Understanding the Paycheck Protection Program in PT | Breakthrough

Understanding the Paycheck Protection Program as a Private Practice Owner

As many practice owners continue to struggle financially during the COVID-19 crisis, the new Paycheck Protection Program may offer a ray of hope.

The PPP is part of a $1 trillion+ stimulus introduced by the federal government that provides a financial cushion for small businesses in the form of a loan—some or all of which may be forgiven.

As you explore ways to pull your practice through declining revenue, the PPP should be among your options. Here’s what we know about the PPP so far:

What Is the Paycheck Protection Program Intended For?

The PPP was introduced as part of the larger CARES Act as a means to help small business owners continue to keep employees on their payroll, even if they had to bring business to a grinding halt. The alternative, of course, is to lay off employees, which would allow them to draw unemployment benefits. The goal is to continue to compensate employees through the PPP, regardless of whether there’s work for them to do. 

What Determines Loan Eligibility

To qualify for a PPP loan, you’ll first need to determine what your payroll costs are on a month to month basis. Then, you’ll multiply those costs by 2.5 to get the maximum amount you’ll be eligible for. You will need to provide supporting documentation of payroll costs so that your lender can determine your eligibility. 

Nearly every bank and credit union is now approved to issue PPP loans, but your own bank is the best place to start. It’s advisable to apply wherever you already have a strong banking relationship, as most banks are not taking non-customers for this loan. 

How SBA Loans Relate to PPP

The PPP is part of the larger CARES Act, and many small businesses may have already applied for an SBA loan in addition to the PPP. If you’ve already received an SBA loan, you should be able to roll that loan into your PPP. For example, if your PT payroll costs are $50,000 per month, and you received a $25,000 SBA loan, then your total loan amount would be $150,000 ($50,000 x 2.5 + $25,000). 

How Are You Allowed to Use the Loan?

Once you receive your loan money, you begin an eight-week period in which you must spend your loan. This period is also used for comparative purposes to determine how much of your loan is going to be forgiven. Ideally, a large part of this loan will essentially be free money for PT owners. 

The allowable use covers payroll costs and other operating expenses, including rent, utilities, mortgage interest, and debt service. You’ll be required to provide documentation of these expenses. During the eight weeks, the amount of loan money you spend on qualified expenses becomes the amount that is potentially forgivable.

How Much of the Loan Can Be Forgiven?

Once you have a potentially forgivable sum, you’ll need to calculate how much of the loan can actually be forgiven. To do this, you’ll compare your FTE from February 15 to June 30 to this same period one year ago (another option is to review FTEs in January and February before the pandemic began). You’ll also need to compare how much you’re paying in wages during this time compared to this same time frame a year ago.

This goes back to the PPP’s intention: to keep people on payroll instead of cycling through unemployment.  

The forgiveness process has yet to be defined, but you will need to apply for loan forgiveness. It’s advisable to work with your accountant to help you accurately calculate payroll costs that can affect your loan eligibility and forgiveness.

You can watch Bob Kowalick from Certified Reimbursement Solutions do a full training on PPP in the free Facebook community, Private PT Practices: Standing Up Through Crisis.

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