Important Update on COVID-19—Taking Care of Staff and Cash Flow During Office Shutdowns

Mar 17, 2020

Important Update on COVID-19—Taking Care of Staff and Cash Flow During Office Shutdowns

The April 1st issue of the C&A Doctors' Newsletter will be devoted to ways we can fortify our practices during the economic shutdown.  But, before that goes to print, we want to address the most immediate needs - helping our staff through this difficult period and having enough liquidity to manage the next several weeks of uncertainty.

Employee Sick Leave and Unemployment Insurance: The economic bailout bill now being negotiated in the Senate will address paid sick leave. The House version required employers with 500 or fewer employees to provide two weeks of paid sick leave for employees who contract Covid-19, who are taking care of family with Covid-19 or who are taking care of kids whose schools or day care centers have been closed. After that, there would be another 10 weeks of paid sick leave (at a reduced level) but only for employees taking care of kids off from school. Employers with 50 or fewer employees (most of you) are likely to be exempted from these requirements. We don't yet know that for sure and will have to wait for the bill to become law, which may happen as early as the end of the week.

If you are closing your office and you are not required by law to provide paid sick leave, then you should direct your employees to your state’s unemployment benefits office. The states (with help from the federal government) are relaxing their requirements for claiming unemployment. Normally, employees have to be laid off and wait a certain period of time before benefits commence. These criteria are being waived, so that employees who have not been terminated, but whose business have been temporarily closed, can collect ASAP. (If paid sick leave is required for all businesses in the final legislation, then unemployment benefits likely won't commence until the paid sick leave runs out.)

You can help your team by researching your state's updated requirements. It shouldn't be hard to find the website. Google "[Your State] Unemployment Covid." The employees will have to provide some basic information about themselves and their employment situation and apply individually, and the unemployment should start quickly. Alternatively, you may choose to pay your employees any accrued vacation time prior to your team starting unemployment benefits.

Short-Term Loans to Keep the Practice Afloat – Personal Loans, Bank Lines of Credit and SBA: If you have sufficient cash sitting in your personal bank account, then you can make a loan to your practice to help cover ongoing operating expenses. This should be documented with a promissory note with a reasonable repayment term (perhaps two to five years) and a reasonable interest rate. This will distinguish it from a capital contribution. The loan can be paid back tax-free and with deductible interest. A capital contribution would add complexity, especially in a group practice, and the "repayment" could end up being taxable.

If you don’t have enough personal cash, and your savings are in stocks that have gotten pummeled, then don’t sell the stocks to free up the cash if you have a bank line of credit or you can obtain one. If you have a line of credit, then draw down on that now - even if you are on the fence about whether you will truly need it. In times of financial panic, there’s a big difference between having access to a line of credit and actually having the money. Banks are stressed with clients drawing their lines of credit. If you wait too long, the funds may not be available, though the Fed may step in and prop up the banks as needed.

If traditional bank lending dries up altogether, the federal emergency bailout will include at least $50 billion (and maybe a lot more) for the Small Business Administration (SBA) to loan to small businesses during the emergency. Your governor will first have to declare your county a disaster area, but the repayment terms will be quite favorable.

The areas currently eligible for disaster assistance loans can be found here:
https://www.sba.gov/disaster-assistance/coronavirus-covid-19

Best wishes as we all hunker down and work our way through this difficult time.

Brandon Collier

22 Comments

  1. Brent & Ashley Paulus on at 1:57 pm

    Brandon,
    Thank you so much for all your sound advice in this time of crisis. A few more questions…
    1- Do we need to send our employees a letter documenting that we are temporarily closed and they need to file UI claims? We let everyone know via text/in person, but didn’t know what type of legal documentation was required.
    2- Do you recommend having an associate doctor or any of the owner doctors file for unemployment at this time?
    3- We have not yet put our office manager on unemployment due to the countless hours she has worked this week to help us shutdown. If this shutdown continues for several weeks/months, as is very likely, what would your recommendation be for office managers? Is there a way for us to bonus the office manager/give her some extra funds prior to submitting her UI claim?



  2. Diana Liley on at 6:10 pm

    ADA sent out email on 3/19
    “ADA lobbies Congress on third Coronavirus bill” suggesting ADA members contact legislators through ADA.ActionCenter.org.
    ADA is asking Congress to consider various proposals, one of which is “ requiring all business interruption insurance policies to cover national emergencies including those related to diseases such as COVID-19”.



  3. Stan Heleniak on at 3:59 pm

    Brandon,
    I have an associate doctor employee who is filing for unemployment after the office is now closed. She works on a commission. She will still be getting checks the next few payroll runs from her collections. Can she file and collect and still be paid by me? How does this work. If she were to come in the office to see and treat an emergency how should she be compensated or not at all if collecting?



  4. Dr. Melannie Turpin on at 11:25 am

    Thank you, Brandon – I am just guessing, but as for portfolios and stocks your advice may be “just sit on them for now”? Hard to look over the cliff that is the stock market right now.



  5. Dr. Barry Feldman on at 8:35 am

    Thank you Brandon for giving us this information between Newsletters. It is very much appreciated!



  6. Dr Scott Boyle on at 8:25 pm

    Brandon Great advice. If say you withdraw 200,000 from Line of credit do you take cash or place in a fidelity checking account . Creating another potential withdrawal problem? Dr Scott Boyle Orthopaedic Surgery private practice



    • Brandon Collier on at 10:54 am

      Yes. Thankfully, the checking accounts are FDIC insured.



  7. Colin Richman on at 6:17 pm

    Brandon and team Collier.
    Thanks for the timely advice.
    In your opinion, and for your portfolio, do you personally still regard this time as a buying opportunity, as you suggested in your last newsletter.
    Colin Richman DMD



    • Brandon Collier on at 10:52 am

      Colin, in my opinion, yes. The U.S. economy is resilient. But, the recovery will be slower than it otherwise would (should) have been had the government decided to shut it down. It may be a couple years before prices get back to where they were at the start of the year.



  8. Jim Diette on at 5:54 pm

    Should we reconsider maxing out our 2019 401(k) contributions, considering:
    1) an ensuing “bear market”
    2) expecting considerable cash flow reduction in 2020



    • Brandon Collier on at 10:49 am

      Protecting the practice takes precedence over funding the plan, even if this proves to be a great entry point.



  9. Paul Englander on at 5:01 pm

    Thank you for the advice. Are you suggesting a Promissory Note would preclude us from paying personal taxes on the interest from a loan?



    • Brandon Collier on at 10:47 am

      No. That part is taxable.



  10. Gary Roach on at 4:49 pm

    Can the owner/president of an s corp (who takes a W2 wage) file for unemployment?



  11. Michael Kehoe on at 3:01 pm

    I have Overhead Expense Insurance through the American Association of Orthodontists which is stepping up to help me during these uncertain times and office closure.



  12. Charles canepa on at 2:55 pm

    Thank you for your advice all these things have been crossing my mind I am putting my staff payroll as top priority. And the rest of my bills on the back burner. It was tough to make the decision to cancel all patients for two weeks but the state board letter was a little intimidating. However after a while it seemed more like a recommendation versus threat. Anyhow it probably was the right thing to do to keep my staff safer and not spread things.



  13. Mark Rarrick on at 2:37 pm

    Thank you Brandon Collier! You dad would’ve very proud of your leadership!



  14. Dr David L Sykes on at 2:27 pm

    I have Practice Interuption Insurance thru The ADA, would this be useable as well as my BOP office policy,



  15. Magnus Wilson DDS on at 2:13 pm

    Thank you Brandon. This extraordinary communication is a very good idea in these unprecedented (in our lifetimes) times.
    I fully retired two years ago, and have benefited greatly from many years of the teachings of your father and yourself. I fortunately feel prepared for these difficult financial times. However I am humbled by the concerns many of our younger colleagues face now, especially those early in their careers.
    Could it be helpful to establish some form of pipeline or forum for mentoring? I recall how helpful it was for me to be “talked down” in times of financial crises, thus preventing catastrophic errors.
    Since you have so many doctor’s attention across the country, your organization could play a role in this potentially helpful resource.



  16. Diana Liley on at 2:01 pm

    What about Practice Interruption Coverage benefits ?



    • Brandon Collier on at 3:04 pm

      Good question, but unlikely. This is in your commercial property casualty policy. Ask your agent. Business interruption often is covered if the insured property suffers a casualty loss due to something like a fire, not if the office shuts down due to a government mandate stemming from a virus. (The insured property technically is fine even if there’s a chance the virus is on it). Policies may have coverage for property losses (and resulting business interruption) from losses resulting from bacterial infection, rot, virus…, but the insurance companies will be arguing that this is a different situation. State insurance commissions may step in and contest that, but, for now, business interruption from Covid-19 is doubtful.



  17. Timothy John Reaume on at 1:57 pm

    Thank you for the timely and helpful information as we strive to take care of our employees during this challenging time.



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