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Can Health Care Providers Qualify For The Paycheck Protection Program?

on Friday, 3 April 2020 in Covid-19 Information Hub

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”; Pub. L. 116-136) apportions $349 billion to the “Paycheck Protection Program” (the “Program”) which authorizes small business loans guaranteed by the Small Business Administration (“SBA”) under Section 7(a) of the Small Business Act which can then be forgiven if certain conditions are met. The Program is described in other articles posted on the Baird Holm COVID-19 Information Hub(See “U.S. Treasury Releases Additional Guidance on Paycheck Protection Program”).

Health care providers are eligible to participate in the Program; unlike other SBA programs that are limited to for-profit businesses, the Program defines eligible businesses to include nonprofit organizations that are exempt under Section 501(c)(3) of the Internal Revenue Code. Generally, nonprofit entities—like other businesses—are eligible only if they employ not more than 500 employees (counting both full- and part-time employees). However, there is nothing in the Program that suggests that governmental bodies, such as county hospitals, are eligible to participate.

While most SBA loan programs require that the business show that it cannot obtain credit elsewhere, that is not the case here; thus, a nonprofit entity would not be required to show that it cannot obtain credit elsewhere.

All entities—both nonprofit and for-profit—must certify that:

  • The loan is necessary because of the uncertainty of current economic conditions;
  • They will use the funds to retain workers, maintain payroll, or make lease, mortgage, and utility payments; and 
  • They are not receiving duplicative funds for the same uses. 

Health care providers seeking to participate in the Program must apply though banks participating with SBA.  Applications are to be available as of April 3, 2020.

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