Lending Update II

California Dental Practice Sales

Following is an excerpt of an email sent by Jerry Morey, CPA, President of Morey CPA & Associates regarding the CARE Act and the application process for the different SBA loans.

If you need a referral to an SBA 7(a) lender, please let us know as we have several different resources available.

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The CARE Act provides the following for individuals:

INDIVIDUALS

Direct payments of $1,200 per adult and $500 per child for workers earning less than $75,000 (and couples making less than $150,000). This direct payment is reduced by $5 for every $100 over the earnings of $75,000 for a single person and $150,000 for a married couple (phasing out at earnings of $99,000 for single and $198,000 for a couple).

The earnings are based on your 2019 tax return. If you have not filed your 2019 tax return, then it will be based on your 2018 tax return.

Mailing of checks are slated to begin this week.

The following is a long update for business owners. Business owners please read all of the following.

We have received a number of questions concerning the various federal and state loan programs available to help businesses due to the COVID-19 crisis. Below is a summary of loan programs and helpful tips as you make decisions on how you should proceed with the impact on California Dental Practice Sales.

Payroll Protection Program loan update.

Please see my blog at www.cpamorey.com/blog/ for loan details.

• This loan is provided through SBA 7(a) loan providers, not through the federal government SBA website. I would contact your bank for instructions on how to apply and proceed. I cannot find a list of SBA 7(a) lenders, so I would contact your primary bank to see if they can assist on the application.

• You should apply for the PPP loan through a bank you have an existing relationship with, if the bank is an SBA 7(a) lender. If the bank is not an 7(a) lender, they will direct you to the bank that can process your application.

• We have been speaking to bankers we work with and are told as of Monday the banks are waiting for clarification from the SBA before producing a loan application.

• Since each bank will be processing loan applications, I do not have a hard application start date. We have heard rumors that banks will set a uniform, consistent start date for applications to avoid confusion, but this is not confirmed.

• Because each bank is processing these loans, you need to coordinate with your bank on the loan application process and loan documentation requirements. There may or may not be consistency in terms of the application process or documentation required.

• We have heard that the application start date may begin as early as the end of the week. We do not know of a firm start date at this time.

• I do not know what documentation an independent contractor will have to supply to apply for the loan. I hope we learn more about this during this week. Please contact your banker on this question. If they cannot answer the question, they can research and follow up with you.

• Tips on where to find the suggested documentation

IMPORTANT NOTE: Because each bank is coordinating its own application process, you need to check with your bank on the specific documentation process. You should also check that the reports listed below provide the required documentation required by your bank. The reports below may or may not provide the specific information required by your bank.

o Payroll Tax Forms 940, 941, 944: Check with your payroll software provider or your Client Portal if we prepare your payroll. The returns are also available via ADP Run, Paychex Flex and QuickBooks Online if you use these software programs. If you do not use these software programs, check with your payroll software provider.

o Last 12 Months Payroll Report. ADP, Paychex and QuickBook Online have a report called “Payroll Details or Payroll Journal” that will summarize this information. If we prepare your payroll, then we can provide this report to you.

o 2019 Form 1099s. Check with your payroll software provider or check your Client Portal if we prepare your 1099s.

o Documentation showing total of all health insurance premiums paid by the Company Owner under a group health plan: Your health insurance provider should have a billing summary or invoices available to you to show total premiums and employees covered.

o Document the sum of all retirement plan funding that was paid by the Company Owner (do not include funding that came from the employees out of their paycheck deferrals). ADP, Paychex and QuickBooks Online have a reported called Payroll Details or Payroll Journal that will summarize this information. If you do not use these software programs, check with your payroll software provider.

SBA Disaster Relief Loans. The SBA has another loan for which you can apply directly on its website, found at https://covid19relief.sba.gov/#/ This is the Economic Injury Disaster Loan (EIDL). This loan provides funding, up to $2,000,000, to meet working capital needs. This loan also provides a $10,000 advance within 3 days of applying and can be forgiven if the loan is not granted. Based on new guidance from the SBA, the EIDL loan is available in addition to the PPP loan (see note below on this).

Here is the application process.

1. Go to https://covid19relief.sba.gov/#/

2. Select the appropriate entity—most will be “applicant is a business with not more than 500 employees.”

3. Review and verify that you meet the criteria

4. Proceeds with submitting the requested information on the business and ownership.

This is a streamlined application and should take around 15 minutes to complete.

Here is what you will need for this loan application. You cannot stop and save the application process, so please be prepared when applying.

1. Basic information: name, EIN, address, business type.

a. Your organization type reflects the type of tax return you file (S corporation, C corporation, partnership, etc).

b. Trade name: If you do not have a DBA or fictitious name, use the Business Legal Name.

2. Basic financial information: Gross revenue (collections) for the 12 month period prior to January 31, 2020 (February 1, 2019 to January 31, 2020).

a. You can find gross revenue from your management/billing software, accounting program or invoice program.

b. If you do not report cost of goods sold on your business tax return, enter $0 in this filed.

3. Basic ownership information.

Interaction of the PPP loan and EIDL Loans

We heard conflicting information last week that receiving an EIDL loan would prohibit you from receiving a PPP loan, due to language that says you cannot use two loans for the same purpose.

This language has been clarified to include different dates. For example, you could use an EIDL loan to cover payroll from a certain date range and then use the PPP loan for payroll for a different date range. You can now proceed with applying for both an EIDL and a PPP loan.

CALIFORNIA

California employers experiencing a hardship may request up to a 60-day extension from the Employment Development Department to file their state payroll reports and/or deposit state payroll taxes without penalty or interest.

Other SBA Loan Programs. Please contact your banker to learn more about other SBA programs available to help finance your business. Some of these loans may involve refinancing existing loans or mortgages. The loans may have different criteria for qualification, so please contact your banker for more information on how this impacts California Dental Practice Sales.

If given an opportunity to request an amount for financing, request 6 months of operating expenses. Most loans will not provide this amount of financing, but we recommend having more cash than less cash.

Other Loan Opportunities. If your business is in the medical, dental or veterinarian industries, we know of banks that can refinance existing loans and provide up to $100,000 of working capital. This may not make sense if you have a heavy repayment penalty on your existing loans. If interested, please contact me and I will make introductions.

If you still have questions, then feel to email me at jmorey@cpamorey.com and I can answer your questions.

Also, you can sign up for my newsletter at https://www.cpamorey.com/newsletter.htm and then I have my blog which I will be updating daily www.cpamorey.com/blog/

Stay safe and talk soon.

Jerry H Morey, CPA PFP CTC

President

949-485-2011

949-374-3743 Cell

949-777-6228 Fax

www.cpamorey.com

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As we receive additional updates for other banks, lending resources and industry professionals we will forward to our clients.

We are here to assist you in anyway we can.

Thank you.

Reno, Evelyn & Eric

949-548-4559 office

www.firstchoicedds.com

Specializing in California Dental Practice Sales