PPP2 Applications And CCA Updates

Dear Client & Friends of PracticeCFO,

Two items in this release:

  1. Updates to our prior guidance about the recently passed legislation:
    1. We were incorrect regarding the moratorium on student loan payments. Per Studentaid.gov: “After the student loan payment suspension ends 1/31/21, no payment will be due before 2/22/21.” However, it appears your student loan payment will be due after that and auto-withdraws will continue.
    2. The employee retention tax credit: You are eligible if you were mandated to close your office OR saw a 20% decline in your collections in any quarter of 2020 relative to 2019. You’re eligible for a tax credit of 50% up to $10,000 of “qualifying wages” paid to your staff from March 12th through the end of the year. You may not count payroll covered by PPP1 toward the qualified wages. Also note, the IRS has yet to issue guidance where and how this credit can be applied for. Until then, it’s a holding pattern.
  1. IMPORTANT: We mentioned in our email last week that the PPP1 certification stating the following is no longer required for PPP2:  “Current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant.”  Some CPAs and other resources are saying this because it doesn’t appear to be directly stated in the PPP2 section of the new act. However, the SBA application released a few days ago includes this certification. It’s our belief that since virtually all of the same provisions of PPP1 apply to PPP2, so does this certification. And we’re seeing early bank application require this certification explicitly.  In other words, as an applicant, you’re certifying this loan is necessary to sustain your operations. It’s PracticeCFO’s opinion that most dentists do not need additional PPP funds to sustain their practice operations and it would be better to therefore not apply. We arrive at this conclusion because of the following:
    1. The dental industry has recovered exceptionally well over the past six months. Most dentists are well capitalized and in fact have more working capital now than before COVID-19. Collections are at or close to pre-COVID collection levels.
    2. Dentists are getting vaccinated within the next two months, reducing patient concerns about office visits. General population vaccines will be rolled out as well later this year. Projected vaccine rollouts reduce the economic uncertainty in the dental industry.
    3. There is a much higher likelihood of an SBA audit over PPP2 funds. Here is our reasoning:

      •   The SBA has issued guidance that they intend to review individual SBA loans. Although they will focus on larger loans, they may only start there. You are required to maintain supporting documents for six years after the date of PPP loan forgiveness. Most of our clients will comfortably pass a review for PPP1. We are not confident they will pass a review of PPP2. See SBA Letter, page 8.
      •  Two days ago the Office of Inspector General issued a formal management alert to the SBA that they have “serious concerns about improper payments” on PPP loans. They are requesting “expedited management action” to reduce further improper payments. The SBA is “systematically putting a hold flag on loans identified” as ineligible.
      •  All PPP loans are public and easily searched on the SBA website, identifying companies by name.
      •  We believe the SBA will rubber stamp most applications now, then spend six years identifying those that falsified information or did not need the loan to sustain their operations.
      •  The goal of PPP2 is to assist those industries that continue to be significantly affected by COVID-19, including the restaurants, travel, tourism, gyms, salons, etc). For them, PPP2 may actually mean survival.
    4. In determining whether you can certify “current economic uncertainty makes this loan request necessary to support the ongoing operations “ of your practice, consider the following now relative to 2019:

      •  Your cash and credit card balance
      •  Your collections over the past six months
      •  Your current schedule
      •  What government stimulus you already received in 2019  (PPP1, EID Grant, EIDL, HHS Grants, local grants, etc.)
  2. If you feel your practice does in fact need PPP2 funds to sustain your operations, we recommend you complete the application with your bank. Most banks have not opened their window to accept applications yet. They will likely open up in the next two weeks. PracticeCFO can provide you the information you need. Please email all requests to hairah.nazir@practicecfo.com. Hairah is coordinating our efforts to assist clients as needed. If you cannot complete this application on your own, please make that known to her and we may be able to advise with the full application.

PracticeCFO is in the middle of one of our busiest months (1099s, 401K census and testing, completing 2020 accounting, preparing for tax season). Our primary value is great business and personal financial planning. To do that, we need to remain focused on that core mission during this time. We appreciate your patience as we work through it! Here’s to a successful 2021!

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