Trump Signs CARES Act

The Academy of General Dentistry (AGD) is actively working with legislators and administrators of the federal government as well as members of the White House Coronavirus Task Force on behalf of general dentists. On March 27, 2020, President Trump signed the CARES Act into law.

The CARES Act includes a financial lifeline for small businesses, sole proprietors and self-employed individuals. This includes virtually all dental practices that are impacted substantially by COVID-19, especially those trying to manage payroll and other costs associated with their practices.

Payroll Protection Program

Most significantly, the bill creates the Payroll Protection Program, a loan program to be administered by the Small Business Administration (SBA). The application will be available through the SBA website, and AGD will notify members when the application is ready.

Eligible entities may seek a loan for up to 2 ½ months of payroll and other costs. The law requires applicants to make a “good faith certification” as to eligibility. Further, the legislation includes provisions for loan forgiveness based on a formula relating to the number of individuals employed by the business during the loan period. Eligibility requirements are detailed in the legislation.

The CARES Act also includes a “Sense of the Senate” statement that instructs the SBA to provide “guidance to lenders to ensure that the processing and disbursement of covered loans prioritizes small business concerns and entities in underserved and rural markets, veterans and members of the military community.” This may position some AGD members further ahead in line and others further back.

Payroll Protection Program Highlights

  • Covered period: Feb. 15, 2020, through June 30, 2020.
  • Interest rate cannot exceed 4%.
  • No personal guarantee or collateral required.
  • No prepayment penalty.
  • Complete payment deferring for at least six months and no more than a year.
  • Each eligible recipient is assumed to be an “impacted borrower” (no requirement to prove).
  • Establishes maximum SBA 7(a) loan amount tied to previous 12-month payroll expenses incurred by the business.
  • Increases the government guarantee of SBA 7(a) loans to 100% through Dec. 31, 2020. After that, guarantee percentages are 75% for loans exceeding $150,000 and 85% for loans equal to or less than $150,000.
  • Provides an authorization level for the SBA 7(a) program of $349 billion through Dec. 31, 2020.

The bill also includes:

  • Loan forgiveness: The borrower is eligible for loan forgiveness equal to the amount spent by the borrower in the eight-week period following the origination date of the loan on payroll costs, utility costs, and interest payments on mortgages or rent payments prior to Feb. 15, 2020. The amount of loan forgiveness partially depends on if there was a reduction in employees as a result of the COVID-19 shutdown.
  • Emergency economic injury disaster loans for organizations with fewer than 500 employees. Grants and loans are not to be used together, so dentists will need to decide which method might work best to make their businesses whole.
  • Changes to medical product supply chain: The CARES Act allows for many provisions to improve the medical product supply chain, with changes to the strategic national stockpile, treatment of respirator protective devices as countermeasures, and methods to prevent medical device shortages from occurring in the future.
  • Student loan interest: Federal student loan borrowers are allowed some leniency until Sept. 30, 2020. Interest will not accumulate on federal loans held by the Department of Education. Those with federal loans will want to verify their eligibility with their lenders.

AGD will continue to analyze the legislation and will update members on provisions that are of interest to general dentists.