Dentist 10 Step Financial Action Plan for Coronavirus

Hi everybody, this is Wes Reed with practice cfo and I wanted to give you an update to our 10 step guide to helping dentists through the COVID era, financially speaking. And as you know, we work with dentists exclusively to help them achieve financial independence by integrating all of their cp, CPA and business and personal financial planning into a single integrated plan. Here are our five CFO advisors that are working feverishly right now with all of our clients to help them get through this period, apply for loans and educate them on the process and the right things to be doing. Quick caveat. Again, we are not labor attorneys and we recommend you consult with the labor attorney for anything related to your team. We will talk about that here, but also recommend that you confirm accuracy with a labor attorney. We reviewed all of the laws, there's three of them that have come out related to the coronavirus and how they help businesses. And let's jump into this. Again, this is an update. Some of this will be a repeat from my first 10 steps. But there's been a lot that's happened over the past, really four or five days since I created that. So step number one, let's determine the minimum amount of cash you need to get through the next six months and define your target loan needs. Now, you know, there's the EIDL loan, there's the EID grant, There's also the 7A loan. And before we rush to these, let's sort of step back and say, what do I actually need in order to get through the period? We don't want to go just rushing and taking out loans just because they're available. Let's be methodical about this.

And here's the exercise I'm requesting that you do is you take these four key categories of facilities, dead service, skeleton staff, the staff you need just to do your emergency procedures before you reopen doors, and your personal budget and put in the monthly amount for those four categories and then multiply each amount by the multiple factor. In this case, facilities, it's three months debt six months, skeleton staff three, and your personal budget three. A lot of you are getting a deferment on your debt service, some on your facilities. So we bumped that out to six months. But then we subtract out the amount of debt that you do have abated or deferred there. So if you have three months of debt service deferred, put in the total amount of deferment here in this column. So then you Simply take column 1 times the number of months, subtract out the amount deferred or abated equals the amount of reserves we should target for that specific category. Sum up each of the four categories and you arrive at your disaster cash. This is the cash needed to get through the disaster through this period. But add to that your working capital requirements that you need on an ongoing basis. So once you get through this period, you're not at zero in the bank account. You're still at your standard working capital levels that you need. Sum those two up, you have the cash required, 174,500 in this example. Then subtract out $80,000 in this example, which is the amount of cash net of credit card that this doctor has on hand. So 174,500 total target cash, less 80,000 on hand means we need to get $94,500 of money from these various channels with the government and the legislation that's recently been passed. So that's our target. That's a methodical way of deciding what we need to get through this period. So here's the action step. Complete the table for yourself and your own practice. Let's go on to step number two. Apply for the Economic Injury Disaster Loan, the eidl, or what I'll call the eidl, which will include a request for the emergency grant of 10,000. Now, the emergency grant of 10,000 really is simply an advanced against the loan. And what the law says is that if you get the grant and then you subsequently are not eligible for the loan, you still get to keep that 10,000 and don't have to pay it back. However, today I learned from somebody that they would receive the 10,000 grant after they were approved for the loan. So I don't know if that original legislation is being changed because the SBA has been doing that lately to say that you have to be eligible for the EID loan in order to get the EID grant. TBD on that. It's supposed to be three days from the time you apply for it, but there's still some uncertainty around that. And we'll keep you up to date as we learn more. If you applied for this before.

Sunday, which was 3.

Or Sunday the 29th. If you applied for this before Sunday the 29th, recommending that you apply again because you're using the old EID application, which was applicable to disasters that existed before cares. This isn't a new thing with the SBA. They had this since 2017. I believe they changed that entirely as of Sunday night, April, 20. I'm sorry, March 29, to really be applicable to the corona needs, the business needs resulting from the coronavirus. And it's a very simplified application and it takes maybe 15 minutes to complete. In that application, there's a couple things it asks for. It asks for your total revenue over the past 12 months, which you could use as your collections. Probably. Okay. Even if you just use your 2019 collections. Then it asks for your cost of goods sold or your cogs. Cost of goods sold are the cost of goods that you buy and then sell. That's called inventory. Dental practices don't have inventory other than your toothbrushes and the baggie. Ignore that you're a services based business, so put zero in. That is generally.

What we're advising our clients to do. It's possible the SBA used the term cost of goods sold as a generic term to represent your overhead, but I don't believe so. The literal explanation of cost of goods sold is that's inventory which you don't have. So put zero. And then also be sure to check the box. I would like to be considered for a $10,000 grant and then you would include your direct deposit information in that.

Anything else related to the Eidl. Let's see. The main thing for underwriting is simply that you're certifying that you need this due to the economic environment and, and the impact that it's had on your practice. Okay. Another important thing is if you didn't get this, I wouldn't worry. The main reason why you need the EIDL is to get you through until you get the 7 loan. In other words, to bridge that period of time from the cash you have on hand right now to it being supplemented with the 7 loan that will eventually come in. If you have enough cash on hand right now and to get through the 7 loan, you actually don't need to apply for this. You're going to say, well, Wes, what about the $10,000 free money? It's true the grant could be free money, but it does lower the amount of the 7 loan that you could have forgiven. The total amount of EID grant and 70 loan that can be forgiven is the same. Keep that in mind. Very important. So the action step is in this number two step is to complete the EIDL application if you have not already done so. Step number three, decide what to do with each employee and you have three options. Option number one is you terminate them and use this option for employees that you've been wanting to terminate already but couldn't do so for extenuating circumstances. Possibly you're concerned about wrongful termination, et cetera. The sort of what I believe is a free period where you can terminate somebody and a lot of states are at will anyways. But that doesn't mean an employee can't come back and litigate and have cause to win in a litigation. In this case, I foresee it would be difficult for an employee to claim that they were wrongfully terminated simply because you don't have the funds coming in right now, the income to pay them and therefore termination is simply an economic decision. And that's it. If you terminate them, remember you have to pay out their accrued vacation pay. Some states, not California, but some states require that you pay out any accrued but unused sick pay.

Option number two is you put them on furlough. And putting on furlough isn't a. It's not a deliberate action. It's just the default outcome of saying you're not, you're still on payroll. I just don't have hours for you right now. And so you're at home. I'll just call you back in action when I have work for you to do. The unique thing about unemployment income right now is that those that are furloughed can actually apply for unemployment income. Where I believe in any other circumstance that would not be the case. So use this option for employees you wish to resume once operational. Option number three is to keep them on payroll. And you're going to use this for those team members that you need to do your emergency treatments. And the more emergency treatment you can do right now, the better because we need, I know we need to stay our distance and self isolate and all that. And if it's only if it's appropriate. But any income you have during this period of time when will really help support you.

As you strive to come out of it. So use this option for employees you need to perform emergency treatment for patients or handle administrative tasks during the office closure. All right. One of the most common questions we get is what do I have to do as it relates to the Families First Coronavirus Response act that came out on March 18th that requires that I pay two weeks of sick and up to 12 weeks of emergency family leave for my employees. Well, the Department of Labor specifically answered that question. And you'll see over here in the side note with a link to this Q and A. Assuming it's still current and live where.

The Department of Labor says no, you don't have to pay them if prior to the FFCRAs, that's the Act Effective Date, which is April 2, your employer sent you home and stops paying you because it does not have the work for you to do. You will not get paid sick leave or expanded family and medical leave, but you may be eligible for unemployment insurance, of course, as they should apply for unemployment income. Unemployment and sick and family medical leave, two entirely separate things. And they can't get both, by the way. This is unless they get a little bit of sick enough that it's below the threshold where they're not totally phased out of unemployment income. But for most people that are on sick and family leave, since it's typically the lowest amount is usually 2/3 of their pay or $200 a day, then they're most likely going to be phased out of unemployment income if they are being paid sick and family medical leave.

Key thing here to note. So anyways, I hope that bottom lines that question, if anybody has Covid in your office right now or they're watching somebody with COVID or they have to stay at home and watch their kids, but your office was closed down, or you simply don't have work for them because of the economic environment, you do not have to pay them. You could, if you are sort of wanting to be generous and, and support them and build goodwill and all of that, great, but you're not required to. Now, once you open doors back up and you have a need and you're saying, hey, hygienist, please come back, I need you. And the hygienist is saying, my child's out of school, I have to stay home and watch them. And I don't have a, and I can't work from home, obviously, then you're actually required to pay them for that emergency family leave. Or if they have the virus at that time, let's say it's June 15th, you have the virus, you are required to pay them two weeks of sick in the case of sick leave. Or what you could do is say, I still don't have work for you to do and you can leverage one of your other staff members that could get a little sensitive. Contact a labor attorney about that one. Now, another important thing here is how much will my staff receive on unemployment? I'm going to use California as an example. In California, the maximum amount of unemployment is $450 under the normal and usual circumstance of unemployment, meaning they're completely unemployed and they were earning roughly around $3,900 a month, $4,000 a month, which probably most of your staff are somewhere around there. If they're full time, then they become eligible for that full $450 a week of unemployment income. If they are less than that, they earn less than $4,000 a month, they'll get something less. They might get $350 or $250. Other states, it's lower max is around $250. If you go into Massachusetts, it gets way up there to I think, like 13 or $1,400 a week.

So they get $450 a week in California, max plus. Now, under the CARES act, they're going to get $600 of additional income on top of the $450 which should be coming right now. It's April 7th, which should be applicable as of now. And so in the next couple of weeks, I would imagine that would be provided to your employees. Bottom line is that's $1,050 for California. In other states, it might be $800 or might be 14 or $1,500. But in California, that's $1,050 per week. At 4.2 weeks per month, that's almost $4,500 that they're receiving. That might cover fully or most of what your staff were paid. Hygienists perhaps were paid more, but still, that is a really healthy amount. Uncle Sam's going to pay that through July 31st. So you don't have to feel bad about their economic situation over these next few months. Let them know you care, you're researching what you can do to help them and what the amounts are for them to receive. And. And then typically, we advise our clients not get in the way and let them file for unemployment and not necessarily file for them as an employee total, which some states allow that that could be okay. But typically we just say let your staff deal with the estate employee department directly. Also, the CARES act is going to give most of your staff an extra $1,200 per adult in the home and the $500 per child in the home. That's a really healthy amount. If they make more than $200,000, married, filing joint, they're not going to get anything. Or it's about 100,000. Single, they're not going to get anything. But for most of your staff, I would think that they're going to be eligible to receive that. That might end up being another $3,000 or $4,000 that they're going to get during this period of time. So they're going to be fairly well taken care of is my key point there. So the activity for step number three is for you to fill out this table with each of your staff and indicating what you're going to do with them. Terminate furlough or skeleton team. And then are you communicating with each team member the expectations? Step number one big question we get is should I apply for unemployment? If you do, you need to take yourself entirely off of payroll. And you could do the same for your spouse. We typically recommend not doing it for your kids. I don't even know if you can do it for. For your kids who are on payroll. For a lot of our clients, though, keep in mind the following that in some states the application might say if you're working, even if you're not paid. If you're working, that is Emergency dental treatments, you may not be eligible for an employment just by virtue of being in the office and in the practice and doing some work. Secondly, if you're an S corporation and you're transferring money as a draw outside of payroll, this is a gray area. But. But if you're audited, I could definitely see the state agency saying that that was an income that you paid yourself personally, which could disqualify you. And also keep in mind that there's a bunch of paperwork with this and might be a bit of a nuisance. Lastly, this will likely increase at some level. What is your unemployment insurance rate which applies to everybody in your practice? The first In California, the first $7,000 of everybody on W2, you have to pay that rate. Typically it's around 2% all the way up to, I think 6.2% for California clients and doctors. In most states, I think it's around the same. And that could stay there for year after year. So it's possible you'll end up having to pay more in unemployment insurance over time because you decided to go on unemployment. Now, if your income is really low, your bank accounts are low, we're waiting on money from the bank. You don't have personal reserves, then yeah, you should go ahead and file for unemployment. Just make the right moral decision of what's appropriate for your specific situation. Step number four is conserve your cash like water in the desert. This is really important. Here's the checkboxes. Furlough your staff other than those you need for your skeleton team for practices established as corporations. Adjust your payroll by either removing yourself entirely or. Or at least eliminating the federal and state income tax withholdings. Avoid making any quarterly estimated tax payments. Delay making your 2019 taxes owed until July 15th. Why? Because you can now and request a deferment on your bank loans. Most bank are offering. Banks are offering that. Talk with your attorney about requesting an abatement on your rent. Be careful though, however, since it may trigger unwanted consequences based on the terms of your lease agreement. Avoid paying vendors that aren't giving you direct support through this crisis. As a last resort, you can stop funding your retirement plan. However, as a financial advisor, not just a cpa, but as an investment consultant, I really tell people, capitalize on the moment. If you have cash and you know you're going to have enough to get through, then keep funding your retirement plan. The concept of dollar cost averaging, which is an investment term some of you may have heard of, which is where you're buying little amounts of shares but consistently over years, causes the average cost per share to be really effective relative to the value. And this is a great chance the value of the shares has dropped so much these last few weeks, these last month or so, usually ranging around 15% on the low end to all the way up to 60, 70% on the high end, that this is a great time to keep funding your retirement plan. The compounding effect of that gain, which inevitably will happen over the next I don't know if it's six months or four years, but the gain will be there will be incredible for your long term retirement. Note that federal direct student loans are receiving a six month automatic deferment of payments through September 30th. If it's still being pulled out of your account, contact your loan servicer. This is great because it's not even capitalizing that interest at the end of the period. And then check with your city's website for financial aid programs that might be available for you. A lot of cities have done that. A lot of them may have run out. Really confusing thing. There's a lot of states require what's called your business license or sometimes like San Diego they call it your business tax certificate. Has nothing to do with income taxes, nothing to do with payroll taxes. I don't know why they call it tax certificate. It's simply your business license which your attorney would have given you some instructions to apply for at the time of incorporating. Many dental offices have it hanging on their wall as a requirement by the city. Step number five start scheduling your patient appointments even if you don't know when you'll resume operations. Wayne Gretzky, one of the cocky grades, said I skate to where the puck is going, not to where it is, not to where it has been. How applicable is that right now? So even if we don't know when you're Going to open doors. Start scheduling if you have to reschedule some that were scheduled a little early because the mandate to stay at home and your office is closed carries on longer than we expect. That's okay. Better be safe than sorry and try to be scheduling people in the office. Use your skeleton team to be reaching out to patients. Send out a letter. Really important, in fact critical. Send out a letter to all your patients outlining your office procedures to maintain a clean, sanitized office with the highest level of sterilization procedures. Help them feel comfortable coming to your office. I suspect there's going to be a lot of people who for good measure are going to stay away from anything that could be non sterile and sanitized for a good three to six months. So reassure them that you've done everything possible to make this a squeaky clean office. Number four. Number three, personally reach out to your patients to check in with them. I love this. I really encourage my clients to actually pick up the phone, voice to voice. Talk about building goodwill with your patients, seeing how they're doing, especially ones who have upcoming big treatments. Ask if there's any pain, maybe do some virtual consults, et cetera. Great idea to build goodwill with your patients. Also communicate regularly to your staff as well. Help set expectations with them so they know that you care. Step number 6 apply for the SBA 7A loan shortly before you're permitted to resume office operations in your state. Now I'm updating that here to say that the safest bet, the absolute safest bet would be to apply now. Why? Because it's true. Theoretically, could this money run out? Yes. And the SBA stated in some updated guidance a few days ago that this is a first come, first serve loan. And so there's been, it's like an arms race, this mad rush on the bank to get there and to try to build up your get your loan application in before other people do. And you may need to do that. If you can't sleep at night because your cash is so low, go ahead and do that. But keep in mind that as the law currently is currently stated, if you receive that money and you're not able to open up doors and therefore re engage your team on payroll, then a portion of that, potentially the majority of it may not be forgivable and in which case you're going to have to pay that, you're going to have to pay it over a two year period. It's actually it's a six month deferral, then over an 18 month period at 1%. So be very careful about this. The government just came out today and said they are already talking about another $1 trillion of stimulus. I'm sure this is going to change from the, from today as I'm sharing that with you, the amounts, etc. But, but I'm highly confident there's gonna be another round of stimulus. Cause the first time around they weren't projecting how long they were gonna require business closures. So that original $349 billion allocated to small businesses is not gonna be enough. I can tell you right now it's not gonna be enough. So they're likely going to restock the gunpowder and you'll be able to apply later. So conceptually you'd want to apply for the seven day loan about two to three weeks before you know you're going to be able to open your office so that when that money comes in you can immediately re engage your staff, open doors, full steam ahead. Even if you don't have patience, filling all the chairs, still have your full team in there because if you do, you'll be able to have potentially 100% of that loan forgiven. Timing is very important and, and I don't know how long the banks are going to take to process approvals and when it's going to be funded. What I suspect may happen is one of two things is number one, the banks will be given an ability to determine when the money is funded, when it's originated. As the law says, the forgiveness starts on the day you receive the money from the seven day loan and over the ensuing eight weeks. And that's the eight week period that you've got to have your team fully re engaged. Fully re engaged. Now one of two things is going to happen. They're either going to allow banks to defer receipt of the funds after approval so that you receive the money when you're allowed by your state to open back up. Or two, they're going to say the eight weeks starts at the later of loan funding or when you can reopen your office, hoping the second one is the case. But again, I don't know if either of those is going to happen. But it doesn't make sense that they're saying here's loans that can be forgiven so you kickstart payroll and protect paychecks, but you can't open your office for business and therefore you're not going to get loan forgiveness because the eight week period you didn't have your office open. That just doesn't make any sense. So I'm hoping that our government can make sense about this and and that they'll come out with a provision allowing one of those two things to occur. All right, let's talk about the provisions of the seven loan. The maximum loan amount. This is sort of old news for a lot of you, but it's 2.5 times your average monthly payroll costs and over the past year. For simplicity, just use 2019 and that's your gross payroll cost. You exclude employer portion of FICA when making that calculation. You have to exclude any individual staff which is most likely you that you doctor whose wages are in excess of $100,000. You might have an associate who's paid $130,000. You can only include $100,000. In that case, if you paid yourself 200,000, you can only include $100,000 in the calculation of your average monthly payroll. Keep in mind the original bill allowed you to include independent contractors. And but the SBA came out and overrode that and now excludes independent contractors. So if they're not on your w, if they don't have a W2, you cannot include them in calculating your average monthly payroll costs. What do you have to use these funds for? Well, salaries and wages of course. That's the big one. Paychecks. This is the paycheck protection program. Number two, payroll processing costs. You can also use it for cost of group health insurance.

Rent number five, payment of interest on any mortgage or debt incur before February 15 and utilities. Now the SBA came out stating that even though it's not in the bill, the CARES act bill, you have to use 75% of this for payroll. If you fully re engage your team well and you have the same level of payroll as before, then automatically over those eight weeks, 75% is going to be used for your payroll. Really important that you doctor are on the payroll for the same amount as well. You want to max that amount and paying yourself at least $33,000 during those 33,333 during those four months of W2. And then of course you want to re engage your spouse and any kids that were on payroll as well if they were removed. One other thing about the maximum loan amount. You can also include the employer portion of health insurance premiums paid. The employer portion, not employee employer. Same thing with any 401k matching or I believe the lies are clear on this. Any profit sharing contributions in addition to the safe harbor that you pay on behalf of your staff. We don't believe this would allow you to include defined benefit contributions during that period. I think the nature of the law or the sentiment of the law would exclude that.

Now, before the terms of the loan were up to 10 years and under 4%, well, the SBA came out and just suddenly changed that, which was totally unexpected. And they said, no, it's actually two years and 1% with the six month deferral. So after the six month deferral, you're left with 18 months to pay that. So be very careful about this and that you need to get that loan forgiven. Otherwise you're going to have some big payments to make up during that 18 month period. Potentially. The other important thing on this note relates to the EID loan, the EIDL loan that we discussed above. According to the regulations, the CARES act, you could refinance your EID loan into the 7 loan. So the EID loan goes away. And now you have your 7 loan, which is the two and a half times your monthly pay, plus the EID loan that you refinanced into it. And now you have your total total loan. The SBA came out, clarified some of this. If by miracle you actually got an SBA EIDL loan that the emergency disaster loan before April 3rd and you used it for payroll, then you have to refinance it into the seven day loan. If you didn't use it for payroll, you don't have to. And it really doesn't say after April 3rd whether you have to or you don't. I don't believe you have to. In which case don't, because the SBA EIDL loan has terms of up to 30 years and 4%. So it has a lot longer term. The terms are just better on that than any unforgiven portion of your 7A loan. So don't refinance, don't Eid loan. In my previous version, I was typically saying to go ahead and refinance. Now I'm changing that because of what the SBA has come and basically overridden what was in the legislation. All right, loan amount, underwriting requirements, Real simple. Were you in business on February 15, you certify that you need this money due to economic circumstances and you have a reasonable credit score. I have no idea what the credit score needs to be, but it does state that the banks can look at your credit score when determining whether you're eligible for a 7 loan. The amount of the loan that can be forgiven is up to 100%. As long as you fully reengage your team, it can be reduced by the amount that you don't reengage your team. So any reduction in total staff during the eight week period relative to the prior year, also any staff you bring back on board, just don't give them more than a 25% pay cut, please. Because if you do, you're also going to reduce the amount of loan forgiveness. I don't see why you'd possibly give any pay cuts perhaps, but especially one more than 25%. So you need to fully reengage them to the same amount of hours that existed that they had before all this went down. A couple other things a lot of people ask, do I have to have employees on payroll at the time of filing or applying for the 7 loan or even the Eidl loan? The answer is no. You, you don't have to have a single employee on payroll when applying for this. It's only used historically. It's only using the average of your payroll costs in 2019 to determine that. The only thing that qualifies you is you saying, hey, the economic uncertainty of the time requires that I get loan, that I get money. You don't even have to say, I can't get money from other lending options. You don't have to say that even if you could go get a line of credit, you could still go ahead and apply for this, what could be potentially free money. All right, as of today, Thursday, April 7, that's today, the banks had begun taking applications. They started April 3, which was past Friday. However, they are doing so at different speeds. Some rushed to take applications, Wells Fargo started on Saturday, the day after, while others have yet to formally take anything other than inquiries. You need to first attempt using your existing banking relationship as most of the large banks require you to have a pre existing credit facility with them. Originally I thought that banks were making money off this. I don't know how much they are making money on this, given the loan is 2 years and 1% for anything that's unforgiven. The only way they make some money on this is the origination of the loan itself, which are typically paid between 3 to 5% of that, which is decent money. But they have a lot of work to do to process these. So I don't necessarily see this as a money maker perhaps, and they're not rushing to necessarily do this because of that fact. So please note that for Wells Fargo clients who feel like you missed the 7A application, since the window only lasted about 24 hours over this past weekend, we believe that they'll reopen it. We think that Wells Fargo was in a power play with the, with the government to release a restriction that's on them and that they're using this as a leverage point to be able to do that. I think that they will. Once that sort of negotiation works itself out, I think that they'll reopen the window to apply with them. I mean, it was only open for like 24 hours over a weekend, so it's kind of silly and a lot of our clients are saying, hey, we didn't get that in on time. Well, hopefully they will over these next few days or we just have to go to another bank. There are some other online banks who are doing this that I believe are certified SBA lenders. Be very careful with who you use. As I state here, there are a lot of fraudulent sites already springing up designed to capture your information. Be very careful about that. The same thing is true with unemployment applications. Make sure it is the state's official website when filing for unemployment. So that's all very important. And we're keeping our clients up to date with global emails on on where they can file for these loans or we're doing these loan applications for them. Action step. Estimate the amount of loan you'll be eligible for by completing the table below and pretty straightforward there. Number two, determine if your primary bank is an SBA lender. If so, request the 70 application. If you're a client of practice, CFO will do that. Determine if you wish to apply now or if you wish to apply later. Don't wait later than one, two weeks before opening your doors with full staff or two June 10th. In other words, go with the earlier of those two options. I will say that on our blog post on our website practicecfo.com go to our blog and there's an article we did. I think it was yesterday on April 6th, April 5th right around there where we talk about the pros and cons of filing now for the or applying now for the 7 loan are definitely pros and cons to this. All right, step number seven. Upon receiving the seven loan proceeds, make sure you re engage your team at full or close to full capacity to be eligible for the highest level of loan forgiveness. Ideally, you would receive the loans on the same day that your state allows you to reopen, which is the same day that you re engage your staff fully. Those three things. We know that's not going to happen perfectly, but if you can get those pretty close, key thing is your team is fully on board once you get the seven loan proceeds. If you happen to get the seven loan proceeds before you can reopen and the government hasn't allowed you to sort of defer that or use the later update as I discussed earlier. Then at that point you have to decide am I going to hire them so they can sit on the couch, watch Netflix or and basically replace their unemployment income with government loan proceeds income. That's essentially what's happening. It will replace their unemployment income because they're not, they're going to lose unemployment if you put them back on payroll even though they're still staying at home. So really a little bit your call there. I don't know yet exactly what's going to happen with the ability to get the forgiveness and the timing of all of this. As I get more information, I will let you know. Action step re engage your full team when receiving the 7A loan. Okay, step number eight. Complete the application to receive loan forgiveness after the eight week period. And there's an equation here which is, here's how you calculate the amount of loan forgiveness you take. The 7A loan received times the quotient of your full time equivalent during eight weeks after the receipt of the loan divided by your full time equivalent before receiving before actually closing down your office. Less the EID grant. Remember I said that 10,000 EID grant.

Will reduce the amount of 7A loan forgiveness. There it is. In the equation. That formula equals the amount of loan forgiveness. Let's talk about this middle one. What is an FTE? An FTE is a full time equivalent. Let's use 30 hours. It's totally fine. All that matters is that you use the same number in the after during the eight weeks as you use in the prior period when measuring whether or not you re engaged your team. So 30 hours is fine. If you have, if you have four staff who are all more than 30 hours then you got four full time equivalents there. Then let's say you have three staff working at 15 hours a week. Well, you take the average hours per week of your part time staff, in this case 45 and you divide it by 30 and that is 1.5 full time equivalents and take the 1.5 plus. What did I say before? Did I say 4 full time? If you had 4 full time true full time, you add the 1.5. Now you're at 5.5 and that's your FTE. So your average FTE during the 8 week period after receiving the loan divided by your FTE before. Now what is before? Well, the bill says, the Cares act bill says it's either February 15th through June 30th of 2019 or January 1st, 2020 to February 29th, 2020. And the bill specifically said at your election, whichever one you want to choose. Now, knowing math, you want the lowest one. You want the one because we're comparing before to be lower. That's the denominator. If the denominator is lower than this quotient is higher, you want that to be 100%. By the way, you can't engage your team more than before and get 110% of loan forgiveness. That doesn't work. It's only up to 100%, of course, but, but the SBA came out with more clarification on this and I believe it said that you have to use February 15th through June 30th or if you weren't in business at that time, January 1st, 2020 to February 29th, 2020. So we'll find out in a few months when you can get the application to receive forgiveness from your bank. Those don't even exist yet, not even close. But when you get that application, it will clarify what is the FTE before period that you are required to use. Okay, let's look at an example of the amount of loan that can be forgiven. Two scenarios. One scenario is the EID grant. In both scenarios, you got the grant of 10,000, the Economic Injury Disaster grant. And let's say you didn't get a loan, an EID loan. And to be honest, it doesn't matter because if you got the EID loan, we're not refinancing it into the 7 loan as I'm telling you to, because the EID loan terms are a lot better at 30 year repayment than the 7 loan, which is two years. So I just excluded this. This is an update from my prior 10 step where I showed you refinancing that into the 7 loan. So you got a 7 loan total of $100,000 in this example. And your FTE quotient, this quotient right here is 100% meeting. You.

Re engaged 100% of the headcount in your office and you didn't give anybody more than a 25% pay cut. Option two, it's the same, except you only brought back 75% of your average FTE during those eight weeks after you received the loan. So in the example then here's the solution is in the first one, $100,000 to times 100% cause you brought everybody back less the $10,000 grant that you received, your loan forgiveness is 90,000. And the remaining debt is 10,000 which has to be paid back.

Over the two year period. In the second example, you didn't bring back everybody. You brought back an average of 75% of your team and therefore 100,000 times 75 less than 10,000 equals loan forgiveness of 65,000. So you've remaining debt, there's of 35,000. See how important it is to re engage your full team so you don't have that extra debt. That's, that's just really, that's just really important. So action step. Once the eight week period, once the eight week period after receiving the seven loan proceeds has elapsed, apply for the loan forgiveness.

Okay. Keep in mind that 75% of your loan proceeds have to be used for payroll. There's been a lot of questions about if I got an EID loan and I got a 7A loan, can I have both? The answer is yes, you can have both. There was some ADA confusion on this saying that you can't. That was, I believe, a misinterpretation of the SBA's update. You can, but they need to be used for different things. So your EID loan can be used either for payroll before you got the seven A loan or it can be used for other things that you didn't use the 7A loan for, like rent or mortgage interest or administrative costs, etc. Utilities, whatnot. Okay, step number nine, file your 20191040 tax return by July 15th. As you know, the date's been extended both on the time filing and, and also the date that any taxes are due.

Related to 2019. And take advantage of that.

And then let's see anything else about 2019 for our clients. A lot of them we simply didn't extend if we didn't file your 20191040 yet. We didn't even need to extend if we knew we're going to get it done by July 15th. We didn't even need to file the extension. We which was great. And so here's. Oh, and also if you're a practice CFO client, we're deferring your tax fee for 60 days.

From last week in order to help sort of financially get through this period of time. We are continuing to charge our standard monthly CFO fee just because of we're working about 140% of our average time right now. We are fully engaged here with all of our accounts and it is full steam ahead for practice CFO in working with our clients right now. And step number 10, build your financial walls back up. Rahm Emanuel said, Never let a good crisis go to waste. That's a variation of it and how true that is. We're in sort of this crisis as we've all defined it, and yet it's such a good time in this period to connect with your staff in a way that you've perhaps never been able to connect with them and show them you care.

And support them in the ways that make sense for your practice. Also with your patients, be calling them and reaching out and letting them know everything you're doing to let them know you're thinking about them and preparing to have them come in and take care of them. It's also a great opportunity for you to self reflect on your relationship with money and your spending patterns and are you spending less than you earn or are you saving money for your future? What are your risk levels with the market as we've seen such a sharp decline? The way people spend money, it tells a lot. It tells a great story about the values in their life. And so many of our clients, we want you to be rethinking perhaps a little bit the way that you spend money. And if you went into this having no personal emergency reserve funds or, or not enough working capital in your practice, then we're probably not doing some things right. And if we don't have any other reserves other than having to go to the government stimulus package, we're probably not managing our finances in such a way that we build walls of security around us. That doesn't mean that you shouldn't go to government support. This is a unique situation where the government forced you to close down. So it makes sense that the government is stepping in to help you through, through this period of time. But my final parting words are, is that let this be an opportunity to perhaps rethink the way that we approach money in our lives with that. That is our ten step program for our clients, our dentists, or really in some ways any small business owner. You could apply these 10 steps. But getting through this period of time, and I hope it was helpful.