Paycheck Protection Program loan forgiveness 101

DermWorld spoke to Alexander Gross, MD, and Joanne Gross, from Georgia Dermatology Center in Cumming, Georgia, about their successful attempts to obtain Paycheck Protection Program (PPP) loan forgiveness.

DermWorld: Tell us about your practice.

Dr. Gross: I am a solo practitioner with one office. I have two physician assistants that work with me while I’m on site supervising them. I have two licensed aestheticians and a total of 20 staff including the PAs and aestheticians.

DermWorld: Tell us about the PPP loan you applied for in April 2020.

Joanne Gross: We had to go to three different banks to get a PPP loan. We went to our bank and they weren’t providing PPP loans to small businesses like ours. We went to a regional bank where we weren’t customers, and they weren’t providing loans to non-customers at first. Finally, we tried a local bank, and they gave us a PPP loan in less than 24 hours. The loan amount was for 2.5 months of staff salary.

DermWorld: Tell us about the loan application process.

Joanne Gross: The Small Business Administration (SBA) had the banks collect the information from the borrowers. Then the banks would develop a package for each customer with information on the borrower’s payroll, how much they needed, etc. The bank told us what the SBA wanted in terms of information, and they helped us determine what we were entitled to under the CARES Act.

Our bank had an online portal to apply for loans and included a check list of the required documents. This included state payroll tax 941 forms to ensure the accuracy of the payroll information. The bank wanted to see our business license, articles of incorporation, the practice’s 2019 tax return and a balance sheet/income statement for 2019. A photo ID of the business owner who would sign for the loan was also needed. It didn’t require as much as it would if it were a personal loan, but it required a lot of information.

DermWorld: The PPP loans were to be used on business expenses such as payroll, mortgage interest, rent, and utilities. How did you utilize the loan?

Joanne Gross: We used the entire loan for payroll except for one month of rent. The SBA dictated that we could only use a certain percentage of the loan for items other than payroll and we were within that percentage. We used the loan for payroll knowing that we had to slow down the business significantly. The practice was seeing about 30% of our normal patient load and we knew we would need it for payroll. The PPP loan worked exactly as it was intended to work in our case and we were able to handle payroll as a result. It was wonderful.

DermWorld: What does the loan forgiveness process entail?

Joanne Gross: For loan forgiveness, you have to work with the same lender who provided you the PPP loan. The SBA has posted forgiveness applications on their website, so you know exactly what they’re looking for. Anyone can go on the SBA website and pull the application for loan forgiveness and manually fill it out. Our bank happened to load the applications into their portal so that we could do the math on the computer. There are two applications: a full form and an EZ form. We got an EZ form and it’s not an extensive application. Anyone can use the EZ form if they can certify that their business was shut down or impacted due to COVID-19 restrictions, but you still paid everyone a salary that wasn’t reduced more than 25% during the covered period of your loan. The fact that we used almost all of the loan on payroll was important for the forgiveness application process.

DermWorld: What type of supplemental information did you need to provide for the loan forgiveness application?

Joanne Gross: Once again, just remember, you’re dealing with the bank and not the government. The bank wants spreadsheets and check registers as proof of what you used the loan for. Our usual bank wasn’t our PPP loan bank, so I kept a separate check register for the PPP loan in QuickBooks. Because it was a separate account, every time there was a withdrawal, I made a copy of the check, put in the memo what it was used for, and attached it to the invoice (the rent receipt or the payroll register for that week). With the forgiveness application, I submitted the check register and the payroll documentation for each week for the period until the funds were used up. Additionally, we use ADP for payroll which has a pre-loaded form that produces a report that showed that we didn’t reduce salaries during the covered period by more than 25%.

The other items you’re required to submit are your state payroll tax 941 forms again, but they want it for the quarter before the covered period of the loan and the quarter(s) during the covered period. I sent quarters one through three to include pre-COVID-19 and the two quarters that occurred during the covered period. I also included information on employee insurance health care costs because health care is considered a payroll expense. Because I wrote the check to the health care insurance provider through that PPP loan, I needed to include that information. Separately, it depends on the bank, but they also asked us to submit the W2 of the business owner and bank statements for the practice during the covered period.

Not all payroll is eligible to be used for PPP loans because there’s a salary cap of $100,000. On the front page of my payroll register for each payroll cycle, I wrote out the math: this person’s salary is over the cap and was not paid through the PPP loan, this person’s salary applied and was used from the account for payroll, etc. There were just sheets and sheets of paper for each payroll cycle.

DermWorld: How long did it take for your loan forgiveness to be processed?

Joanne Gross: Two weeks after applying for loan forgiveness, our loan was forgiven.

DermWorld: What tips would you offer other physicians who are getting ready to seek loan forgiveness?

Joanne Gross: I anticipated that this entire process would take time, so I was pulling the extra paperwork as I went along. I didn’t wait until the end and it was time to apply for loan forgiveness. Get organized early and often.

Dr. Gross: The whole process was easy because Joanne is extraordinarily organized. She was ready to apply for loan forgiveness a month before you were allowed to apply for it in October 2020. Also, my advice is to work closely with your banker.

Joanne Gross: Our bank was extremely helpful. It’s not as scary as I thought it would be. If you just give the bank what they need to prove that you used the loan for what you were supposed to use it for, your loan will be forgiven. It’s like any other banking process.

Alexander Gross, MD, owns Georgia Dermatology Center in Cumming, Georgia. Joanne Gross serves as an administrator in that office.

Quick facts on PPP loan forgiveness

• Borrowers who do not apply for loan forgiveness will need to start paying back the loan on Oct. 10, 2021.

• A borrower must apply for loan forgiveness through the lender that processed the original loan.

• All of the loan will be forgiven if it is used for payroll, mortgage interest, rent, and utilities over the covered period of the loan.

• The loan will not be forgiven if the borrower does not maintain their staff and payroll. (Borrowers had until Dec. 31, 2020, to restore staff levels for any changes made between Feb. 15-April 26, 2020.)

• The loan will not be forgiven if the borrower decreases salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.

Get more information about PPP loans at the Academy’s COVID-19 Resource Center.