The CARES Act: How to Get Your Loan for Your Dental Practice

(Note: We are not financial advisors, but we have worked with financial consultants and referenced resources such as the ADA to gather this information. Always consult with your accountants and lawyers before taking out a loan.)

Dentists across the country have been waiting for the $2 trillion CARES Act to pass, with $377 billion dedicated to small business relief, providing financial relief for practices affected by COVID-19 closures. Finally, on the evening of March 27th, the bill was signed into law. But many dentists are wondering, what do they need to do to get their small business loans as soon as possible? 

If you’d like to get a clear action plan on how to protect and grow your practice right now, download our Emergency Dental Marketing Guide by clicking below.

Two Different Loans

Within the $2 trillion CARES Act, there is a $10 billion supplement to Economic Injury Disaster Loans (EIDLs). These loans have been used in the past for disasters, but this is the first time it is being used for a virus or a pandemic. EIDLs are loans of up to $2 million dollars, with a 30-year term and an interest rate of 3.75%. The first month’s payments are deferred for one full year. With the CARES Act, EIDL approval is only based on the owner’s credit score, not taxes or repayment. The vital part of this expansion is that borrowers can immediately receive $10,000 in grants that will be forgiven if it is spent on payroll costs. You can apply for an EIDL on the SBA website however you can only use an EIDL and the CARES Act 7(a) loan (called the Paycheck Protection Program Loan) if they are used for separate expenses. Most small businesses will choose to solely apply for the Paycheck Protection Program Loan, which is what we will cover for the rest of this article.

How to Apply 

To apply for the Paycheck Protection Program Loan, businesses must apply through banks and credit unions. 1,800 lenders have been approved to issue the loans, so start with your bank to see if they are on the approved lender list. Call your bank today, because applications can be filled out now.

When you submit your application, you will need documentation to prove your payroll costs during the 12-month period. This includes:

• Your payroll report detailing employee wages for the last 12 months, including your own
• The report must also include: paid time off, vacation, sick pay, family medical pay, etc. 
• Amount of withholding for state and local taxes on employee wages
• 1099s paid to any independent contractors
• Total employer payment towards employee group health insurance premiums for the last 12 months.
• Total employer payment toward employee retirement plan over the past 12 months (401k, cash balance plans, SIMPLE and SEP IRAs). Note: employees own salary deferrals will not count.

When Will I Get My Loan?

Treasury Secretary Steven Mnuchin said the loans will be given out “at lightning speed,” as soon as this Friday, April 3.

How Much is the Loan For?

The final version of the CARES Act allows for a maximum loan equal to 2.5 times your average payroll costs during the 1-year period before the loan. Payroll costs include:

• Salaries, wages, commissions, up to $100,000 per year, $8333.33 per month
• Vacation, parental, family, medical or sick leave payment
• Severance payments
• Group health insurance
• Retirement plan contributions
• State and local taxes assessed on such compensation

(Note: Many original reports stated the loan would be calculated on past costs for mortgage, rent, utilities, etc., but that is not the case.)

Loan Forgiveness, Deferment, & Interest

These SBA loans are being forgiven for payroll, rent, mortgage, and business debts during the 8-week period of eligibility (the loan must be taken out before June 30, the 8-week period begins when you get your loan). There are several documents needed to get your loan forgiveness:

• Tax filings reported to the IRS, state income, payroll, and unemployment insurance filings that verify the number of employees on payroll during the. 8-week eligibility period 
• Any canceled checks, payment receipts, accounting reports verifying payments on business debts, rent, and utility payments
• Certification from the owner that the information is true, and the total amount of forgiveness requested was used for employees, rent, mortgage, utilities, and business debts. 

It is advised that practices provide as much detail as possible to receive their loan forgiveness.

The amount of the loan that is not forgiven will have a maximum maturity of 10 years, and will not exceed an interest rate of 4%. 

Any forgiven debt from these loans will not be taxed and will be excluded from income. In addition to loan forgiveness, you can also defer repayment of principal and interest for at least six months, but not more than one year. The bank from which you receive your loan will have full discretion on deferment allowances.

If you’d like to get a clear action plan on how to protect and grow your practice right now, download our Emergency Dental Marketing Guide by clicking below.