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How to Maximize Your PPP or EIDL Funding

If you recently received PPP or EIDL funding to weather the COVID-19 storm, here's how you should use it.

Kylie McKee
5 min read
April 27, 2020
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Last week, Congress approved an additional stimulus package that, among other things, replenishes the Paycheck Protection Program (PPP). Though legislation has not yet been signed and the US Department of the Treasury has yet to implement rules for these additional funds, rehab therapy practice owners who are looking to obtain PPP funding should contact their banks immediately to discuss the application process, as these funds likely will be claimed even faster than the first round.

As the loans are disbursed, practice owners must focus on ways to properly—and efficiently—spend this money. Their goal should be to ensure the financial security of their practice while simultaneously maximizing loan forgiveness. To that end, we’ve put together this handy guide to using your PPP and Economic Injury Disaster Loan (EIDL) funding in the best way possible. But first, here’s a quick recap of the terms and purposes of PPP loans versus EIDLs:

PPP Loans

The PPP provides loans for small businesses—meaning 500 employees or fewer—to help those businesses retain employees. Here’s how they work:

  • Borrowers can request 2.5% of their average total monthly payroll cost (up to $10 million).
  • Businesses must have been operational with employees as of February 15, 2020.
  • The PPP will forgive up to eight weeks’ worth of payroll costs, mortgage interest, and utilities. (The eight-week clock begins ticking when the first installment of the money is dispersed.).
  • Borrowers must apply for forgiveness at the end of the eight weeks.
  • Unforgiven amounts convert into a loan with a two-year maturity period and a 1% interest rate.
  • Borrowers must apply for a PPP loan with an approved lender (either a bank or a credit union). For a list of approved lenders in your area, check the website for your state or city commerce authority, or go to the SBA website to review its list of approved PPP lenders by state.  


Alternatively, EIDLs are loans small businesses can use to help keep the business running.  Borrowers are eligible for EIDL funds if they suffered substantial economic injury as a result of the COVID-19 pandemic. Here’s how EIDLs work:  

  • Borrowers can request up to $2 million.
  • Businesses must prove they were operational as of January 21, 2020.
  • Businesses must use these funds for operational costs—which can include payroll—but they cannot use them to grow the business or make up for lost profits.
  • Borrowers can defer EIDL payments for one year and repay at a 3.75% interest rate.
  • Borrowers apply for EIDLs directly with their local Small Business Development Center (SBDC), which you can locate on the SBA website.
  • The borrower is under no obligation to repay the first $10,000 of an EIDL.
  • The loan is not forgivable beyond the initial $10,000; however, if the practice owner uses a portion of the funds for payroll costs, he or she can refinance the loan as a PPP—making that amount eligible for forgiveness per PPP rules.

Where to Apply Your Funding

Payroll Costs

The vast majority of your PPP funding should go toward your clinic’s payroll costs, which means payroll should be the first thing you should spend that money on. According to the CARES Act, businesses must follow the “75/25 rule”—meaning that in order to qualify for loan forgiveness, 75% of your funding should go toward “qualified expenses” and 25% should go toward utility costs. The CARES Act defines “qualified expenses” as:

  • salary, wages, commissions, or similar compensation (up to an annualized amount of $100,000 per employee);
  • cash tips or equivalent;
  • vacation, parental, family, medical, or sick leave (not including emergency paid sick leave or expanded family and medical leave);
  • separation or dismissal pay;
  • group health insurance;
  • retirement benefits; and
  • state or local payroll tax (excluding federal payroll tax).

According to guidance from the Treasury Department (in consultation with the SBA), payments to business owners—including partners or members of an LLC—are also included in payroll costs. However, you should consult with your accountant before providing payroll funding to any of these individuals.

Annual Bonuses and Wage Increases

It’s not yet clear whether payroll costs include employee bonuses or raises. However, it is clear that any eligible cost should be “necessary to support the ongoing operations” of the business. That said, because funding is limited, you may want to enact a temporary freeze on any raises or bonuses until business picks back up. That way, you can make your money stretch further.

Because forgiveness for PPP loans hinges on using 75% of the funds for payroll costs, we strongly recommend that you use that money for those purposes first—before applying them to any utility costs. 

Operational Costs

Assuming your payroll expenses were covered by the amount you received from the PPP loan, you should focus your EIDL funds on covering your operational costs, as you are under no obligation to repay the first $10,000 of this funding.

At this point, you already should have negotiated any possible reductions in rent with your landlord. But, if you haven’t—and your remaining funds won’t cover your rent and utility obligations for the next six months—then you should immediately approach your landlord and work with him or her to develop a plan that will help you preserve your business. Next, you’ll want to funnel any remaining PPP funds into your operational expenses (specifically, that means your mortgage or rent payments and any utilities). It’s important to note that you may only apply PPP funds to any mortgage obligations incurred (or lease agreements enacted) prior to February 15, 2020. Similarly, any utility service to which you apply these funds must have been active prior to February 15, 2020. 

Loan Forgiveness

Once you’ve appropriately distributed PPP funds per the “75/25 rule”—and as long as you meet the qualifying expense requirements—you can apply for loan forgiveness. Borrowers must contact their banks at the end of the eight-week period—which begins on the date the funds are dispersed—to apply for forgiveness. The loan forgiveness amount will then be "prorated" to exclude any non-qualifying expenses.

Protect yourself.

As this legal resource from JD Supra states, “Given how quickly this was rolled out, there will also inevitably be those who inadvertently don’t follow the rules and will find themselves trying not to be lumped in with those who committed actual fraud. Borrowers should protect themselves from liability by ensuring PPP funds are used only for authorized purposes.” 

That is to say, practices should use this funding quickly and purposefully. If your clinic furloughed or laid off any employees, rehire them ASAP to bring your staffing back to pre-pandemic levels. This could be a challenge for some practices, but as the above-referenced resource states, “the law anticipates that borrowers may not be able to spend all the money in the time frame indicated for the purposes indicated.” So, if practice owners are unable to use enough of their PPP loan for existing payroll expenses, they will likely be able to use it to hire additional staff.  

We strongly recommend educating yourself on the ins and outs of the CARES Act before you distribute your funds. WebPT’s Chief Compliance Officer Veda Collmer, JD, OT/R, has compiled and updated this CARES Act resource on the WebPT Blog, and the SBA has provided this CARES Act guide, which lists various resources to educate and advise business owners who have received PPP and EIDL funds. Additionally, contact your local Small Business Development Center and ask for counseling. SBDCs have excellent resources on their websites, and it’s their job to help small businesses thrive. So, take advantage of this resource.  

The next few weeks will prove crucial for rehab therapy practices as they recover from the pandemic fallout. If you have any questions about the CARES Act or PPP and EIDL funding, drop your questions in the comment section below and we’ll do our best to get you an answer.


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