The Economic Relief Package: A holiday gift for practice owners

December 28, 2020
As you've probably read, today practice owners got a belated holiday gift from the American Government: the Consolidated Appropriations Act. This bill is a 5,000+ page document with lots of bells and whistles which affect many Americans, but this short email will focus on what practice owners should know about their PPP loans as well as two stimulus benefits that were noticeably absent from the bill.
Forgiveness
Over 80% of PPP recipients were businesses who received $150,000 or less. As if the application process was not difficult enough, banks have been struggling with forgiveness. The new legislation has made loans les than $150,000 forgivable with a one-page form and no documentation, a relief to both banks and practice owners who have not yet applied for forgiveness. Presumably forgiveness should move faster with this streamlined process.
Deductibility
The biggest benefit of this new bill (in my opinion) is the deductibility of expenses PPP funds were used for. This can be a very large number- Many practice owners were expecting to owe $30,000 or more per $100,000 of forgiveness. Owners who were expecting a large tax bill can breathe a sign of relief.
PPP Round 2
The second biggest benefit was the announcement of PPP round 2. Practices that had a 25% decline for any quarter in 2020 versus 2019 (for most practices this will be Q2, April 1 - June 30) qualify for a second round of stimulus, assuming they are less than 300 employees and the loan requested is less than $2mm. I am under the opinion that if those are the criteria and a practice meets it, they should participate. It might be a bit before that application process is available, so keep your ears open but be patient.
Assuming the terms and conditions remain the same, I encourage practice owners who are looking to sell in 2021 to still consider PPP round 2- there has been plenty of precedence and documentation in 2020 to account for PPP loans in the event of ownership transfer. Even if unable to spend the funds before the sale, the amount that was spent on eligible expenses can still be forgiven and the rest repaid.
What wasn't addressed?
Two common questions I get about the bill are related to extension of student loan payment deferrals as well as SBA loan payment deferrals. Neither of these provisions are extended in the new stimulus bill (student loan payments resume January 31, 2021 and SBA loan waivers expire after 6 months).
There is a lot of speculation however about Biden taking executive action to extend student loan payment deferrals or look at the blanket forgiveness he proposed on the campaign trail. However, I suspect this next round of PPP reduces the likelihood that there will be any additional SBA payment waivers.
As I write this, the S&P 500 is up almost 1% for the day and a 2021 is just 4 days away. Best wishes for a safe, healthy optimistic end to 2020 for you, your practice and family.
Happy New Year!
FOR EDUCATIONAL AND INFORMATIONAL PURPOSES ONLY. 
The views expressed here are as of the date of publication and are subject to change. This information should not be construed as investment advice. It is presented for information purposes only and is not intended to be either a specific offer (or recommendation) Hayes Wealth Advisors to sell or provide, or a specific invitation for any investor. Information herein may have been obtained from sources believed to be reliable, Hayes Wealth Advisors is unable to warrant its accuracy.
All data, projections and opinions are as of the date of this report and subject to change.
Investing involves risk, including the possible loss of principal. Past performance is no guarantee of future results.
Hayes Wealth Advisors does not provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions. All recommendations must be considered in the context of an individual investor’s goals, time horizon, liquidity needs and risk tolerance. Not all recommendations will be suitable for all investors.
Investments have varying degrees of risk. Some of the risks involved with equity securities include the possibility that the value of the stocks may fluctuate in response to events specific to the companies or markets, as well as economic, political or social events in the U.S. or abroad. Bonds are subject to interest rate, inflation and credit risks. Treasury bills are less volatile than longer-term fixed income securities and are guaranteed as to timely payment of principal and interest by the U.S. government. Investments in foreign securities (including ADRs) involve special risks, including foreign currency risk and the possibility of substantial volatility due to adverse political, economic or other developments. These risks are magnified for investments made in emerging markets. Investments in a certain industry or sector may pose additional risk due to lack of diversification and sector concentration.