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The CARES Act—What Does It Mean for Your Practice?

Posted on Apr 16, 2020 by Samantha Novick

    Understanding the CARES ActPushing off bills, battling with landlords, laying off employees—these are just a few of the ways independent practices are fighting to survive until the COVID-19 pandemic passes.

    Hold on. Relief is on the way. 

    On March 27, 2020, President Trump signed a $2 trillion economic stimulus package into law, known as the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This bill is the most extensive stimulus plan ever passed and illustrates how far the federal government is willing to stretch to alleviate the COVID-19 economic crisis.

    The CARES Act provides citizens, small businesses, hospitals, care providers, pharmaceutical manufacturers, physician practices, health tech companies, and more with financial assistance to weather the storm. SBA loans, wage protection, tax extensions, payroll credits, grants—the government is making every effort to support independent practices in need.

    The financial aid available under the CARES Act could be the difference between sinking and swimming. If your business needs financial assistance to stay afloat, then consider the CARES Act your lifeboat.

    Read on to discover all the different ways the CARES Act can save your practice.

    What Does the CARES Act Mean for Your Practice?

    The CARES Act provides general relief to small businesses and additional industry-specific aid for practices in the healthcare industry. We'll cover both, so you know all your options.

    Paycheck Protection Program (PPP)

    The CARES Act commits $349 billion to the SBA to help businesses maintain payroll and weather the COVID-19 pandemic. Your Paycheck Protection Program loan amount will be equivalent to 2.5 times your average monthly payroll expenses. And these loans are 100% forgivable. Yep, that’s right: any portion of these loans used on payroll and other qualifying expenses (more on that below) may be forgiven — assuming you maintain your staff and payroll. Whatever portion of the loan that isn’t forgiven will carry a 1% fixed interest rate and repayment terms of two years. Payments are deferred for the first six months, and there are no fees or collateral requirements.

    Below is a list of qualifying expenses. 

    • Payroll-related costs: 
      • Salaries, wages, commissions, and tips (capped at $100,000 annualized per employee)
      • Healthcare costs (including insurance premiums)
      • Vacation and paid (parental/family/medical or sick) leave 
      • Retirement benefits
      • State and local taxes on compensation
    • Mortgage interest (not principal) 
    • Rent
    • Utilities (for which service began before February 15, 2020)
    • Any interest on debts incurred before February 15, 2020

    No more than 25% of the forgiven loan amount can be used towards non-payroll-related costs. You can use this CARES ACT SBA Loan Calculator to estimate the amount you'll be able to borrow. 

    SBA Economic Injury Disaster Loans (EIDL)

    US businesses with less than 500 employees that have been damaged by the coronavirus (and can prove it)Use relief money during coronavirus crisis qualify for an EIDL. EIDLs are SBA loans up to $2 million, with a 3.75% interest rate and terms up to 30 years. Payments are deferred for a year. Use your EIDL to cover businesses expenses that would have been taken care of had the coronavirus not swooped in and devastated our economy:

    • Payroll
    • Sick leave for employees
    • Accounts payable
    • Rent or mortgage payments
    • Matching increased costs of materials
    • Fixed debt and bills that can't be covered due to decreased revenue

    You will be required to provide a personal guarantee for loans greater than $200,000 and provide collateral for loans over $25,000. You can apply here

    Emergency Economic Injury Grant (EEIG)

    If you need money now and can't afford to wait for the whole 3-week processing ordeal, you can request a $10,000 advance. This cash should come within three days of your EIDL application and can be used to cover the necessary expenses. It does not need to be repaid. In your EIDL application, make sure to check the box next to "I would like to be considered for an advance of up to $10,000." 

    HHS Health Care Provider Funding

    The CARES Act provides $100 billion for grants to aid health care providers affected by COVID-19. It includes Medicare- and Medicaid-enrolled practices, public entities, hospitals, and nonprofits. Practices can use these grants to cover non-reimbursable expenses:

    • Increased staffing and training
    • Protective equipment
    • Lost revenues

    Use the AAFP's COVID-19 Related Loss Calculator here to estimate the economic damage to your business.

    Advance Payment Program for Medicare Providers and Suppliers

    The Centers for Medicare & Medicaid Services (CMS) expanded its Accelerated and Advance Payment Program to get qualified Medicare physicians and practice capital faster. Previously, the funding process took 3 to 4 weeks—now, it's as quick as 4 to 6 days.

    During the pandemic, many practices are being forced to cancel non-essential procedures, and these procedures are typically the primary source of business income. Under the program, most practices can request the Medicare payment amount for three months to help their business stay afloat.

    Small Business Tax Provisions

    Small business loans for coronavirus reliefThe CARES Act includes several tax provisions to help small businesses and independent practices. 

    Employee Retention Credit

    If COVID-19 subjected your business to a full or partial closure and you've suffered a decline in gross receipts of more than 50% (compared to the same period for the prior year), you're eligible for a refundable credit of up to 50% of the first $10,000 of qualified wages per employee. 

    Deferred Payroll Tax Payments

    The CARES Act allows most businesses to delay payment of the 6.2% Social Security payroll tax. If you choose to defer, you'll need to pay 50% by the end of 2021 and the remaining 50% by the end of 2022.

    Coronavirus Economic Stabilization Act Loans for Practices

    If your mid-sized practice (500 to 1,000 employees) hasn't received adequate economic relief, you may qualify for a Coronavirus Economic Stabilization Act loan. These loans come with interest rates below 2% and a 6-month deferred payment schedule to help maintain payroll.

    Expanded Medicare Coverage for Telehealth 

    Under the CARES Act, the Centers for Medicare & Medicaid Services (CMS) introduced several new policies to expand Medicare coverage of telehealth services. You can find a summary of CMS and federal government actions here.

    Stay Tuned

    The government is still developing plans to assist small businesses impacted by COVID-19. Things are moving quickly, so keep your eye out for updates on existing and emerging aid programs. America needs its practices (both now and in the future), and the government is bending over backward to keep yours alive.

    If your business hasn't felt the sharp economic pains from this disaster yet, it's still a good idea to go ahead and apply for financing. There are no application fees or rejection upon acceptance penalties, so you have nothing to lose. Thousands of businesses across the US are applying for financial help, so it's best to get your practice in contention for financial assistance as soon as possible.

    Don't wait until you need cash to start the lengthy funding process. Yes, the government is working quicker on processing this financial aid, but it's by no means fast. Set yourself up for post-COVID-19 comeback success, and get ahead of the game by securing the financing your practice needs before it needs it.

    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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