What small-practice physicians should know about Paycheck Protection Program loans

Understand how the program works and the steps to take to apply for a loan.


Physicians who run smaller practices are eligible to apply for small business loans from the Paycheck Protection Program (PPP), a key provision of the CARES Act passed in response to the novel coronavirus disease (COVID-19) pandemic.

Jayme Matchinski, JD, provided an overview of the program and steps physicians should take to apply for a loan in an April 29 AOA/AOIA webinar. Her slide deck is available here.

As of Monday, May 4, the money available in the PPP was half gone, CBS News reported. This means any physicians interested in a PPP loan should apply for one immediately. That said, many in the industry believe there may be more opportunities for financial assistance coming.

Overview of the CARES Act and implementation of the Paycheck Protection Program (PPP)

The CARES Act modifies Section 7(a) of the Small Business Act, which is historically how small businesses have received funds. New “Paycheck Protection Loans” under Section 7(a)(36) will be available during the “covered period,” from Feb. 15 – June 30.

The loans are available from SBA- and Treasury-approved banks and credit unions. Loans are guaranteed by the SBA 100% until Dec. 31, 2020; After that date, it will be 85% for loans less than $150,000, and 75% for loans over $150,000.

You don’t need to establish that you were unable to get credit elsewhere. No personal guarantee is required, or collateral. There will be no prepayment penalties, no guarantee fees, and no yearly fees.

The borrower needs to certify that the loan is necessary due to current economic conditions, that it will be used to retain workers and maintain payroll or make mortgage payments, lease payments and utility payments; and that the borrower does not have an application, or has not received a payment, for a loan under Section 7(a) for the same purpose from Feb. 15 to Dec. 31 of this year.

Who is eligible?

Businesses with no more than 500 employees, or businesses that if applicable, meet the size standard for the industry established by the SBA. See page 4 of the slide deck for details.

How do you determine your number of employees?

Take the average number for each of the pay periods for the preceding 12 calendar months. If you haven’t been in business for 12 months, take the average number for each pay period you’ve been in business. This includes all individuals employed on either a full- or part-time basis. The only exceptions are independent contractors; they must apply for their own loans.

In the past, when applying for an SBA loan, applicants needed signatures from all owners, or at least 20% of the ownership group. Through the CARES Act and PPP, only one signature is required. As long as you are an authorized representative, you can sign for this loan. A decision will be made by the lender within 60 days.

Paycheck Protection loans overview

Maximum loan amount

The sum of:

(Average monthly payroll costs for the 1 year prior to the date on which the loan is made * 2.5)


Any outstanding disaster loan under Section 7(b)(2) of the SBA that was made after Jan. 31, 2020 and refinanced into a 7(a) loan

The maximum loan amount is $10 million, so if the above sum exceeds that figure, the loan amount will be $10 million. Other stipulations apply for those who were not in business between February and June 2019, or seasonal employers. See page 7 of the slide deck to learn more.

Payroll costs

Loans cover payment of compensation to employees for wages, commission, and salary up to $100,000. For self-employed taxpayers, net earnings are also capped at $100,000.

Not included in that figure are: payroll taxes, employees who live outside the U.S., and medical or family leave, which are covered by separate legislation.

Acceptable use of funds

During the period Feb. 15, 2020 through June 30, 2020, the borrower may use the borrowed funds to cover:

  • Payroll costs
  • Group health care benefits
  • Interest on any mortgage obligation
  • Rent or utilities
  • Interest on any other debt incurred before Feb. 15, 2020

Terms of the loan:

  • Maximum maturity of 10 years.
  • Maximum interest rate of 4% (usually 1%-2.75%)
  • Guaranteed deferral of repayment for 6-12 months

Matchinski says the June 30 end date may change based on the length of the COVID-19 stay-at-home regulations.

Loan forgiveness

If the loan money is used to pay certain expenses, the first eight weeks’ worth of these payments will be forgiven on a tax-free basis.

Which payments are forgivable?

  • Interest on a mortgage incurred before Feb. 15
  • Rent for a lease in force before Feb. 15
  • Certain utilities for which service started before Feb. 15
  • Payroll costs (same definition as under Section 7(a)(36))
    • Note that 75% of a PPP loan needs to be spent on payroll in order to qualify for loan forgiveness

Note that the forgiveness amount will be reduced if you reduce your number of employees, cut salary, or receive a $10,000 advance under the disaster loan program.

For examples of forgiveness amount calculations, please see pages 14-18 of the slide deck.

Documentation required for loan forgiveness

Applications for forgiveness must include documentation verifying the number of full-time equivalent employees on payroll and pay rates for the periods:

  • The covered period (8 weeks after the loan was taken out)
  • Feb. 15, 2019 – June 30, 2019
  • Jan. 1, 2020–Feb. 29, 2020
  • Feb. 15, 2019–June 30, 2019 (for a seasonal employer)
  • Feb. 15, 2020 through 30 days after the enactment of the CARES Act.

You can share this information with payroll tax filings, unemployment insurance filings, cancelled checks and verified payments on mortgages, rent and utilities. By sending this in, you are certifying that the information is true and correct, and that the amount of forgiveness requested was used to retain employees.

To see additional documentation requirements, please review pages 28-30 of the slide deck.

Other loan options

To learn more about other loan options outside of the PPP, please review pages 21-26 of the slide deck and watch the above video starting at 41:41.

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