A Dentist’s Guide To The Best Loan Programs During Crisis
May 19, 2020
Dental Industry Financing and The COVID Crisis
The dental industry is one of the sectors hit hard by the COVID-19 pandemic. Dental practices across the US can only perform emergency procedures. Because of this, dental offices are experiencing financial hardships.
To reduce the severity of these hardships, the U.S. government created the Corona Aid Relief and Economic Security (CARES) Act. This delivers fast and direct relief for American workers, families and small businesses. It also aims to preserve jobs for several American industries.
Types of CARES ACT Loans
1.PA 7(a) or Paycheck Protection Program
This loan enables business owners to maintain their payroll. This includes wages, tips, vacation pay, benefits, 401K contributions and some taxes.
Application: Apply at any SBA 7(a) approved lender or through a broker.
Eligibility: This loan is available for any business (non-profit included) that meets the following:
500 employees, or meets the SBA industry size standard if more than 500
NAICS code that begins with 72 that has more than one location and employs less than 500 per location
Sole proprietors, independent contractors and self-employed persons
Largest amount loan: Borrowers can get 2.5 times their average monthly payroll, up to $10 million.
Loan Purpose: Help dental offices pay their staff and cover essential costs.
2. SBA 7(a) Express Loan
This loan offers relief to all SBA loan borrowers that have existing loans they are unable to pay. Starting April 2020, the government will make the next six payments on existing loans. Any new SBA loan funded before Sept. 27th, 2020 will also have the first six payments covered.
Application: Apply at any SBA 7(a) approved lender.
Eligibility: Lender’s discretion.
Largest amount loan: At least $350,000, and up to $1 million.
Loan Purpose: For dental offices looking for large and long term loans without immediate repayment.
Key Distinction Between Furlough and Layoff
Businesses across the U.S. are struggling with the economic effects from the pandemic. Dental offices have no choice but to downsize their workforce. The two options for this are furloughs and layoffs.
Furlough A furlough reduces the hours, days or weeks employees may work. This is a temporary fix for retaining staff without paying a full-time salary. Additionally, furloughs can affect only certain portions of the workforce.
Furloughed staff members are still employed and are eligible for unemployment compensation.
Layoff Layoffs represent a permanent termination of employees from their position. There is an option to rehire them once business improves.
In some cases, the company may offer a severance package, although there is no rule that they do so. Laid off employees should be paid in full in the event they do not get rehired.
Before finalizing a furlough or layoff, dental offices should:
Coordinate with a legal counsel
Make sure that the position isn’t critical to your office’s operations
Prepare information on the reason for this change
Prepare information for unemployment compensation and COBRA
The COVID-19 crisis has brought unexpected challenges to every American industry. If you need a loan, are looking for help or need more information, reach out to Benco’s Practice Coaching team.