APMA Guide to Loans | Practicing DPMs | APMA
APMA Guide to Loans

Guide to COVID-19 Small Business Loans

This is the first of a four-part series prepared by Marcum, LLP, to help podiatry practice owners understand COVID-19 resources available to small businesses and to begin planning for recovery. The other articles in the series are linked below:

Without a doubt, the COVID-19 pandemic has severely tested the nation’s economic stability. In response, Congress approved funding for a $2 trillion aid package to help struggling businesses—especially small businesses ordered to temporarily close operations.

The Families First Coronavirus Response Act provides assistance for employees affected by the pandemic through expanded unemployment benefits, COVID-19 testing, extended sick leave and Emergency Family and Medical Leave (FMLA) provisions for employers with 500 or fewer employees.

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provides loan assistance to businesses, primarily through the Paycheck Protection Program (PPP) and the Emergency Injury Disaster Loan (EIDL) program. Each is intended to help keep businesses afloat and retain employees. Other forms of assistance include relief to health-care providers in the form of Medicare relief funding and additional lending programs.

It can be daunting for small business owners to navigate these programs, keep up with the legislative actions and understand which provisions are best for your practice. The following information provides an overview of each program.

Small Business Loans

Congress approved two disaster relief loan programs for small businesses affected by COVID-19. A business may choose only one of these programs. After funds were quickly depleted for the two programs within two weeks, Congress approved another $370 billion under the Paycheck Protection Program and Health Care Enhancement Act.

Paycheck Protection Package Loans

The CARES Act included $349 billion in forgivable PPP loans for small businesses with fewer than 500 employees. Congress approved an additional $320 billion to replenish the funds in April.

PPP loan provisions include:

  • Borrowers must have been in business by February 15, 2020 with employees on the payroll.
  • Covered loan period: February 15 through June 30, 2020
  • PPP loans are forgivable if the employer doesn’t lay off or reduce the salaries of employees during the downturn by more than 25 percent within eight weeks of the first loan disbursement
  • Helps businesses cover their operating expenses during the crisis

Learn more

Emergency Injury Disaster Loans (EIDLs)

Congress added $50 billion to the $10 million program in April after the high demand for the loans. In early May, the SBA reopened its EIDL portal for agricultural businesses only, though loans for other businesses may be considered at a later date.

  • Long-term, low-interest working capital loans are for small business owners who do not have other available credit.
  • Loans of up to $2 million at a 3.75-percent interest rate can be used for payroll, to pay fixed debts, accounts payable, and other bills that could have been paid prior to the crisis.
  • EIDLs may not be used to replace lost sales or profits, and they may not be used to expand.
  • Loan terms are up to 30 years and payments may be deferred for four months.
  • Loans exceeding $25,000 may require collateral.
  • Applications can be made online or by mail; see the federal SBA disaster relief site for more information.

Learn more

Medicare Provider Relief Funding

The CARES Act provided for $100 billion in relief funding to health-care providers based on their 2019 traditional Medicare fee-for-service payments. Providers will only receive a payment if they billed Medicare in 2019 or provided diagnoses, testing, or care for individuals with possible or actual COVID-19 cases after January 31, 2020.

As of April 24, the Health Resources and Service Administration distributed $30 billion to providers via automatic deposit or by paper check. There was no need for providers to apply to receive the funds. Some received a second payment based on Medicare Cost Reports. If a provider meets certain terms and conditions, the payments received will not need to be repaid at a later date.

Some providers have criticized the allocation process, claiming that some geographic areas that have a large number of COVID-19 cases have received less payment based on fewer Medicare fee-for-service beneficiaries.

Learn more

Additional Provider Funding

Medicare providers who have already received payment as of Friday, April 24, 2020, may now apply for additional funding. Providers are required to submit data regarding annual revenue and estimated COVID-related losses by using the Provider Relief Fund Application Portal.

Providers must attest to having received the payment via the Provider Attestation Portal and agree to the terms and conditions on the portal.

Providers will need the following documents to begin the application process:

  • TIN that has received prior Provider Relief Fund payments
  • TINS of subsidiary organizations that have received prior Provider Relief Funds but do not file separate tax forms (i.e., subsidiary organizations that are accounted for in the parent organization’s tax filing)
  • Amount of payments received
  • Relief Fund payment transaction numbers / check numbers
  • A copy of the provider's most recently filed tax forms

If a provider has not received a payment, they should not use the General Distribution Portal and may still receive funds in other distributions.

Lending Programs

Loans for Community Lenders

When Congress reauthorized funding for the CARES Act, lawmakers included $60 billion to small lenders and community banks. The goal is to alleviate the burden on small banks but also to make it easier for small business owners to work with their community banks to receive lending and apply for the loans. Providers will need to work closely with their lenders to attain funding for the programs described above. Marcum can help facilitate these relationships; see contact information at the bottom of this page.

Main Street Lending Program

The Federal Reserve is expanding its emergency Main Street lending program intended to help corporations with damages related to COVID-19. According to the Fed, the goal of the program is to help credit flow to small and midsize businesses that were in sound financial shape before the pandemic. The minimum loan size will double to $1 million. Unlike the PPP, Main Street loans are not forgivable. Launch details have not yet been announced.

Learn more

Tax Considerations

Practice owners should be aware of the following tax provisions and implications from CARES Act tax cuts.

Employee Retention Tax Credit

  • Open to businesses of all sizes.
  • Fully refundable tax credits equal to 50 percent of qualified wages paid in a calendar quarter.
  • Maximum of up to $10,000 per employee (including qualified health plan expenses).
  • Maximum credit is $5,000 ($10,000 qualified wages x 50 percent per quarter per employee.)
  • Businesses are entitled to a credit per quarter until receipts exceed 80 percent of the same quarter in 2019.
  • Cannot be combined with the PPP loan.

Delay of Payment of Employer Payroll Tax and Self-Employment Tax

  • Allows all employers to defer payment of the employer portion of Social Security taxes (6.2 percent of wages) otherwise owed for wage payments after March 12, 2020, through December 31, 2020.
  • Payroll tax deferral amounts to an interest-free loan where 50 percent is repaid on December 31, 2021, with the remaining balance deferred until December 31, 2022. 
  • Cannot be combined with PPP loan.

Active Losses

  • Pass-through business owners can offset active losses against other forms of income, such as wages and investments, without limit.
  • Previous tax law limited this offset to $250,000 per year for individuals and $500,000 for couples.

Net Operating Losses (NOL)

  • Cares Act loosens restriction on NOL carrybacks and interest deductions, which should boost business owners’ tax flow.
  • Taxpayers can carry back losses incurred during 2018–2020 for five years.
  • Corporations can amend their returns to reduce taxable profits for years prior to the 2018 tax year.

Interest Deductions

  • Prior to the CARES Act, interest deductions were limited to 30 percent of earnings before interest, taxes, depreciation, depletion, and amortization (EBITDA).
  • Under the CARES Act, the limit was raised to 50 percent for 2019 and 2020.
  • On April 30, the IRS stated that any expenses businesses pay to qualify for COVID-19 relief loan expenses cannot be deducted.
  • Forgiven loans are not included in the business’s gross incomes.

Coronavirus Resource Center

Do you have more questions about the impact of the coronavirus on your business? Call or email Maryann Czarnota, CPA, at 847-282-6525 or David Mustin, MBA, at 440-459-5755.

Visit Marcum’s Coronavirus Resource Center for up-to-date information.

This information is accurate as of May 13, 2020, and is subject to change. Your Marcum tax advisor will keep you posted on updates.

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