Second Draw PPP: Paycheck Protection Program Part 2Submitted by Mission Financial Planning on February 9th, 2021
Most dentists we work with took advantage of the first round of Paycheck Protection Program (PPP) loans and HHS funding, and many are now looking at PPP Part 2 and Employee Retention Tax Credits to help make up for lost revenue and increased expenses due to COVID-19. A new relief bill was signed at the end of 2020 that can provide additional funds to practices still affected. Here’s what you should know about eligibility, applications and amounts of the second round of PPP loans.
Am I eligible for the second round of PPP?
If you didn’t receive a PPP loan last year, you’re automatically eligible for one this year. If you did receive a PPP loan in 2020, your dental practice must have suffered a loss of revenue last year in order to qualify for the second round.
For those applying for the second time in 2021, your dental practice will be eligible if:
- You’ve used up your first PPP loan amount
- You had a reduction of 25% or more in gross revenue in any given quarter in 2020.
How do I apply?
Applications for all PPP loans opened on Jan. 11, 2021, and are available until March 31, 2021. To apply, you’ll need to go through an SBA lender (a bank), this is not directly available through a portal like the Cares/HHS funding.
How much am I eligible for?
The second round of PPP loans will be calculated based on your average monthly payroll costs just like the first round. If eligible, you’ll have access to a loan equal to 2.5 times your average monthly cost.
Also like the first round of PPP loans, at least 60% of the loan must be spent on payroll and the rest on other eligible expenses. Beyond payroll, rent and utility costs, the second relief bill has expanded eligible expenses to include:
- Operations expenditures, like software and other human resources needs
- Costs of property damage caused by public disturbances in 2020, not otherwise covered by insurance
- Supplier costs for purchase orders essential to operations and made prior to receiving a loan
- Worker protection expenditures, like personal protective equipment for staff or property improvements to maintain COVID-19 safety compliance
If you follow these guidelines, the loan will be fully forgiven. If you don’t follow the guidelines, the loan will have an interest rate of 1% and a term of five years. Your payments will be deferred—either for 10 months after the covered period ends or when you receive a verdict on your forgiveness status.
PPP loans have been a saving grace for many dental practices. Now that we know the tax implications, this is a very useful tool in the tool box (along with HHS, Employee Retention Tax Credits, Family Leave Credits, State Grants) for helping dental practices that haven't fully recovered from a very difficult year. Give us a call; we can help you determine your eligibility, decipher loan terms and consider the impact of these tools on your practice and personal finances.