Updated: 1/7/2021
As you may have already heard, the newest round of COVID-19 Stimulus was signed into law on December 27th, 2020. The new Act created another PPP loan opportunity for qualifying businesses. We believe many dental clinics will qualify for a second forgivable PPP loan. The new SBA & Treasury interim guidance was released late last night, January 6th, 2021. Some key points regarding the Second Draw PPP Loan:
- Must have fewer than 300 employees
- Maximum loan amount will be $2 million
- Must have had a reduction of 25% or more in gross receipts (see information below regarding gross receipts) in any one quarter in 2020 over that same quarter in 2019. Most dental clients should be able to qualify with Q2 2020 vs Q2 2019.
- Has used, or will use, the full amount of its First Draw PPP Loan on or before the expected date on which the Second Draw PPP Loan will be disbursed
- Business has been in operation by Feb 2020 or earlier (start-ups in Q1 2020 would compare Q2, Q3 or Q4 2020 to Q1 2020 gross receipts to calculate the 25% reduction requirement)
- Deadline to apply: March 31, 2021
I recommend you REACH OUT TO THE LENDER WHO HELPED WITH YOUR PPP ROUND 1 if you have not done so already. They will help you through the process to determine if you qualify. If you need a referral to a local lender, please let us know and we will introduce you to a few contacts who have been amazing to work with.
One concern that we have been discussing with our banking & legal network is what is considered “Gross Receipts.” Some dentists received sizable grants (including the HHS stimulus) during the mandated Q2 2020 shutdowns, which in some cases have increased the total income above the 25% reduction qualification. The amount of any forgiven First Draw PPP Loan shall not be included toward any borrower’s gross receipts test, however, grant money/HHS stimulus may count as gross receipts per the SBA & Treasury guidance released last night.
Per the SBA and Treasury guideline:
Ҥ 121.104 РHow does SBA calculate annual receipts?
(a) Receipts means all revenue in whatever form received or accrued from whatever source, including from the sales of products or services, interest, dividends, rents, royalties, fees, or commissions, reduced by returns and allowances. Generally, receipts are considered “total income” (or in the case of a sole proprietorship “gross income”) plus “cost of goods sold” as these terms are defined and reported on Internal Revenue Service (IRS) tax return forms (such as Form 1120 for corporations; Form 1120S for S corporations; Form 1120, Form 1065 or Form 1040 for LLCs; Form 1065 for partnerships; Form 1040, Schedule F for farms; Form 1040, Schedule C for other sole proprietorships). Receipts do not include net capital gains or losses; taxes collected for and remitted to a taxing authority if included in gross or total income, such as sales or other taxes collected from customers and excluding taxes levied on the concern or its employees; proceeds from transactions between a concern and its domestic or foreign affiliates; and amounts collected for another by a travel agent, real estate agent, advertising agent, conference management service provider, freight forwarder or customs broker. For size determination purposes, the only exclusions from receipts are those specifically provided for in this paragraph. All other items, such as subcontractor costs, reimbursements for purchases a contractor makes at a customer’s request, investment income, and employee-based costs such as payroll taxes, may not be excluded from receipts.”
Links to Source Documents:
https://home.treasury.gov/system/files/136/PPP-IFR-Second-Draw-Loans.pdf
https://www.journalofaccountancy.com/news/2021/jan/sba-treasury-issue-ppp2-guidance.html
Please contact Kevin Bray at Dental Accounting Pros as questions arise.
Kevin manages marketing, business development, and customer success for Dental Accounting Professionals LLC & Benton Bray PLLC. He is highly analytical, creative, and forward thinking in his approach to working with clients. His background is in commercial real estate with a focus in dental office leasing and investment sales. Kevin’s passionate about investing for the future and implementing new technologies to streamline outdated workflow processes to increase bottom line results.
