Accessing Various Forms of Capital for Your Practice | Practicing DPMs | APMA
Accessing Various Forms of Capital for Your Practice

This article is the second 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:

In our previous article, we provided a guide to COVID-19 Paycheck Protection Program (PPP) loans, Medicare Provider Relief Funds, and other forms of disaster assistance under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). In this article, we turn to ways you can access capital through SBA 7(a) loans and other traditional loan programs to help maintain cash flow for your practice. We will also address some best practices to enhance practice reimbursement and boost overall revenue practice management.

Government Programs

Before practices closed their doors to elective medical services during the COVID-19 pandemic, many were already financially stressed due to consolidations, the new value-based care models, and other industry pressures. The pandemic has further exacerbated cash-flow challenges. The Medical Group Management Association reported that many practices have experienced an average decline of 60 percent in patient volume since the start of the crisis.

As individual practice owners decide when and how to fully reopen their practices, their attention will be on cash flow. The Paycheck Protection Program Flexibility Act was signed by President Trump on June 5, 2020, giving those who had received PPP funds additional flexibility. This act provides for:

  • more time to spend loan funds and still obtain forgiveness, with an extension from eight to 24 weeks to spend loan proceeds;
  • a reduction from 75 percent to 60 percent in the mandatory payroll spending provision;
  • time to pay off the non-forgiven portions of the loan has been extended from two to five years;
  • new exceptions letting borrowers obtain full forgiveness even without fully restoring their workforce; and
  • letting businesses delay paying payroll taxes even if they took a PPP loan.

As we mentioned in our Guide to COVID-19 Small Business Loans, the CARES Act provided $100 billion in relief funding to health-care providers based on their 2019 traditional Medicare fee-for-service payments. Learn more.

Traditional Small Business Lending Programs

Long before the COVID-19 crisis, the SBA program provided financial assistance to small business owners. Following is an overview of some of the SBA loan programs available.

Standard SBA 7(a) Loans

  • Terms and loan amounts depend on the type of loan.
  • Maximum loan is $5 million with a maximum SBA guarantee of 85 percent for loans up to $150,000 and 75 percent for loans above that amount.
  • No collateral required for loans up to $25,000.
  • For loans exceeding $250,000, the SBA requires lenders to collateralize the loans to the maximum amount possible, up to the loan amount.
  • Business owners can work with their lenders to negotiate interest rates. 

7(a) Small Loan Program

  • Has a cap of $350,000 with a maximum SBA guarantee of 85 percent for loans up to $150,000 and 75 percent for loans greater than $150,000.
  • Similar to the standard SBA 7(a) loan program, lenders and borrowers can negotiate the interest rate, but the rate cannot exceed the SBA maximum.
  • Qualified lenders can make eligibility determination without SBA review.

SBA Express

  • Accelerated turnaround time: a decision is rendered within 36 hours of application.
  • Maximum loan amount of $350,000 with a maximum SBA guarantee of 50 percent.
  • Lenders not required to take collateral for loans up to $25,000, but may use existing collateral policy for loans exceeding $25,000 up to a maximum of $350,000.
  • Loan provides up to seven years of revolving lines of credit with maturity extensions permitted.
  • Lenders and borrowers can negotiate the interest rate but it cannot exceed the SBA maximum.
  • Eligibility is determined by the lender.

The SBA provides select lenders the authority to manage the loan process under the Preferred Lenders program. Lenders have the authority to determine eligibility without SBA approval, underscoring why good working relationships with lenders are essential. Many national and regional banks have specialists who lend to medical professionals and medical practices.

Marcum’s Healthcare advisors work closely with our clients to facilitate lending relationships and help health-care practices determine the best loan program for their practice. 

Unlocking Capital within Your Practice

One way to free up capital is to consider whether the equipment in your practice is being sufficiently utilized to warrant the cost. Survey your office to determine if any major equipment is being underutilized and, therefore, not producing sufficient revenue—your business advisor can help. Consider whether equipment can be refinanced or sold and then leased back.

Managing Costs Through Shared Services

Business owners with smaller practices may better weather the current storm by partnering with other practices under various structures. These partnerships can help lower costs by sharing high-cost back-office services, without requiring the practices to merge.

Areas for partnership could include:

  • financial, billing, and collections services and staff;
  • shared practice management, receptionist, and administrative support;
  • shared equipment;
  • EHR management;
  • group purchasing;
  • training and HR; and
  • risk-management services.

You may even consider partnering with other specialty health-care practices.

Revenue Cycle Management (RCM)

It is essential that each practice owner takes the time to identify gaps in the RCM process that could be depleting your practice of the revenue you have earned. Work with an experienced health-care tax professional to examine the following issues: 

  • Is your practice writing off too many services due to improper coding and documentation?
  • Are you making errors in the claims submission process?
  • Are you using best practices in patient invoice collection?
  • Are you collecting copays and balances from patients up front?

Marcum’s health-care advisors or an RCM management firm can help you identify ways to strengthen your RCM process, drive practice-side efficiencies, and accelerate revenue. Even a few changes in your current process may sharply increase revenue.

Alternative Service Delivery

As you look for ways to access various forms of capital and trim unnecessary expenses from your practice, consider complementary ways to meet your patients’ needs during the pandemic and beyond.

For example, telehealth has seen a tremendous boost in practitioner adoption. According to the American Medical Association, only 15 percent of practices were using telehealth one year ago. The COVID-19 pandemic has made telemedicine a necessity that has seen widespread adoption. The ability to consult with patients via video chats on Skype, Zoom, FaceTime, or other technology can help you focus on those with more complex needs.

As practices begin to reopen, it will be essential to have a plan in place to generate revenue in this new health-care environment.

Watch for Part Three of our series: Building a Path Forward for Your Practice.

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.

The information in this blog is accurate as of June 8, 2020, and is subject to change. Your Marcum tax advisor will keep you posted on updates.


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