The Paycheck Protection Plan (PPP) has been one of the most talked-about forms of COVID-19 relief since applications opened to business owners in early April of 2020. Offered via the U.S. Small Business Administration (SBA), PPP "loans" — technically a grant because, as long as the money is spent on employee payroll, building rent, office utilities, and mortgage interest, it doesn't have to be repaid if used correctly — have been both incredibly helpful and extremely confusing for the medical practices, small businesses, sole proprietorships, independent contractors, and self-employed individuals who sought them out.
While PPP is undoubtedly an essential aspect of the COVID-19 relief effort, continuing to receive more and more funding as the pandemic rages on, it's clear that those who are getting the money need to understand all the rules and regulations the loans entail. So, to amend this issue, the United States Department of the Treasury now has answers to the most frequently-asked questions. Keep reading for a summary of the most important points you and your team need to know.
Which Payroll Cycles Are Included in PPP Loan Forgiveness?
One of the things borrowers were most confused about when reading over the PPP loan forgiveness had to do with payroll costs: When do the payroll costs need to be from in order to count toward PPP loan forgiveness? In short, if the payroll costs were incurred during the covered period but the usual payroll run falls after the end of the covered period, it will (thankfully) still count toward forgiveness. Additionally, if payroll costs were dated before the covered period but paid during the covered period, they are also considered forgivable. The FAQ also clarifies that the covered period absolutely cannot go beyond December 31, 2020.
This is an extremely important bit of clarification — after all, no practice wants to find themselves in violation of the PPP loan terms and conditions and fail to receive loan forgiveness over something as simple as incorrect math on payroll costs.
How Much Interest Will Need to Be Paid on PPP Loans?
Everyone knows that loans come with interest. This is simply part of the deal. This is also why it's so essential for the PPP loans to make it completely clear how much interest will be accruing and when it will begin to accrue. The FAQ clarifies that, while interest will start building from the day the loan is received, the borrower only has to pay the interest on the loan amounts that are not forgiven (if any).
This should help office managers understand exactly how much money they should be setting aside to cover interest costs, should a portion of their PPP loans not be eligible for loan forgiveness sometime down the line.
How Do You Calculate Loan Forgiveness If Workforce or Wages Were Reduced?
This issue is an incredibly difficult one, especially for practices that saw a decrease in physicians due to COVID-19 restrictions or social distancing guidelines. The FAQ tries its best to clarify that, while the PPP loan program was created to help keep employees on the payroll, recent regulations have changed this. Instead of office managers being responsible for a reduced payroll in excess of 1/4 of the amount of the loan, the FAQ states that you can exclude any sort of reduction in your loan forgiveness calculations if you can prove that it was impossible to rehire the employees or similarly-qualified employees before the end of 2020.
There's also language that outlines the procedure for any office that sees a former employee reject a rehire offer as well as a detailed rundown of what to do if you have no choice but to shrink employee compensation by more than 25% of their initial salary. This portion of the FAQ is key for healthcare practices of any shape or size — no matter if you're a dentist with a handful of employees, an optometrist with a few key players, or an outpatient center with a whole roster of skilled surgeons, this new guidance shows that the PPP loan program understands that sometimes things happen, cuts need to be made, and they simply can't always be undone right away (especially in the midst of a global pandemic).
What Types of Transportation Costs Will Be Forgiven?
Up until the release of this all-important FAQ, office managers were left to guess which kinds of transportation costs might be forgiven when (or if) the PPP loan needs to be paid back. It was an especially glaring omission for many offices, especially ones that deal with any sort of medical transportation. Thankfully, this new guidance has answers: The FAQ says that transportation costs eligible for forgiveness can't extend beyond the transportation utility fees to be assessed by state and local governments.
While the term "transportation utility fees" might sound a little vague, just know that the FAQ is saying that the transportation of anything that isn't a "utility" will not be a forgivable expense, but gas (including the gas used by the vehicle) is technically considered a utility and can be forgiven.
Further Questions About PPP Loans
The COVID-19 pandemic shook the world to its core and continues to burden business owners across the world. As the fight against the novel coronavirus extends into the fall, practice owners, office managers and employees can be certain that more guidance and provisions (and possibly even more funding) will be on the way in the coming months. The pandemic is far from over, which means that relief will need to continue coming to keep the nation's businesses thriving. If you still have questions about the loans you received through the Paycheck Protection Plan, visit the U.S. Small Business Administration's website to read through the Frequently Asked Questions section in full.
If you are a current HR for Health client and have additional questions, please reach out to our team by calling 877-779-4747. Please keep in mind that due to an influx in questions related to the COVID-19 outbreak, our response time may be slower than usual, but we will get back to you as soon as we can!
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