Many of our clients around the country have received (or will soon receive) funds from the PPP loan. The next obvious question to arise is this: now what?
At the time of this writing (10:13 AM PST, April 23, 2020), the SBA has not given all the guidance that will come regarding forgiveness of the loan. There is still a lot that we don’t know about the forgiveness process and calculation. Here is what we do know:
- The Federal Government is a very blunt instrument (think: root canal with a baseball bat); many people will try to defraud of this program; other intended beneficiaries will miss out. As such, the government will be making many changes over the coming weeks in an effort to better direct the use of funds toward their intended purpose. Some of these changes may benefit you, others may not.
- After the 8-week period is up (or sometime thereabouts), the bank who gave you the PPP loan will have a process for you to apply for forgiveness.
- The banks want as much of these loans forgiven as possible – they do not want a 1% loan on their books.
What should I do now with the funds?
As the rules to this program evolve, the strategy will evolve. However, as of today, this is our advice:
Run your practice – including the hiring of employees and expenditure of funds – based on natural economic reasons, not based on the hope of loan forgiveness.
For example, hire your staff to work as you have work for them to do and as they are needed in the practice. These decisions should be based on patient flow, staff availability, safety procedures you should follow, and the laws in your state. Again, don’t let these loan proceeds, or the desire to have the loan forgiven, dictate how you run your office. (In saying this we do not minimize the goal to have loan funds forgiven; it’s just not the number one, most important thing to consider).
Here are some specific things we recommend:
- Employees – hire and pay them for actual work performed. If they are on unemployment, don’t start paying them just to get the money forgiven.
- Rent – during the 8-week period you should pay your rent twice. Even if your landlord has deferred your rent payments, make the rent payments now that you have the loan money.
- Utilities – pay as normal.
- Loan Payments – almost everyone reading this will have their loans on deferment. However, once you receive the PPP funds we recommend you contact your creditors and make interest-only payments.
- Paying the doctor – PFG will work with each of you to set your own payroll (including your family).
Should I open a separate bank account?
If you are a PFG client, we do not recommend you open a separate account for the PPP funds (unless mandated by your lender).
If you are not a PFG client and don’t have a good accounting system in place, this advice may not apply to you and perhaps you should open a separate account to track the use of the funds. But again, for PFG clients, do not open a separate account.
I have the PPP Loan and I am currently on unemployment. Should I pay myself a salary?
The bird in the hand is the unemployment money; the “two in the bush” is the money you may get forgiven from the PPP loan.
As such, if you currently are receiving unemployment benefits, we recommend you continue to receive those (and not pay yourself a salary) until you start working again. Once your office opens and you start performing dentistry, we recommend you get off unemployment and start your salary then.
*There may be other circumstances to consider; for questions regarding your own salary talk with your PFG planner.
What will PFG do to help with the process?
Among other things, here is what we offer our clients regarding the PPP loan:
- Continue to keep an accurate accounting system, which will be critical when applying for loan forgiveness
- Be completely knowledgeable on the loan forgiveness process
- Help you through the forgiveness application, working to ensure that you receive the maximum amount of loan forgiveness under the law.