The pandemic hit the healthcare industry hardest by lasting clinical and financial stress from the COVID-19. We observe the widespread furloughs and layoffs at hospitals and physician practices due to the COVID-19 pandemic. Moreover, some practices have even temporarily closed due to the loss of revenue and the cancelation of non-emergency care during shelter-in-place orders. Hence to boost the industry and help small businesses in this uncertain time the Paycheck Protection Program is launched by the former US president.
The objective of the Paycheck Protection Program is help businesses to keep their workforce employed. The PPP supports small businesses with funds to pay up to 8 weeks of payroll costs including benefits. As per the federal data, healthcare providers are the major beneficiary of this program as the Coronavirus (COVID-19) crisis adversely impacted the healthcare sector as a result physician practices have experienced significant financial hardships.
PPP program was established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act and it offers up to $10 million for businesses with fewer than 500 total employees. If at least 60 percent of the money goes to payroll expenses, among other criteria then the loans can be waived off. Hence to avail loan under PPP, an entity should know about the edibility criteria.
Eligible entities include sole proprietorships, independent contractors, small businesses, and self-employed individuals also, we have tried to cover edibility for each of these in more detail.
Sole proprietorships- will need to submit a Schedule C from their tax return filed (or to be filed) showing the net profit from the sole proprietorship.
Independent contractors- will need to submit Form 1099-MISC (now 1099-NEC in 2020) in addition to their Schedule C.
Self-employed individuals will need to submit payroll tax filings reported to the Internal Revenue Service.
Hospitals owned by government entities should review the Treasury guidance specific to them for eligibility. According to exclusive of Medicaid "A hospital that is otherwise eligible to receive a PPP loan as a business concern or nonprofit organization (described in section 501(c) (3) of the Internal Revenue Code of 1986 and exempt from taxation under section 501(a) of such Code) shall not be rendered ineligible for a PPP loan due to ownership by a state or local government if the hospital receives less than 50% of its funding from state or local government sources.
The SBA announced on January 19, 2021, that SBA borrowers who have 7(a) loans, 504 loans, or Microloans approved during the period beginning on February 1, 2021, and ending on September 30, 2021, will receive payments for 3 months instead of 6 months, subject to funding availability. This reduction is due to the insufficiency of funds, according to the SBA.
Health care providers and suppliers remaining open due to their essential nature during this uncertain economic period must become aware of this loan program and associated requirements of the SBA.
The borrower may use the borrowed funds to cover the following activities during the period Feb.15, 2020, through June 30, 2020.
• Group health care benefits
• Payroll costs
• Rent or utilities
• Interest on any mortgage obligation
• Interest on any other debt incurred before Feb.15, 2020
The purpose of the PPP loans was to help cover payroll expenses to mitigate the risk of lay off. Moreover, if a loan borrower under PPP able to document the spending the PPP funds on that can take advantage of loan forgiveness. Our team continuously keeps an eye on these programs and keeps you informed of any new developments that will impact your practice.