing.

    A PPP loan could help your medical practice pay employees, cover rent, invest in software, or even fund protective equipment. Since PPP loans have the potential to be 100% forgivable, there's no reason not to apply.

    Below, we'll cover all the details of PPP loans and what your practice needs to know.

    PPP Loans in 2021

    PPP loans are government-backed loans, meaning SBA-approved lenders do the lending—not the SBA. The government simply provides the guarantee to mitigate risk for lenders, and then the SBA handles the forgiveness.

    You don't need to provide any application fees, personal guarantees, or collateral to qualify for a PPP loan. Your PPP loan is eligible for full forgiveness (if used appropriately), meaning it's essentially converted from a loan into a non-taxable grant.

    If your PPP loan is not eligible for forgiveness, it'll be converted into a 5-year loan with a 1% fixed interest rate.

    The SBA has made PPP loans available to both first-time drawers and second-time drawers. That means those who received a PPP loan last year and those who didn't both qualify for financing in 2021. 

    However, your eligibility requirements and maximum funding will depend on whether you're getting a first-draw or second-draw loan.

    First-Draw Loans

    If you didn't get a PPP loan last year, here's what you'll need to qualify:

    • Your medical practice began operations before February 15, 2020
    • Your medical practice is currently open
    • Your medical practice has 500 or fewer employees (or 500 or fewer per location)

    First-time drawers can receive a PPP loan up to 2.5 times their monthly payroll costs ($10 million maximum).

    Second-Draw Loans

    If you're applying for a second PPP loan, here's what you'll need to qualify:

    • Your medical practice began operations before February 15, 2020
    • Your medical practice is currently open
    • Your medical practice has 300 or fewer employees (or 300 or fewer per location)
    • Your practice will need to have used up the original PPP loan (or have plans to use it up before the second loan is disbursed)
    • Your practice will need to prove it's suffered a 25% or greater loss in revenue

    Second-time drawers can receive a PPP loan worth 2.5 times their monthly payroll costs ($2 million maximum). 

    Expanded Eligible ExpensesGettyImages-1270096200

    The SBA expanded the list of eligible expenses for PPP loans in 2021. Initially, you could only use these loans on payroll, utilities, and rent. Now, there's a bit more coverage:

    • Payroll: Salaries, wages, commissions, tips, employee benefits, group insurance benefits, and paid leave.
    • Rent: Payments on rental properties with a lease agreement that went into effect before February 15, 2020.
    • Utility payments: Water, gas, electricity, telephone, internet service, and transportation fees for agreements that went into effect before February 15, 2020.
    • Interest payments: Interest payments on mortgage obligations that went into effect before February 15, 2020.
    • Operations expenditures: Payments for software, accounting, cloud-computing, human resources, and remote work-enabling services.
    • Property-damage costs: Expenses to repair damages incurred from public disturbances in 2020 that your insurance won't cover.
    • Worker protection expenditures: Costs to purchase protective equipment and change workplace environments to comply with updated health and safety guidelines.
    • Supplier costs: Expenses to suppliers for essential purchases that were incurred before obtaining a PPP loan.

    Qualifying for Full Loan Forgiveness

    To be eligible for full PPP loan forgiveness, you'll need to comply with the following requirements:

    • 60/40 Rule
    • 8- or 24-Week Coverage Period
    • Staffing Maintenance
    • Pay Requirements

    60/40 Rule

    You must spend at least 60% of your loan on payroll costs—the remaining 40% can be used on other eligible expenses. If your payroll expenses fall below 60%, then your forgivable amount will be reduced proportionately.

    8- or 24-Week Coverage Period

    All eligible expenses must be incurred over the 8- or 24-week coverage period you chose. This coverage period begins on the day you receive your PPP loan disbursement—not necessarily the day you signed the loan agreement.

    Staffing Maintenance

    You're required to maintain the same number of pre-COVID-19 employees. If you've furloughed or let go employees, you'll need to rehire (or prove you attempted to rehire) them before you apply for loan forgiveness. Failing to rehire employees will reduce your forgivable amount proportionately.

    Pay Requirements

    You'll need to maintain at least 75% of each employee's total salary. This is calculated on an individual employee basis, so you'll need to make sure everyone's compensation is maintained.

    Simplified Loan Forgiveness Application

    If your PPP loan is under $150,000, then you can submit a simplified forgiveness application.

    This application is a one-page certification that includes:

    • Number of employees retained because of the loan
    • Estimated amount spent on payroll costs
    • Total amount of loan

    Since PPP loans average about $107,000, there's a good chance you'll be able to use this expedited application for your forgiveness process.

    Is a PPP Loan Right for Your Practice?

    If the COVID-19 pandemic has negatively impacted your practice, then a PPP loan can likely alleviate some of the financial strain. These loans were launched to primarily help businesses cover their payroll costs, but their eligible uses have expanded to include various expenses.

    Applying is quick, easy, and free, so there's nothing to lose. Yes, you'll need to keep meticulous records for when you submit for loan forgiveness, but a little bit of bookkeeping is worth the thousands of dollars in free government money.

    Find more ways to recover lost revenue from a difficult year.
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    Samantha Novick

    Samantha Novick

    Samantha Novick is a senior editor at Funding Circle, specializing in small business financing. She has a bachelor's degree from the Gallatin School of Individualized Study at New York University. Prior to Funding Circle, Samantha was a community manager at Marcus by Goldman Sachs. Her work has been featured in a number of top small business resource sites and publications.

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