CARES Act and the SBA Loan Program

Nate Williams COVID-19 Updates Leave a Comment

The CARES Act (H.R. 748) was signed into law by President Trump just hours ago. Much of the contents of the bill have been public information for days and have been blowing up every dental-related Facebook group in America. You can read the full contents of the bill (here); we have read almost every word that applies to you, with particular focus on the new SBA loans and the promise of free money.

 

Emergency EIDL Grants (Section 1110)

The rumors are true. Through an SBA loan, you can be granted up to $10,000.00 if the money is used for staff costs, rent, business debt payments, or other business expenses that you can’t pay because of revenue loss. We give detailed instructions on how to apply for this loan here: https://practicefinancialgroup.com/apply-sba-economic-injury-disaster-loan-eidl/

Here are some important things to glean from this provision of the bill:

  • Eligibility; check, you’re eligible (less than 500 employees)
  • Emergency Grant
    • This is requested as an “advance…not more than $10,000.
  • Use of funds:
    • Providing sick leave to employees unable to work due to COVID-19 (not applicable if your office is shut down)
    • Maintaining payroll to retain employees during business disruptions or substantial slowdowns (not applicable – you’re not paying your employees)
    • Making rent or mortgage payments (mortgage = loan on the building, practice purchase note or equipment note)
    • Repaying obligations that cannot be met due to revenue loss
  • Repayment – you’re not required to repay up to $10,000.

Is there a “first come first serve” order on this? Yes. The SBA was granted $10,000,000,000 to carry this out. They will dole this out until it is gone.

 

SBA 7(a) Relief Loans

These loans will be administered by private banks, authorized to approve SBA loans. Although the legislation is out, we do not recommend taking action on this loan yet. The terms of this loan apply for all of 2020, and unlike the EIDL loan, there is no first-come-first-serve basis (no rush). We will provide more guidance on these loans in the coming days.

Remember, other than the $10,000 mentioned above, and the few possible provisions of loan forgiveness in the 7(a) loan (the legislation is out; we have read it word for word, but are waiting for further interpretation as the law gets applied), these are loans. And almost never do we recommend that you hastily run out and borrow money. Again, we recommend putting a hold on this one.

Sincerely,

PFG Advisory Team

Nate WilliamsCARES Act and the SBA Loan Program

How to Apply for the SBA Economic Injury Disaster Loan (EIDL)

Nate Williams COVID-19 Updates Leave a Comment

As recommended in a previous communication, we recommend applying for the EIDL loan; the first $10,000.00 will be a “grant” (free money) from the government if used for the following:

  • Providing paid sick leave (not applicable if your office is closed)
  • Maintaining payroll (not applicable if office is closed)
  • Making rent or mortgage payments (yes, applicable if you pay rent or if you have a loan on your building, a practice purchase or equipment loan)
  • Repaying obligations that cannot be met due to revenue loss (other bills)

To clarify, we recommend borrowing $10,000.00 on this loan; this is free money. Any additional amount you borrow is a formal loan that you will have to pay back; we only recommend you borrow more money if you actually need it.

 

Frequently Asked Questions:

  • Do I fill this out for my partnership or S-Corp?
    • Fill this loan application out for your partnership. The purpose of this loan is to cover payroll, rent, and other necessary business expenses. Your largest expenses are going to be at the partnership level.
  • Do I fill out a separate application for my real estate entity?
    • No, fill this out for your dental practice only.
  • Do I fill this out in my own name, or the name of the practice?
    • This is a business loan; fill out this loan in the name of the practice and provide information (i.e. tax returns) from your practice.

 

Instructions for filling out application

Go to the following website and apply for the SBA Economic Injury Disaster Loan (EIDL): https://disasterloan.sba.gov/apply-for-disaster-loan/index.html

Please complete the highlighted forms below:

 


Business Loan Application (Form 5)

  • Check box for “Economic Injury:

  • Check the box most relevant to your entity’s organization type, most common will be Limited Liability Entity. Info can be verified via your tax return, which will say “LLC” or “PLLC” (both Limited Liability Entities). If your entity is a PC or a PA, then select the “Corporation” option.

  • Complete the following info as it relates to your business entity:

  • Complete the remainder of the application as it relates to your practice and individual situation.

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Economic Injury Disaster Loan Supporting Information (Form P-019)

Please obtain the following information from your PFG-prepared Income Statement by doing the following:

  1. Return to https://practicefinancialgroup.com/
  2. Click “login” then “Net client login”
  3. On the left-hand pane, select the name of your practice
  4. Select “Accounting”
  5. Select “12-31-19” of the folder appropriate folder for the info needed
  6. Open “Financial Statements XX/XX/XX”

Please do the following to answer the 2nd & 3rd questions:

  • Gross Revenues for the twelve (12) month period prior to the disaster, formula will be as follows:

  • Cost of Goods Sold for the twelve (12) month period prior to the disaster, formula will be as follows:

  • Loss of rents due to disaster: this will not apply to you since your dental practice is not renting property to any other entity.

Please answer all other questions on Form P-019 as they apply to your own situation.

 

Personal Financial Statement (SBA Form 413D)

Fill out this form with the most up-to-date information that you have available to you. Below is a guide to locating information for some sections we most frequently have questions about.

  1. IRA and Other Retirement Accounts
    • You can find the balance in your PFG-managed IRAs and 401k by going to https://practicefinancialgroup.com/
    • Click “Login” and “PFG Investments”
    • Once logged in, you will see a list of accounts on the left-hand side, along with the balance in each account. Retirement accounts include those labeled “401(K)” “Defined Benefit Plan” or “IRAs”
      1. Your IRAs may have longer names, such as “Roth IRA Contributory” – these are still IRAs for this section
      2. Most of the time your 401(k) is a “pooled” account; therefore, as a general rule, use 75% of the balance for your own 401(k) balance
    • The total for IRAs and Other Retirement Accounts is the sum of the accounts listed above. Provide the total on page 1 of the form and a listing of each account below in Section 5
  2. Stocks and Bonds
    • This section applies only to doctors with taxable investment accounts. If all of your accounts qualify as retirement accounts (above), then no need to fill out this section
    • In your PFG Investments portal, click on your taxable account (“JTWROS” or “TOD” for an individual account)
    • The amount listed by the name is the total amount to be reported on page 1 of the Personal Financial Statement form
    • More details are required in section 3. To find those details:
      1. On the bottom right of the screen is a section labeled “Holdings” click on the “More Details” button in this section
      2. A screen will appear on the right. Click on “Detail” at the top of that screen.
  • Here you will find the information requested on the SBA form, including Number of Shares, Name of Securities, Cost, and Market Value.
  1. Salary
    • Return to https://practicefinancialgroup.com/
    • Click “login” then “Net client login”
    • On the left-hand pane, select the name of your practice
    • Select “Accounting”
    • Select “12-31-19”
    • Open “Financial Statements 12/31/19”
    • On page four of the financial statements, you will find your salary under “DR Salary” in the “Year to date” column
  2. Net Investment Income
    • This is where you report income from rental properties or other investments you own outside of your PFG-managed investments. Don’t include a self-rental property (if you own your practice building)
  3. Other Income
    • This is where you include your net income from the practice. This can be found on page four of your 12/31/19 financial statements (see instructions above under “Salary”)

*Quick Note: don’t get hung up on having the exact number (for example, Net Investment Income); getting close is good enough here.

 

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Request for Transcript of Tax Return (IRS Form 4506-T)

Go your PFG portal and pull up your 2019 (or 2018) business corporate return (or partnership return).  Commonly used form will be Form 1120-S (or Form 1065 for Partnerships), as shown below:

Form 4506-T will be complete using the info above

  • Line 1a, will be name as show on your corporate (or partnership) tax return.
  • Line 1b, will be Employer identification number
  • Line 2a & 2b, leave blank if you practice files an 1120-S, 1065
  • Line 3, current address – must match address on tax return
  • Line 4, complete only if applicable
  • Line 6, applicable form (1120-S is more common for PFG clients)
  • Check Box 7
  • Check Box 8
  • Box 9, leave as is
  • Check Box for Signatory attests
  • Include phone number, sign, and date

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Schedule of Liabilities (SBA Form 2022) – please use instructions provided by SBA

 

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Instructions for Additional Filing Requirement (SBA Form 1368)

This information can be obtained by the Statement of Revenue and Expenses prepared by PFG.

  1. Complete the highlighted yellow as shown above
  2. The fields circled in red will come from your PFG prepared Income Statement – Net Collections for each month (these are total collections numbers, after adjusting for insurance)
  3. Numbers 1, 2, and 3 in blue above will reasonably match the Gross Income reported on your tax return. Form 1120-S, Income, Line 1c
  4. Page 2 (Forecast) is not required.

 

We hope this is helpful; if you have questions let us know.

 

PFG Advisory Team

 

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Nate WilliamsHow to Apply for the SBA Economic Injury Disaster Loan (EIDL)

PFG’s Coronavirus Crisis Employee Guide

Nate Williams COVID-19 Updates Leave a Comment

New Guidance on Employees – updated March 27, 2020

We are not employment law or HR experts. We have never claimed to be. But if you wake up and see your neighbor’s house burning down, do you sit back and watch because you’re “not a fireman?” (maybe it depends on which neighbor 😉)

This post is not intended to be a comprehensive FAQ on all employee-related issues. A few sources we have been turning to for clarifying advice, which we recommend to you, are:

Additionally, we have been reading the text of the actual bills that have been passed recently, searching for relevant guidance related to your practice.

 

Emergency Family Medical Leave and Paid Sick Leave

Recently the DOL clarified legislation that came out in bill H.R. 6201 regarding required sick leave and emergency medical leave. Officially, if your office is closed due to COVID-19 reasons, you do not have to pay your employees the 14-day sick leave, nor emergency medical leave (EFMLA). Here is what you should do:

  • Do not fire your employees (as has been our consistent advice). It may be difficult to ask for and expect loyalty from them if you abandon them now.
  • Pay your employees for actual work performed, actual hours worked (consistent advice). Don’t pay them beyond this and don’t invent work to keep them after you’ve closed; if you have promised to pay them beyond hours worked, consider revising that promise. They should all be eligible for unemployment benefits.
  • Tell your employees to go apply for unemployment insurance (consistent advice)

When your office reopens and you are seeing patients again, the paid sick leave and EFMLA benefits may apply to you and some of your employees, if they are eligible. We will help you deal with those one-off cases as they come up…after you are open for business again!

 

What other action should you take regarding your employees?

  • Stay connected to your team. Call them, text, Zoom, etc. Be their friend and look out for them.
  • If they have PTO (sick or vacation time) saved up, you’ll have to negotiate with them when they cash this in. Hopefully they can save and use it later.

 

Health Insurance

If you provide health insurance for your employees, do not stop paying the premiums. This would be a bad time to cut people off health insurance benefits. If the employee is responsible for paying a portion of their premium, you should continue to collect that portion of the premium from the employee. If they cannot afford to pay their portion, we recommend you work out a deal with them for you to pay and for them to reimburse you once they start working again.

 

Unemployment Benefits – Should I, the doctor, apply?

The new bill – H.R. 748 or the “CARES Act” – has many provisions to bolster and increase unemployment benefits. To determine the exact amount of benefits, each individual should apply through his or her state unemployment department, as we have been saying consistently for the past week.

Should you, the doctor, apply for unemployment benefits? Each state will handle this differently and each case will be handled differently. We don’t know if you will be approved by your state or not; however, we don’t think it would hurt to apply.

 

What if I already terminated my employees?

We know of some doctors who panicked and fired all their employees immediately. Others acted on bad advice given in a webinar sponsored by a large dental CPA firm. Regardless of why you did it, if you went against our advice and terminated your employees, we recommend hiring them back as soon as possible (undoing what you did). Depending on what steps you took to terminate them, this may be as simple as a phone call to say, “just kidding.” You may have to grovel, beg forgiveness, or whatever.

Regardless of what you need to do, having employees who are not working will not cost you anything. Wanting to open your office again and not having any employees will cost you a lot!

 

We will provide further updates and information as we have it. If you have any questions, recommendations or helpful information, please email us at coronavirus@practicefinancialgroup.com.

 

Sincerely,

PFG Advisory Team

Nate WilliamsPFG’s Coronavirus Crisis Employee Guide

Cash Emergency Plan 2.0

Nate Williams COVID-19 Updates, General 1 Comment

With each passing day we learn more info about this “New COVID-19 World Order” that we live in. Our hope is to be as helpful to you as we can during this time. Here are some additional thoughts to share that we hope will be helpful:


What should I do?

Financial principles don’t change; the application of those principles – the strategy you should employ – will depend upon your circumstances. Some of our clients continue to operate their practices and don’t plan – at least for now – to shut down. If you’re open for business as usual, keep going as long as you can. Even in these circumstances, we recommend caution against the day when you do get shut down.

But if your office is shut down, you’re in a completely different camp and you should employ an emergency cash strategy. The rest of this email is directed toward those whose offices are shut down, or who will eventually need to shut down.Read More

Nate WilliamsCash Emergency Plan 2.0

Coronavirus and Cash Preservation

Nate Williams COVID-19 Updates, General 1 Comment

Last week we sent out some guidance regarding your investments during a panic/crisis like the one we’re currently experiencing. During this crisis, many people will panic and sell at low values. During this crisis there will be very little real, long-term wealth lost; but there will be massive amounts of wealth transferred. This wealth will transfer from weak to strong hands and from scared to brave hands.

But this note is not about investments, it’s about surviving in your practice during a time where business may stop. We are getting a lot of questions about cash flow and what to do with employee pay. Let me try to address those generally. To get specific answers, please contact your PFG advisor directly.

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Nate WilliamsCoronavirus and Cash Preservation

PFG’s Investment Guide to the Coronavirus

Nate Williams COVID-19 Updates, General 2 Comments

 

Dimensional Fund Advisors (DFA), who manages most of our clients’ money (including our own), recently released this article relating to COVID-19. I recommend you read it: The Corona Virus and Market Declines

For years I have been advising clients to do the following with regard to their investments:

  1. Focus on investing as much as you can.
  2. Pray that the markets go down – another 2008 would be best.

When it comes to #2, I get weird looks and snickers implying that I’m joking. I’m not. Unless you’re going to market to sell, market declines are the best indicator of future returns, and they are your friend. This isn’t my opinion or some contrarian perspective. It’s math.

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Nate WilliamsPFG’s Investment Guide to the Coronavirus

Donald Trump Should Have Invested in Index Funds

Nate Williams Investments Leave a Comment

Since the inception of Practice Financial Group nine years ago, the overarching financial and personal philosophies for our dental and medical clients have not waivered:

  1. Become clinically exceptional at what you do. The more you love it, the better you’ll be.
  2. Learn to make money from your clinical skills with a servant’s mentality: having the focus of giving more value to your patients than you take from them.
  3. Do this in one location and become as profitable as you can.
  4. Maintain a balance of work and life; take care of yourself physically, emotionally, spiritually, etc.
  5. Employ the “one house, one spouse” rule, particularly the one spouse part. Divorce is the highest tax bracket. Nurture your marriage, make it great.
  6. With the help of a trusted advisor, develop a tax-efficient system to pay off debt and invest your money using low-cost, passive mutual funds.

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Nate WilliamsDonald Trump Should Have Invested in Index Funds

Want to Grow Your Practice Collections? Marketing May Not Be the Solution

Nate Williams Practice Management 1 Comment

As your financial advisors, our work begins after money transfers from your patient to your bank account. Collections are the lifeline of your business, and although we’re not technically responsible for how you collect money, as your financial partner we take great interest that you do collect money.

When our clients want to grow collections, a very common response is to throw more money at marketing, intending to bring more patients into the practice. Or worse, they may be tempted to bring on more insurance PPO contracts to attract new business. But oftentimes, these solutions don’t address the real issue.Read More

Nate WilliamsWant to Grow Your Practice Collections? Marketing May Not Be the Solution

Dental Practice Embezzlement

Ryan Millar Practice Management 2 Comments

Embezzlement is a real concern among dental practice owners, as it should be. The statistics and reports vary, but it’s safe to assume that if you don’t take precautions, then you have at least a 50/50 chance that an employee steals from you during your career. All cases of embezzlement are sad, but some are tragic, with the doctor losing hundreds of thousands of dollars.

Through our research and experience, we’ve learned that there are countless ways to embezzle from a dental practice. Because of this, we agree with dental fraud expert, David Harris from Prosperident, who contends that it is virtually impossible to guarantee against embezzlement in your practice. Instead, the goal is to reduce the risk of occurrence and to minimize the magnitude of loss.

In effort to simplify a complex topic, I have organized this issue into three lists: 1) some basic principles and practices you should follow; 2) a list of what PFG does to guard against embezzlement; and 3) a checklist of things you should be doing to address this issue. This third list – the things you should do – isn’t exhaustive. We may decide in a future blog post to give you the several page list of what you could be doing. For now, we’ll start with the most important activities first.

 
Basic Embezzlement Principles:

  1. Segregation of Duties.
    If you have one person who does everything relating to money (paying bills, keeping the books, collecting money) that’s a problem. Ideally, the people who have access to cash will not have access to the accounting records, for example.
  2. Hire Good People.
    Typically, someone who embezzles was dishonest before you hired them. Check references!
  3. Limit Access to the Spending and Collecting of Money.
    One office we recently worked with had 8 people with company credit cards.
  4. Keep a Healthy Professional Skepticism.
    An embezzler is commonly the doctor’s most trusted employee and thus has the most access to money and records.
  5. Implement Internal Controls and Don’t Cut Corners.
    Internal Controls—procedures designed to reduce the risk of fraud and error—can often be annoying to work with. For example, requiring the doctor to sign every check is much more cumbersome than using a signature stamp. But don’t cut corners.

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Ryan MillarDental Practice Embezzlement

Merry Christmas. Lessons Learned by Mr. Potter

Nate Williams Investments Leave a Comment

When I was young my family would often watch Frank Capra’s “It’s a Wonderful Life” at Christmas time. Many years have passed since the last time I saw the movie. But this year, with it showing free on Amazon Prime, I let the kids stay up late one night and we watched this Christmas classic, popcorn and all.

As the story unfolded, I found myself seeing George Bailey differently than I ever have. In many ways I saw myself in him, and I saw many of you. Trying to do the right thing. Trying to meet the demands and expectations of life. Trying to run a small business. Trying to raise a family. Trying to balance the expectations and dreams of a life of adventure and charm with the realities and humdrum of the daily grind. As the pressures mount, George breaks down and loses it. With this viewing, instead of being amused by George, I felt compassion for him.

I love this story for the rich messages of love, kindness, hope and forgiveness. And I love it for how this movie beautifully teaches the value of a human life, even the “worth of a soul.”

Clearly George is the star of the show. But there is another lesson to be learned that is applicable today by Mr. Henry F. Potter, the old miser and George’s arch enemy. Mr. Potter is mean, heartless and sour. He is the embodiment of greed and the antithesis of the Christmas spirit. He gives a great example of how to end up unhappy and alone.Read More

Nate WilliamsMerry Christmas. Lessons Learned by Mr. Potter