A closer look at PPP, EIDL and other relief programs

By Jim Rice, CPA, and Christopher Davis, CPA

As we all try to deal with the COVID-19 crisis, several economic relief programs have gotten a lot of attention but still call for a closer look due to their complexity. Cases in point: The Paycheck Protection Program (PPP), and the Small Business Administration’s Economic Injury Disaster Loan and Express Bridge Loan programs. All of these demand careful handling. This article addresses some of the most important aspects of these and other programs.

Paycheck Protection Program

Many of us were able to get the Paycheck Protection Program (PPP) loan with the understanding that it could be forgiven if we continue to pay our employees their wages. The loan forgiveness is a very important financial benefit.

The details on calculating exactly how much of the PPP loan will be forgiven are still many weeks away. But we know that wages, rent, utilities and certain mortgage interest payments that recipients pay out in the eight weeks immediately after receipt of the loan are the key. Retention of full-time-equivalent employees is also part of the calculation.

Many documents must be gathered for submission to the lender to inform their decision on how much of the PPP loan will be forgiven. Watch for additional information from your lender and the SBA on this required documentation. And be aware that the SBA recently announced that it intends to review all forgiveness applications for loans over $2 million.

Tax deductibility

It is also important to know that IRS Notice 2020-32 states that expenses paid (wages, rent, utilities and mortgage interest) on any PPP loan amount that is forgiven will not be deductible on the tax return. For many taxpayers, this seems to conflict with the intent of the new laws – to help taxpayers deal with the crisis.

The IRS essentially is saying you cannot deduct an expense you did not pay for. There will be much negative commentary on this IRS notice but Internal Revenue Code Section 265 supports the IRS position. We shall see.

Unemployment benefits

For physicians and other medical staff who are being paid less than normal, potential unemployment benefits starting at $600 per week should be explored. Contact the Texas Workforce Commission immediately.

Economic Injury Disaster Loans

The SBA’s Economic Injury Disaster Loan (EIDL) and Bridge Loan programs are intended to provide access to additional capital through low-interest loans. Proceeds received from an EIDL loan, unlike those of the PPP loan, may be used for most normal operating expenses. Businesses can borrow up to $2 million (reduced by any outstanding bridge loans – discussed next) at an interest rate of 3.75 percent.

The loan can also have a term up to 30 years, although terms are determined case by case. It should also be noted that businesses with credit available elsewhere are not eligible for EIDL loans.

As part of the EIDL, a business can separately apply for a $10,000 loan advance. This grant does not have to be paid back regardless of whether the EIDL loan is approved. As of this writing, the SBA is processing agricultural business applications, only. It is unclear when the SBA will resume processing EIDL applications for other impacted businesses but it is expected that they will do so.

Bridge Loans

SBA Express Bridge Loans can be beneficial for emergency cash needs while applying for an EIDL loan. A business can borrow up to $25,000 at an interest rate not to exceed 6.5 percentage points over the prime rate, over a seven-year term. Only SBA Express lenders may process these loan applications. This loan is meant to be a short-term source of funds while a business formerly applies for the EIDL loan.

Many other types of SBA loans are also available. While many businesses prefer other lenders because of the SBA’s extensive documentation requirements, all funding avenues should be explored in times like these.


Businesses should also carefully consider the potential cash liquidity generated by the payroll tax credits provided by the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security Act (CARES).

The FFCRA expanded mandatory paid sick and family leave to employers with fewer than 500 but more than 50 employees. There also appears to be an exemption for healthcare providers regardless of the number of employees. However there is some concern regarding this point.

Wages paid from April 1, 2020 through December 31, 2020 under qualified sick or family leave provisions are eligible for a dollar-for-dollar, refundable credit up to the limitations outlined by the law.

Your business may also qualify for the new employee retention tax credit (ERC) if it was unable to secure (or decided against accepting) a PPP loan. This credit applies to qualified employers that saw a decrease of gross receipts of at least 50 percent compared to the same quarter in 2019 or had to fully or partially suspend operations due to a government order related to COVID-19.

This 50-percent credit of up to $5,000 per employee is available to cover eligible wages paid through the end of the year. Determination of an eligible employer is done on a calendar-year, quarterly basis. Claim the payroll tax credits by either reducing the current payroll tax deposit or filing for an advance payment of the credit. If your business received a PPP loan. it is not eligible to take the ERC.

A business cannot use the same wages to claim both the FFCRA credits and ERC. Also, you cannot claim any FFCRA credits on amounts that are forgiven under the PPP loan provisions.

This crisis has made it even more important to run your medical practice as efficiently as possible. That includes:

  • Employing the best staff and paying them accordingly
  • Discussing morale with your staff and asking them for their opinions on how to make the office a better and more efficient place to work
  • Clearly communicating with your team about your plans for handling the crisis
  • Reviewing financial statements and other financial data frequently
  • Cleaning up patient receivables
  • Continuing to negotiate for discounts and deferrals of payments to vendors and landlords

Most importantly, show your staff that you are involved in the management/business of your practice, not just in being a great physician.

Jim Rice and Christopher Davis are CPAs and shareholders at Sol Schwartz & Associates and lead the firm’s healthcare practice. The firm is observing its 40th anniversary this year.