New Practice? You Can Still Participate in Federal Loan Programs

Did You Just Start Your Practice? You May Still Be Able to Participate in the PPP and Economic Disaster Loan Programs!

Maybe you just graduated from chiropractic college and moved back to Michigan to practice. Or, maybe you worked as an associate for a couple years and decided to strike out on your own earlier this year. And then came coronavirus. Either way, doctors with new practices may be hit even harder than established practices by the devastating economic effects of the COVID-19 pandemic.

Even if you just opened your practice, you are probably eligible to apply for federally offered loans under the Paycheck Protection Program (PPP) or an Economic Injury Disaster Loan (EIDL).

Paycheck Protection Program Loan:
For a typical borrower, to determine the payroll amount of the loan, the lender will look at your average monthly payroll over a 12-month period and multiply it by 2.5. But what if you haven’t been in business for that long?

If you were not in business between February 15, 2019 – June 30, 2019, your maximum loan is equal to 2.5 times your average monthly payroll costs between January 1, 2020 and February 29, 2020.

Keep in mind that, as a new practice, your number of staff may be limited, keeping the amount you may be eligible for under the PPP relatively low. And, to have a PPP loan forgiven, you must spend at least 75% of the amount received on eligible payroll costs, so that could be difficult.

Any part of a PPP not forgiven becomes a loan at 1% fixed interest rate, over a two-year term, with deferment for up to 6 months (but interest still accrues during that time).

Economic Impact Disaster Loan
Any business applying for an EIDL loan must have been in business as of January 31, 2020, and certify that it has suffered a substantial economic injury because of COVID-19. The Small Business Administration (SBA) determines the loan amount, not the applicant. EIDLs are limited to $2 million, but the reality is that initial payments are generally being held to a maximum of $15,000 (plus the $1,000 initial grant per employee).

As explained above, the loan amount is limited to the economic injury – determined by the SBA, not the borrower – minus business interruption insurance and other recoveries. They generally look at a year of gross receipts and other data. We have not been able to get clarification on what they look at for a business that started in February 2020, for example, as there is no year of gross receipts available for a new practice. We recommend talking with some at the SBA to see exactly what documentation they will need moving forward.

EIDLs are not forgivable, except for the initial grant ($1,000 per employee up to $10,000). Small businesses are subject to a 3.75% interest rate, and terms go up to 30 years.

Chiropractic Federal Credit Union
Unfortunately, due to its size, CFCU is not able to participate in the Paycheck Protection Program. However, they do have other loan assistance available for their members. Contact CFCU at (248) 478-4020 to discuss these options.

More Information
For the MAC’s Frequently Asked Questions document regarding these programs, as well as some tax advantages that may also be advantageous for new practices to consider, click here.

Disclaimer: The Michigan Association of Chiropractors is a professional association advocating for the rights of chiropractors and their patients across the state of Michigan. We are NOT a state agency or regulatory body. We are merely informing our membership regarding what they are allowed to do during this difficult and confusing time.

The information we provide during this pandemic is derived in conjunction with our governmental relations and legal experts, developed after examination of all official releases of information from the State of Michigan and in consultation with said experts and representatives from state government. Please refer to our emails and website for the latest information, free from speculation and the rumors currently circulating in the wake of official state actions.

Rest assured that we will continue to advocate for the profession at the highest levels, with the health and well-being of you and your patients, as well as the overall stability of the health care system, foremost in our efforts.