Keeping Up with PPP Changes – How Your Practice May Be Affected

Months after the government began requiring shut downs of many businesses, optometry practices across the nation have re-opened. This means implementing safety precautions to fight COVID-19, practicing social distancing, and searching for PPE for both staff and patients. Our day to day business has been altered, possibly forever. While business owners and staff alike are focused on protecting themselves and the patients in the practice, business owners are also having to muck through the ever-changing policies regarding the new 7(a) loan called the Payroll Protection Plan, or PPP.

Back in April, the Small Business Association, or SBA, provided extensive regulations regarding the funds available for small businesses in the form of the PPP. At the time, it was a grueling and exhausting process; regulations had to be deciphered and practice owners or business managers spent hours figuring out how the PPP would work for their practice. Now that July is over, borrowers have passed the point of acceptance of funds, and are now tasked with determining the policies regarding loan payback. To help ease the struggle of translating the updated rules, as dictated by the Flexibility Act, we have broken down the main points as they affect your loan payback.

• The “covered period,” originally from February 15, 2020 to June 30, 2020, has been changed. New end date of the covered period is December 31, 2020.
• A minimum of 60% of the loan must be spent on payroll, dropped from the original amount of 75%. Payroll still includes wages, employee health insurance, and employee contributions to 401(k) plans.
• The deadline to re-hire employees and have their payroll count toward the loan forgiveness has been changed to the end of the new coverage period (December 31, 2020).
• The maximum amount that can be used for rent and utilities has increased from 25% to 40%.
• Requirements of reporting have been increased in cases where an employer is unable to maintain the same payroll as reported for 2019. These conditions must be met in order to avoid penalty.
  • In a case where an employee did not return to work due to rejecting a rehire offer, being terminated with cause during the covered period, employee requesting a reduction in hours, or an employee resigning, must be documented by written record.
  • Written documentation must be provided if an employer is unable to fill a vacant spot with a similarly qualified employee.
• Repayment period for non-forgiven amounts has gone from 1 year to 5 years, still at a 1% interest rate.

Borrowers must contact their lenders and come to a mutually agreed upon decision to move from the original rules to the rules and regulations dictated by the Flexibility act.

While the new rules of the PPP are certainly appealing, the caveat is this: borrowers will not be automatically enrolled in the new plan. Borrowers must contact their lenders and come to a mutually agreed upon decision to move from the original rules to the rules and regulations dictated by the Flexibility act. Failure to do so will result in the borrower still having to follow all rules and regulations set by the initial PPP. The coverage period, maximum and minimum amounts, and documentation requirements will remain the same as on their original loan. Borrowers are encouraged to contact their lenders quickly to renegotiate and take advantage of these changes.

COVID-19 is still a very real threat in the United States and across the world. Many practices are still closed or seeing limited patients. Due to the indecision of school boards across the nation, many employees with children are forced to remain home, either on unemployment or furlough. Factors such as these will surely affect a practice’s payroll and billable exams. Any increase in loan forgiveness can be the caveat that helps keep a practice afloat, as we continue to fight this pandemic.

With talk of another stimulus still up in the air and the senate recess during the month of August, there will likely be many changes coming that will affect the national and global economy. It is the job of the business owner to stay informed and ensure understanding of any and all policies in place that could both help and hurt their practice.