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Paycheck Protection Program, round 2, opens to small lenders Jan. 15, all lenders Jan. 19

Application deadline extended to May 31; first- and second-draw loans available

January 14, 2021 4745

Quick Summary:

As small-business owners, dentists may be eligible for a first- or second-draw forgivable PPP loan if they have 300 or fewer employees and can demonstrate a loss of at least 25% of gross receipts in any quarter of 2020 when compared to the same quarter in 2019. Applications close May 31.

Updated March 31: President Joe Biden on March 30 signed the PPP Extension Act of 2021, which extends the application deadline from March 31 to May 31.

The federal COVID-19 relief package signed into law Dec. 27 provides $900 billion in pandemic aid, including $284 billion in new funding for the Paycheck Protection Program and $20 billion in new funding for the Economic Injury Disaster Grants and Loans Program.

As small-business owners, dentists may be eligible for a first or second forgivable PPP loan plus other new relief that CDA has been advocating for, including additional grants through the Provider Relief Fund and continued unemployment benefits.

The Small Business Administration announced Wednesday that it will open applications for first- and second-draw PPP loans to small lenders Friday, Jan. 15, and will open applications to all participating lenders Tuesday, Jan. 19.

Initially, beginning Jan. 11, applications for first- and second-draw PPP loans were open only through community financial institutions to “promote access to capital,” an SBA news release stated.

March 31 was the original deadline to apply for a first- or second-draw PPP loan, but President Joe Biden on March 30 signed legislation extending the deadline to May 31.

CDA published the flowchart COVID-19 2021 SBA Loans and Grants to help dentists determine their eligibility for the PPP loan or EIDL, both of which are offered through the SBA. Applications for the EIDL, specifically the COVID-19 Economic Injury Disaster Loan, never closed, but the infusion of new funding was set aside for EIDL grants for small businesses that were most severely impacted by the pandemic. Applications for the EIDL grant are expected to open Jan. 17 but details are forthcoming.

Second draw of PPP loan can be applied toward COVID-19-related expenses

Many dental practice owners will be eligible to apply for a PPP loan, also known as the “PPP second draw” loan, as the new loans are targeted specifically to smaller and harder-hit businesses, and the program allows both new and returning borrowers to apply if they meet specific criteria.

Small-business owners with 300 or fewer employees can apply for a first-time or second PPP loan if they can demonstrate a loss of at least 25% of gross receipts in any quarter of 2020 when compared to the same quarter in 2019.

In order to draw a second PPP loan, eligible businesses must have been in operation by Feb. 15, 2020, and must have used, or expect to use, the full amount of their first PPP loan for authorized uses by the date of their round-2 loan distribution. They must include all affiliates when calculating the 25% drop in gross receipts.

As with the first round, small businesses may receive a loan amount of up to 2.5 times the average monthly payroll costs in the year prior to the loan. Most of the loan terms remain the same as summarized in the CDA flowchart; for example, the amount of loan forgiveness is contingent on the business owner spending at least 60% of the loan amount on payroll costs.

However, several new reforms impact dental practices and other health care providers favorably. Most significantly, Congress expanded the list of allowable expenses and forgivable uses for the funds. 

Dentists are purchasing more PPE for themselves and their staff to comply with enhanced safety protocols during the pandemic. Now they can use a percentage of the PPP funds to cover such equipment.  

Briefly, the PPP program reforms include:

  • 40% of funds can be used to purchase PPE and other COVID-19-related improvements and expenses, such as payment for any software, cloud computing or other human resources and accounting needs.
  • Expenses are now eligible for tax deduction if they were paid for with PPP loan funds that were, or are expected to be, forgiven.
  • A simpler one-page application will be available for applicants requesting loans of $150,000 or less.
  • Borrowers can take advantage of the Employee Retention Tax Credit.

New EIDL funds intended for businesses hit hardest by pandemic

The low-interest (3.75%) Economic Injury and Disaster loans are available with the terms unchanged: Up to 30 years for repayment and 12 months of no payments; however, interest does accrue.

The applicant’s credit score and annual collections and expenses will factor into the applicant’s approval. 

Twenty percent in new EIDL funding goes toward the grant, which is targeted to small businesses located in low-income communities. Businesses can receive up to $1,000 per employee with a maximum grant amount of $10,000 per applicant.

The grant applications are expected to reopen Jan. 17. CDA will update members when applications open.

CDA recommends that practice owners who receive EIDL funds who also intend to apply for the PPP loan to consult with their accountant or financial advisor to ensure efficient use of the loan proceeds.

See CDA’s COVID-19 2021 SBA Loans and Grants flowchart for terms and eligibility details on the PPP and EIDL programs. Prospective applicants can also view the SBA’s interim final rules on second-draw PPP loans.

For more background on the federal relief package, read the CDA article published Dec. 22.

CDA will inform members when the Department of Health and Human Services begins accepting applications for new Provider Relief Funds. In the interim, dentists can watch the SBA website for updates.