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Improving Cash Flow

Improving Cash Flow

Important Details Included in the New COVID-19 Economic Relief Act

Paycheck Protection Act

On December 27th, 2020, the President signed a new $900 Billion COVID-19 relief stimulus package into law. This package includes substantial funding for small business through the Paycheck Protection Program (PPP).

Paycheck Protection Program (PPP)

  • $284 Billion in first and second forgivable PPP Loans.
  • PPP borrowers may receive a loan amount of up to $2 million or 2.5 times their average monthly payroll costs in the year prior to the loan or the calendar year.
  • Funding is available to:
    • First-time qualified borrowers:
      • Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans.
      • Sole proprietors, independent contractors, and eligible self-employed individuals.
    • Businesses that previously received a PPP loan (may apply for another loan of up to $2 million):
      • Have 300 or fewer employees.
      • Have used or will use the full amount of their first PPP loan.
      • Can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019.
  • The costs eligible for loan forgiveness include payroll, rent, covered mortgage interest, and utilities as well as the following:
    • Covered worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines.
    • Expenditures to suppliers that are essential at the time of purchase to the recipient's current operations.
    • Covered operating costs such as software and cloud computing services and accounting needs.
  • To be eligible for full loan forgiveness, PPP borrowers will have to spend no less than 60% of the funds on payroll over a covered period of either eight or 24 weeks—the same parameters PPP1 had when it stopped accepting applications in August.

As of 12/27/20, the legislation includes the following important information surrounding PPP and Tax Deductions:

  • Forgiven PPP loans are not considered taxable income.
  • Business expenses paid with forgiven PPP loans are tax-deductible. This supersedes IRS guidance that such expenses could not be deducted.
  • The COVID-19 relief bill clarifies that "no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income provided.”
  • This provision applies to loans under both the original PPP and subsequent PPP loans.
  • Borrowers are required to retain relevant records related to employment for four years and other records for three years, as the SBA may review and audit these loans to check for fraud.

The new COVID-19 relief bill also:

  • Clarifies that group health plan expenses are considered wages.
  • Clarifies that employers who receive PPP loans may qualify.
  • 100% meals expensing for 2021 and 2022.
  • Unused dependent care and FSA can be carried through end of 2021.
  • Creates a simplified forgiveness application process for loans of $150,000 or less. Specifically, a borrower shall receive forgiveness if a borrower signs and submits to the lender a certification that is not more than one page in length, includes a description of the number of employees the borrower was able to retain because of the loan, the estimated total amount of the loan spent on payroll costs, and the total loan amount.
  • The SBA must create the simplified application form within 24 days of the bill's enactment and may not require additional materials unless necessary to substantiate revenue loss requirements or satisfy relevant statutory or regulatory requirements.
  • Repeals the requirement that PPP borrowers deduct the amount of any EIDL advance from their PPP forgiveness amount.
  • Includes set-asides to support first- and second-time PPP borrowers with 10 or fewer employees, first-time PPP borrowers that have recently been made eligible, and for loans made by community lenders.

Loans, Financing, and Resources to Help Steer You Through the Crisis

If your practice has experienced a negative financial impact from COVID-19, you're not alone. The pandemic has directly or indirectly affected the bottom line of 97 percent of physician practices, according to a study by the Medical Group Management Association (MGMA). On average, practices have reported a 55 percent decrease in revenue since the start of the crisis.

Relief options are available—and we're here to help.

ACT NOW: Provider Relief Fund

On June 9, 2020, the US Department of Health and Human Services (HHS) announced an additional $15 Billion distribution from the Provider Relief Fund to eligible Medicaid and Children’s Health Insurance Program (CHIP) providers. To qualify, providers must participate in State Medicaid and CHIP programs and have not already received a payment from the Provider Relief Fund General Distribution.

Deadline to apply is August 3, 2020.

Medicaid/CHIP Provider Relief Fund Payment Forms and Guidance

Important Update: Paycheck Protection Program

Paycheck Protection Program closed on August 8, 2020. As such, the SBA is no longer accepting PPP applications.

The information provided is for informational purposes. Henry Schein does not provide legal, tax, financial or other professional advice. Customers should consult their own advisors.*

Working Capital Loans2

Manage cash flow, any business expense

  • Loan amounts from $50,000–$150,000
  • Quick approval process
  • Receive funds in as little as 3 business days
  • 7-Year Terms—Fixed Rate
  • 60+ day deferral available

There are also several available government-sponsored opportunities to restore your financial viability including:

CARES Act for medical practices

For more information about these programs, you can also visit the American Medical Association (AMA), which has many resources and links related to financial assistance.

Notes

1. The information contained herein is intended to be informative in nature, and is not intended to be a substitute for professional advice. The information was obtained from sources we believe to be reliable, but is not guaranteed. This situation is dynamic and continuing to change daily. Henry Schein does not undertake any obligation to update or revise any statements contained herein, or correct inaccuracies whether as a result of new information, future events, or otherwise. Dental and Medical professionals must make their own business decisions and may wish to seek professional advice before acting with regard to the subjects mentioned herein. Nothing contained herein should be treated as legal, business, accounting, international, insurance, tax, financial or other professional advice.

The information contained herein is changing continuously and the following website should be accessed for real time updates: https://home.treasury.gov/policy-issues/top-priorities/cares-act/assistance-for-small-businesses.

2. Subject to credit approval and not all will qualify. Offer expires June 30, 2021.

View a webinar with the latest updates to the CARES Act stimulus package, addressing the economic fallout of COVID-19. The webinar was developed in light of the June 9 announcement that $15 billion of the provider relief fund would be allocated to eligible Medicare and children’s health insurance providers.