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Maximizing PPP Loan Forgiveness
Posted: 5/18/2020

Maximizing PPP Loan Forgiveness


By: Brandon Collier  


When a practice receives its PPP loans, the eight-week period for determining how much of the loan will be forgiven has begun.  The goal here is maximizing the amount of forgiveness within the rules as they are presently written and updated.  Even with the SBA’s various “Final Interim Rules” and Q&A’s, there remains much that is ambiguous.  Over the next few weeks, we expect the SBA to provide further guidance on the loan forgiveness.  

The CARES Act states that loan forgiveness will be for “costs incurred and payments made” in this eight-week window.  It will be easy to show that a certain payment was made during the eight-week window, but what does it mean for the cost to be “incurred” during this period?  As we will explain, certain situations are ambiguous, and until the confusion is resolved by future guidance, we recommend interpreting the ambiguity in our favor.  But, before getting to specific recommendations, here is a recap of some of the PPP basics:

1.     The eight-week period starts when the loan is disbursed, not when the application is approved.

2.     The loan is supposed to fund within 10 days of approval, so you do not have the luxury of timing the loan to the date your practice reopens.

3.     The forgiveness will include a more favored category of expenses called “payroll costs” and a less favored category of expenses. 

4.     “Payroll costs” include traditional employee wages (capped at $100,000/yr), plus employer-paid health insurance premiums, plus retirement plan contributions, plus state and local taxes on employee compensation such as unemployment insurance premiums.  (Recent guidelines restrict Schedule C sole proprietors at a hard cap of $100,000 which we explain below).  These costs must comprise at least 75% of the forgiven amount.  Therefore, efforts will be made to boost up where feasible.

5.     The less favored expenses include office rent, utilities (electric, water, phone, internet, gas for corporate car), and interest on business loans for real estate and equipment that existed prior to February 15, 2020.  These expenses can make up no more than 25% of the forgiven amount, so, again, we will want to boost “payroll costs.”

6.     At the end of the eight weeks, you will have 90 days to certify these forgivable expenses to your lender, using a form that it will provide.  The lender will make its decision on how much to forgive within the next 60 days. 

7.     Whatever is not forgiven has to be repaid over two years at a 1% interest rate.  If repayment is a problem, it’s the type of problem we’d like to have.  We took the loan, had some of it forgiven, and were left with some low-interest-rate loan proceeds to help provide a cushion during a difficult time.     

What follows are some ideas for maximizing your “payroll costs” during the eight-week window.  Keep in mind that these recommendations are based on current guidelines and will change if future guidelines restrict or prohibit them.  If additional guidelines are issued before the next Newsletter, we will update our website and send subscribers an email notification.  If you have not been receiving our emails, please call or office at (216) 765-1199 or visit to request your online account access.    

Hire or Boost wages for the non-doctor spouse – Wages can be as high as $8,333/mo.  There is no requirement that the non-doctor spouse had to have been an employee in 2019.  And there is no requirement that his or her pay can’t be increased above what he or she earned in the past.

Boost wages for the doctor’s children if they can reasonably justify a higher salary – We would not boost wages for young children who are employed and earning a few thousand dollars to fund Roth IRAs.  But, we would if the children are older (high school or college) and are assuming expanded job duties.

Pre-pay your staff when you eventually rehire them – You are not required to rehire staff once the PPP loan funds.  When you rehire your employees, you may be several weeks into the eight-week window, feeling like you lost the benefit of some loan forgiveness. 

When your staff comes back, consider giving them a compensation bonus for their cooperation during the shutdown and accepting the temporary furlough or termination.  The bonus is a show of gratitude and an inducement to return paid during the eight-week window but credited against wages to be paid after the window closes. 

This idea is an aggressive interpretation of the CARES Act’s “costs incurred” standard.  But, the argument can be made that the bonus is a legitimate expense and not purely a timing adjustment in when your staff is paid.  After all, the employer is taking a real risk with this bonus.  The employee could quit and keep the bonus money. 

Fund your retirement plan (or plans) during the eight-week window – This area is one that’s been woefully under-addressed by the CARES Act and subsequent guidelines.  If you were too conservative with your original loan request and excluded profit sharing and/or cash balance contributions, that turned out to be a mistake.  The post-CARES Act guidelines permitted these plan contributions to be included in your payroll costs.  And, until future guidelines come along that prohibit or limit it, we will include plan contributions in our request for loan forgiveness. 

Do the plan contributions have to be for the 2020 plan year, or can they also be for the 2019 plan year?  Do the contributions have to be limited to 8/52nds (eight out of 52 weeks) of the maximum allowable contributions for 2019 or can we fund the entire year during these eight weeks?  These questions have not been answered, and until they are, we would be thinking expansively and using retirement plan(s) as a source for boosting up our forgivable “payroll costs.”

Continue paying staff group health insurance premiums – Even while employees have been furloughed or laid off, these expenses count as payroll costs and will increase loan forgiveness.  You can have them cover their share of these monthly premiums from future paycheck reductions.   

Prepaying and (“post-paying”) office rent – We would not be front-loading future months of rent into the eight-week window.  This idea strikes us as too aggressive of an interpretation of the “costs incurred and payments made” standard.  It is hard to argue that your October, November and December rent is “incurred” in April, May or June.  But, we’d be comfortable including these three months into the eight-week window.  For example, if you are still awaiting your PPP loan in early May, ask your landlord for a reasonable grace period on your May rent, and pay it after your loan funds.  You don’t want to pay the May rent on the 1st and get your loan on the 2nd, since that payment won’t be within the eight-week window.           

Additional thoughts - PPP loan forgiveness is going to be “the” hot topic over the next few months, and we will be updating our recommendations periodically.  Be aggressive with your interpretations, while staying within the rules.  The rules are subject to change.  In fact, some of them already have – and for the worse. 

On April 14th, the SBA issued a second “Final Interim Rule” which caps the Schedule C practice owner’s personal payroll costs at $15,385 ($100,000 x 8/52).  For that unincorporated sole proprietor, no additional owner health insurance premiums or owner retirement plan contributions can be added to this figure when calculating loan forgiveness.  The owner will still be able to get forgiveness of staff wages plus their insurance premiums and plan retirement plan contributions.

We recommend keeping a spreadsheet of all eligible expenses as they are incurred and keeping copies of supporting documents in a separate folder.  In order to qualify for forgiveness, you have to provide backup documentation to the lender.   

The government will exert little oversight over the loan forgiveness.  To the extent it does, it will be on the “politically incorrect” multi-million-dollar loans that were given to much larger companies.  The banks will be even less interested in monitoring this process.  They don’t want to incur the expense of carrying these short-term low-rate loans on their books.  The banks will likely be content to forgive whatever the borrower certifies to and can support with documentation.  The SBA says that the banks can rely on the borrower’s certification, and the banks will not be held liable.  None of these suggestions are an invitation to cheat, but they should provide some perspective for doctors willing to take more aggressive but reasonable interpretations of the ambiguities in the rules.  

     * Reprinted from the May 1st, 2020 issue of the Collier & Associates Doctors’ Newsletter.  The C&A Doctors’ Newsletter is a bi-weekly newsletter devoted to taxes, investing, insurance, transitions, and practice management for the dental profession, available for $280 per year from Collier & Associates, Inc., 30195 Chagrin Blvd., Cleveland, OH 44124.  Call (216) 765-1199 or visit for further information.

Brandon Collier

Brandon Collier

Brandon Collier is an attorney and President of Collier & Associates, Inc., publisher of the popular C&A Doctors’ Newsletter, which for 50 years has been providing doctors with unbiased and cutting-edge advice on tax saving strategies, saving and investing, practice transitions, practice management and how to live a good life.  Brandon also conducts the C&A continuing education seminars at top destinations throughout the United States, Canada, Mexico and the Caribbean and oversees the C&A retirement plan division which prepares and administers profit sharing, 401(k) and defined benefit plans for hundreds of dental practices. 

In addition, the law firm of Collier & McBride, LLC represents dentists across the country in practice transitions, including negotiating and drafting practice sale agreements, partnership buy-in agreements, associate employment and independent contractor agreements and practice appraisals. 



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