EIDL Full-fledged Loan – Wednesday, April 15, 2020 5:23PM

EIDL advances are starting to flow, and not a moment too soon.  Two things to note. 

First, although the EIDL advance is a grant and does not have to be repaid, if you receive a PPP loan, it will reduce the amount of the forgiveness on the PPP side.  Basically you can’t get free money from both sources.  But remember—the EIDL advance was supposed to come through in 3 days (hahaha) and there was a need for immediate cash regardless of the terms.  It wasn’t expected that the PPP and EIDL advances would materialize so close together.  Also remember, PPP is 1% interest.  When the practice picks up, life will be good again and you will repay that $10K plus a little interest.   

Second, we have been focusing on the EIDL advance portion—the up to $10K amount.  But the EIDL program is an SBA loan product designed to help businesses through disasters.  And if the last few weeks and more to come aren’t a disaster for your business then we don’t know what is!  In addition to the potential $10K, you will be able, in most cases, to borrow additional funds up to $2million.  Ok…you don’t need $2million. but maybe $50K or $250K or $500K would be nice.  The amount of the loan offered is based on your expected lost revenue.  We’re not recommending you take out unnecessary debt.  But the reality is that we don’t know when this crisis is going to end, especially for dentists given all the aerosol concerns.  Since there are no prepayment penalties and very reasonable terms for this loan, it might be prudent to take it just in case.  You can turn around and repay it if you choose.  What if your practice is closed through June?  Your bills have not stopped completely.  Can you make it another 2 months without additional working capital?

Terms of the EIDL are quite good—up to 30 years at 3.75% interest with no prepayment penalties.  There are no real strings attached but there are some prohibited uses.  You can use the loan for normal operating needs—accounts payable, payment on loans, operating expenses, etc.  You cannot use the funds to pay cash dividends or bonuses, or disbursements to owners (this doesn’t include normal paychecks to owners; those are ok).  You can’t use it to pay off other debt which basically is an unofficial refinance.  You can’t use it for capital improvements that were needed by the business prior to the disaster.  So if you needed to finish out another operatory, you can’t do that.  If the government requires you to buy an IsoLight for your practice in the COVID-19 aftermath, that would be permitted.  If you receive both an EIDL and a PPP loan—utilize the PPP loan during the 8 week period required on the required items, primarily payroll, then turn to the EIDL funds until patient fees return.