March 27, 2020

How Best to Utilize Your SBA Loans If You Receive Both the EIDL and PPP Loan

There is still uncertainty for many of you regarding when you will be able to re-open your practice and what your schedule will look like as you start seeing patients again. Unfortunately, it may take some time for your production and collections to return to the levels they were at before COVID-19. Our recommendation consistently has been to take all the federal dollars available to you as you head down this road.

The CARES Act affords three options available to you through the U.S. Small Business Administration (SBA) – the Economic Injury Disaster Loan (EIDL) advance (grant), the EIDL, and the Paycheck Protection Program (PPP) loan. We wanted to spend time discussing the two loan options and how you might utilize both.

The PPP loan has the option to potentially be forgiven for certain expenses paid with the funds. There is an eight-week period that may be eligible for forgiveness. Because of this, it makes sense to use these funds first as you re-open. Any funds spent but not forgiven will need to be paid back at a 1% interest rate over two years. Allowable uses are payroll costs, mortgage or rent payments, utilities, and interest on debt obligations incurred before Feb. 15, 2020. Forgivable expenses are payroll costs, interest on an office mortgage or lease payments, and utilities. (Our next few articles will dive deeper into possible forgiveness of the PPP loan.) This loan was designed to help businesses with some of their expenses as they ramped operations back up.

Proceeds from the EIDL – the loan, not the grant – are intended for use “as working capital to alleviate economic injury caused by disaster occurring in the month of January 31, 2020 and continuing thereafter.” Again, this is a loan (and does need to be repaid) with a 3.75% interest rate and a term of 30 years. While the interest rate is higher than the PPP loan (but still very competitive in today’s market), the term is much better from a cash flow standpoint. There is no prepayment penalty on this loan, so our suggestion has been to take the maximum amount for which you are approved and keep it in a separate checking account to serve as an additional reserve over the next few months. The use-of-proceeds definition seems rather vague, so these funds could provide you financial help if your collections aren’t meeting your practice expenses.

Under PPP loan rules, eligible expenses may be forgiven. For this reason, we suggest using your PPP dollars first as you reopen your practice. At least 75% of the forgivable amount needs to be spent on payroll costs. The remaining 25% can be spent on lease obligations, interest on an office mortgage, or utilities. Consider keeping your staff furloughed up until your re-opening date (or a few days before for training purposes). Because the timing of your re-opening and the date on which you received your PPP dollars may not line up perfectly, you may end up being open only a portion of the eight-week period.

When your eight weeks are up is a good time to reassess your situation. How much of your PPP loan did you use? Are you back up to full capacity or are you running at something less than prior monthly production? At this time, you can decide if you want to use the remainder of your PPP dollars, knowing that you will need to pay them back. Or you can decide to pay back whatever PPP loan amount you didn’t use and rely on your EIDL to help with your expenses. The EIDL does not have any payments due for the first 12 months, and neither the EIDL nor the PPP loan have a prepayment penalty. This gives you great flexibility as you navigate your practice’s re-opening date and decide how you will use each of these loans.

This is a very high-level assessment of these two loans. If you have specific questions as to how these programs may relate to your practice, please do not hesitate to reach out to us.

Would you like us to speak to your study club? Our Practice Integration Wealth Management team is pleased to offer live, interactive presentations to your colleagues. We can tailor our presentations to fit your content and time requirements and deliver them via an online format. Along with a question-and-answer period, we offer all attendees the opportunity to meet with us individually should they wish to ask questions more specific to their own circumstances. We can also arrange to have your study club’s presentation earn ADA CERP credits for attendees. Contact me for more information.

This commentary originally appeared March 27 on

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About the Author

Katie Collins

Practice Integration Advisor

As a practice integration advisor, Katie works directly with clients to develop a financial plan personalized for their specific situation and goals. She quarterbacks the entire financial picture, often for clients who have never put all the pieces together with one advisor. Katie joined Buckingham Strategic Wealth through the 2014 merger with Indiana-based Hufford Advisors, where she spent more than 10 years working in various financial planning roles, most recently as a senior planning consultant.