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SBA relief loan options: What’s best for dentists?

April 7, 2020
In the wake of the COVID-19 disruption, here's how to make sense of the federal relief programs available to dentists.

By Mark Schmidt

As dentists grapple with the COVID-19 crisis, mandated practice closures and limited patient appointments are leaving many concerned about the future. Without revenue, there’s limited cash flow to cover even day-to-day operational costs and expenses.

With so much information available about the federal government’s relief programs, many are unsure about which option is best for their needs. At the same time, lenders across the country are working closely with the Small Business Administration (SBA) to understand the details and help borrowers get access to the funds. Let’s take a look at some key provisions that can help dentists determine the best course of action to take.  

Payment relief on new and existing SBA loans

First, good news on payment relief: If you have an existing SBA 7(a) loan, 504 loan, or microloan, the government will pay the next six monthly payments for you. Perhaps even more importantly, any new SBA loan—with the exception of the Paycheck Protection Program—that’s taken out in the next six months will have the first six payments picked up by the SBA. 

This is a great option for practice owners doing long-term planning and could be an attractive incentive to help get businesses back up and running. It’s a solid package: you get long terms, large amounts, and payments made by the SBA for six months.

Relief to retain employees

If you need immediate help retaining employees, apply to the Paycheck Protection Program (PPP). This program is designed to lend a small business 2.5 times its average monthly payroll expenses, based on your last calendar year, or up to $10 million, whichever is the lesser amount. The loan offers a very low interest rate, plus no collateral or personal guarantee are required, and will be forgiven if used for authorized purposes.

PPP is designed to help businesses tackle payroll at large, which includes wages, tips, vacation pay, benefits, retirement contributions, and some taxes. While payroll is the defined borrowing base, the use of funds is a little different. Let’s say you borrow $200,000 based on your payroll; you can actually use a portion to also put toward mortgage interest, rent, and utilities. 

At the end of the program, or at the end of eight weeks from the time you get your money, you can apply to have the loan forgiven, as long as the funds were used for the purpose intended. If you can confirm that you used the money per the qualifications, the loan is forgiven in the amount of the use of funds. As long as borrowers use at least 75% of the loan proceeds are used payroll expenses—and then the remaining balance toward eligible mortgage interest, rent, and utilities—the entire loan will be forgiven.

Sole proprietors, independent contractors, and independent DBAs all qualify for PPP. Keep in mind there are 30 million small businesses in the country and it’s a first come, first served program.

Relief if your business is economically injured

The SBA’s Economic Injury Disaster Loan (EIDL) is not new or part of the CARES Act; it’s typically used by business owners in disaster-declared areas. But now that we’re facing a nationwide disaster declaration, every business in the country is eligible to apply for an EIDL if they’ve been economically injured by coronavirus.

What is new is that the SBA is now offering an Emergency Economic Injury Loan, which is in essence a grant. Dentists whose businesses have been harmed by the pandemic can apply for an Emergency Economic Injury Loan and secure an advance of up to $10,000 within three days. The advance does not need to be repaid under any circumstance, and may be used to keep employees on payroll, pay for sick leave, meet increased production costs due to supply chain disruptions, or pay business obligations, including debts, rent, and mortgage payments. According to the SBA, the grants “are backdated to January 31, 2020, to allow those who have already applied for EIDLs to be eligible to also receive a grant.”

The American Dental Association is encouraging dentists to apply for an emergency loan, which can be done through the SBA website. 

What should you get?

What you apply for should be dependent on the urgency and scope of your needs.

If you need an immediate $10,000 relief, apply for an emergency EIDL; you can still get what you need through the PPP, but the forgiveness amount will be reduced by $10,000 (no double dipping). You cannot use two SBA loans for the same purpose. 

If you need more than $10,000 to cover financial needs that are not urgent and not covered under PPP, consider applying for another SBA loan like a 7(a). Borrowers may apply for a 7(a) loan in addition to the EIDL and/or PPP.

Mark Schmidt is CEO of Fund-Ex Solutions Group, a non-bank SBA lender participating in the Paycheck Protection Program and other SBA financial assistance programs. FSG also offers the SBA 7(a) loan. Visit fundexsolutions.com for more information. FSG is a wholly-owned subsidiary of Bankers Healthcare Group

Editor's note: Visit DentistryIQ's Coronavirus Resource Center to find more coverage on the COVID-19 disruption.