Information about financial support for small business owners is sparse and rapidly evolving. It’s not easy to make sense of options, and harder to keep track of what’s available.
To support you and your practice, we worked with Joe Romano, CPA, to create a guide to loans, grants, and benefits available to mental health care providers. Joe regularly hosts finance workshops for members of Alma and has tailored his presentations to focus on immediate action you can take to support your practice right now.
We’ll be making updates to this page as the situation evolves and welcome any resources or tips that you’ve found helpful. Email thedigest@helloalma.com to share.
Unemployment Benefits
Unemployment benefits are available on both state and federal levels.
Who it’s for
If you are in New York State and work as an independent contractor and have no income, you are entitled to collect unemployment benefits. You can find information and file for unemployment benefits here.
If you are a sole proprietor (i.e. not an employee), you’ll also be eligible for federal unemployment benefits.
How it works
You can start collecting benefits within one (1) week of filing your application. If it takes longer for your application to be processed, you’ll be paid retroactively.
New York State will offer $511 per week for 39 weeks. Federal unemployment benefits offer $600/week through July 31. It’s possible to get both, which adds up to $1100 per week through the end of July.
If you had an income before filing for unemployment benefits, or if you plan to have one after, your benefits are subject to an income tax. It is recommended that you set aside 30–35% of your benefits for income tax purposes.
While on unemployment benefits, you can apply for a PPP loan. If approved for a PPP loan, however, you will not be able to collect unemployment benefits.
Payroll Protection Program (PPP)
PPP loans are run through the Small Business Administration (SBA). The first round of PPP funding ran out, but on April 23 the program received an additional $320 billion in funding. Sole proprietors and business owners with employees are eligible for PPP loans.
How to apply
Applications for PPP loans must be filed through a bank. Most banks are not accepting new clients right now and many large banks have massive queues. Working with a smaller, local bank may allow you to file your application faster. Many people are reporting that it’s easiest and faster to file a loan outside of regular business hours.
When filing your loan application, expect the bank to ask for bank statements from the last 15 months as well as a prepared Schedule C from this year. The Schedule C does not need to have been filed yet.
How it works
Funding will be determined by your net profits from the 2019 tax year. To estimate your loan value, look at your net profits, divide it by 12, then multiply by 2.5.
Once a loan application has been submitted, you’ll receive a loan number from the SBA via email. The bank through which you filed your application will contact you separately with information about next steps.
Once you’ve signed your loan documents with the bank, your funds will be released within 24–48 hours, at which point you’ll have eight (8) weeks to use the funds.
What it can be used for
PPP loans can be used over a period of eight (8) weeks to cover gross payroll. A maximum of 25% of the loan can be put toward expenses outside of payroll, like rent and health insurance.
If you are a mental health care provider who is still seeing clients, consider allowing money from clients to cover your business expenses and treat the PPP loan as your own payroll.
Loan forgiveness and payback periods
If the PPP loan has been used properly over eight (8) weeks, it can be absolved and you won’t owe anything. The loan may not be forgiven if an employee was let go and was supposed to be re-hired under the PPP loan. If a PPP loan is not forgiven, it must be paid back within two years at 1% interest.
The bank you filed your application through will ask for proof of how the funds were used. The best and easiest way to prove how funds are being used and transferred is to open a separate bank account for the loan.
While the PPP loan is not considered income and is not taxable, is not yet known if the government will allow PPP loan recipients to write it down to zero, or if you can deduct payroll and rent expenses from it.
Economic Injury Disaster Loan (EIDL)
EIDL is run through the Small Business Administration (SBA). All business owners are eligible and there is no clear formula around funding.
How to apply
Apply directly through the SBA here.
How it works
Within a couple of weeks of being approved for an EIDL, you’ll receive a grant of $1000 per employee.
If you receive PPP funding, the $1000 will count toward your PPP loan.
If you are not approved for an EIDL, you’ll still get to keep the $1000-per-employee grant.
What it can be used for
EIDL funds are true loans, meaning they can be used for paying contractors, paying rent, and paying down higher interest rates. The funds cannot be used for personal reasons.
Loan forgiveness and payback periods
EIDL funds have a 30-year payback period with 3.5–3.75% interest and no payment required for six months.
Joe Romano, CPA, is a New York-based accountant who works with small and mid-size businesses, as well as individual clients. To contact Joe, email jromano [at] romano-tax.com or visit romano-tax.com.
