PPP Loan Forgiveness for chiropractic practices is a hot topic in our profession since it is now more than six months since the Paycheck Protection Program was created to help small businesses survive during the COVID19 challenges.
With many PPP and EID Loans distributed to chiropractors, there is an abundance of accountants, CPAs, financial planners and other experts all weighing in on the same question from chiropractic business owners:
What do we about PPP loan forgiveness for chiropractic practices?
We’ve certainly received more than our fair share of these questions here at the Strategic Chiropractor and while I’m not going to pretend to be an expert in accounting, tax or financial planning matters, my focus is to try and help chiropractors decide what is the best move for their chiropractic business.
Since most DC’s derive their primary income from their practice, these strategies would make sense for most chiropractors.
The Basics of PPP Loan Forgiveness for Chiropractic Practices
Let’s start with the basics — PPP loans are forgivable if the chiropractic business owner uses them according to the PPP guidelines. More specifically, when used correctly, the PPP loan is converted to a grant in the eyes of the Feds which does not need to be repaid.
Obviously, that’s the goal for most chiropractic practices, so the next big question is: how exactly do we do that?
Fortunately, the answer here is simple in theory: to be eligible for PPP Loan Forgiveness, you apply to the bank that disbursed your PPP Loan Funds.
And unfortunately, this is where the simplicity begins to end.
The Process of PPP Loan Forgiveness
To begin the process of PPP Loan Forgiveness for Chiropractic Practices, the business owner needs to submit an application that will go to the lending bank, which will then be submitted to the Federal PPP Loan program to determine eligibility.
For this, standardized loan applications are available and there are two basic choices available:
To add a measure of confusion, there were previous versions of all of these forms and are still readily available on many websites (including the SBA’s). So make sure you submit the form with the valid expiration date (listed at the top of the page) otherwise your application may be denied for being the incorrect version.
WHEN Should You Begin the Process?
Perhaps an even more important question than how is WHEN you should start PPP Loan Forgiveness for Chiropractic Practices.
Many chiropractors feel a bit in the dark about the process and some are concerned that advice from their bank, or unclear government instructions, will end up causing them to miss important deadlines.
Here, my first bit of advice is that despite the application date mentioned above, there may be good reason to wait on applying for your PPP Loan Forgiveness for most chiropractors.
Why Waiting Makes Sense for MOST (But Not All) Chiropractors
There are several reasons that waiting for PPP Loan Forgiveness makes sense for most chiropractors.
In other words, don’t feel compelled to apply by the application date, just because it’s listed on the top of the form (although if you do apply, use the correctly dated form). Here’s why:
- The PPP has built in “customized” no-penalty deadlines – After using PPP loan proceeds, borrowers have up to 10 months to apply for loan forgiveness without needing to make any payments on their loan. That’s the design of the PPP Loan Program and hasn’t changed. If it does change, the PPP Loan Forgiveness deadline will not become shorter (because that will violate the terms of the loan agreement) but it could become longer – which gives you more time to decide what to do or delay the time needed to begin the repayment period). Therefore, most chiropractors will be able to put off applying for forgiveness until Q1 of 2021 at the earliest. For many, it will be even later into 2021. There is no penalty for using this period to decide how to proceed.
- Across the Board Forgiveness is Feasible – There is a great deal of momentum from politicians, trade groups, small business owners and other interested borrowers who all support automatic forgiveness of loans under a certain dollar amount, such as loans of $150,000 or less. While this is not guaranteed nor has it passed into law at the time of writing for this article, it is certainly a possibility. Even more, this proposal is popular for several reasons.
A measure of blanket PPP Loan Forgiveness would certainly ease and remove the burden of paperwork from chiropractors and other business borrowers.
Logically speaking, “blanket” PPP Forgiveness (at least to a certain degree) acknowledges the fact that many of these loans went to small business owners (like chiropractors) who used PPP Loan proceeds for staff compensation and should receive full forgiveness anyway.
Of course, the banks and lenders themselves are definitely in favor of such a proposal because they would no longer need to worry about processing many loan forgiveness applications for small amounts.
So if the law or common sense prevails on any of the above conditions, a forgiveness application will not be necessary for many chiropractors. In fact, if you’re thinking of waiting on this logic you are not alone. According to a recent survey of small business owners, 62% said they expected the government to forgive their loans.
- Both Parties Want PPP Loan Process to Look Good – Here’s the final reality of why waiting makes sense. No matter which side of the political fence you live, two things are clear. Although important, the PPP Loan Forgiveness may not be the most important or top agenda item on their list, so you can join the Feds in waiting to see what to do with it.
Lastly, BOTH political parties want an attractive solution or strategy on how to handle the PPP Loans that way they can take credit for helping you out. So wait to see what they have to offer.
The Exception – Who SHOULD Apply for PPP Forgiveness Soon
There is one group of chiropractors who should apply for PPP Forgiveness sooner than later – those who are looking to sell their chiropractic practice.
As mentioned in my previous post, if you are planning to sell a chiropractic practice but have a PPP, EID Loan or Debt, these liabilities may impact your transition or chiropractic office sale.
Most buyers and banks will want to see your business “free and clear” of any debt or liabilities prior to your practice sale. In the case of a PPP Loan, an “unforgiven” loan is sort of a dangling unknown out there that could be possibly forgiven – or possibly need to be repaid.
So, if you are looking to sell in the near future, the better solution is to apply for PPP Loan Forgiveness so that situation is cleared up prior to your sale.
Chiropractors in this category then, would certainly be the exception to all that I’ve stated above.
I certainly realize that having debt or uncertainty are burdens no chiropractors willingly want to bear. But for most, it does make sense to wait to apply for PPP Loan Forgiveness, in my opinion. With the “extra” time that you save by not applying, you can work on your rebuilding or improving your business.
And waiting could result in an even easier application processes or even better – automatic forgiveness for PPP loans of a certain size.
Unfortunately, for those of you who are looking to sell, you should go through the PPP Loan Forgiveness process as soon as possible. But the good news is that selling your practice may take away many other burdens as you move towards your “Second Act” – whatever that may be!