COVID19 Small Business Loans for Locum Tenens Doctors

Last week, the Federal Government announced the details of the Paycheck Protection Program (PPP). This loan is designed to support American small businesses with immediate cash support during the COVID-19 pandemic. We have received a massive amount of emails about the details of the loan and how a Locum Tenens physician can utilize it. We are all on edge right now and missing out on this economic support is not the path we advise, lets break down how you can take advantage of this loan. 

As a Locum Tenens doctor, your business structure will likely fall into one of a couple large categories. Sole proprietors, S corps, LLC, or independent contractors. While there are differences tax implications and how each of these are paid, for the sake of this article, they are all eligible for the PPP without any major distinguishable differences. The only stipulation is that your business must have been operational as of February 15, 2020. If you have started your locum tenens practice after this date, unfortunately you are not eligible. 

The Paycheck Protection Program is a federally backed program to help Americans retain their salaries, employees and keep businesses running during this economic downturn.  The main function of the program is to maintain payroll, especially for businesses that have been hard hit by the pandemic, and locum tenens work for many specialties falls into this category. The program is designed to provide financial backing based upon your average monthly payroll expense, and can include your salary expenses, contractor expenses, and health insurance premiums. The program provides for a loan for up to 2.5x your average monthly payroll expenses. 

There are major benefits to this program. First, it can be almost entirely forgiven, if you play by the rules. Second, you do not have to pay taxes on the portion of the loan that is forgiven. This is essentially free money from the government to keep small businesses, like locum tenens doctors, from going under. The amount you receive is based on the average of your monthly payroll salary from 2019. If your business started in the first two months of 2020, these numbers will be averaged to calculate the loan you are eligible for. Now, the important factor here is you must keep your expenses even to what they were prior to the pandemic and you cannot pay any one employee more than $100,000 over the time of the loan program. Any loan money used for the first 8 weeks after you receive the loan will be completely forgiven without need for repayment. For locum tenens doctors, that means you can collect a portion of this money a month for two months without having to pay it back, and you can cover your employees if you have any! There is one catch, you cannot receive both the loan and unemployment at the same time. 

Your monthly average payroll expense will be your annual net profit from 2019 divided by 12. For an individual locum tenens doctor, if your annual net profit is over $100,000, you may only claim up to $100,000 divided by 12. Don’t forget that you can include any wages paid to employees in this calculation! This extra amount would not be considered a part of your salary after the loan has been paid out. To have that portion of the loan forgiven, you would need to continue paying your employees that money. Some details here, if you run your business with your spouse, you can only apply one time and would have to pay your partner as an employee from the loan. In addition, if you own multiple businesses with different business tax IDs, you can apply separately for each of these. You would apply for the first PPP loan with your social security number and then each additional business with that EIN. 

When the dust settles from the COVID19 pandemic, you will need to prove how you utilized this loan. Your lender will want to see proof of all wages, commissions, income, and net earnings from locum tenen’s assignments that you have performed. We can’t stress enough the need to keep detailed records of all payments and expenses over the next several months and beyond. Keep in mind, the Paycheck Protection Program funding can be also used for office lease, rent, mortgage interest, home office, travel related to business and other locum tenens specific expenses. You must be detailed and diligent in keeping track of these expenses and filing away your receipts.

The process to obtain these loans is starting soon, locum tenens doctors set up as sole proprietorships can apply starting April 3rd, and independent contractors and self-employed locums doctors can apply starting April 10th. The deadline for application is June 30th, 2020. 

You can apply for the Paycheck Protection Program through an SBA-backed lender. Here is a list of the top 100 SBA Business lenders to utilize. Prior to contacting them, which should be done remotely and not in person, we recommend you download a sample application from the SBA, so that you are prepared to execute the loan rapidly. Remember, these may be first come - first serve, so don’t waste time!!!

~The Locums Life