Time Is Ticking for Senior Living Providers To Tap $350B in Forgivable Payroll Loans

A provision within the newly passed $2 trillion CARES Act stimulus package could open up the floodgates and provide small businesses across the country with a cash infusion — and the senior living industry stands to benefit if it acts quickly.

The $350 billion provision, dubbed the paycheck protection program (PPP), is meant to help small businesses retain their workforce amid economic duress caused by the Covid-19 pandemic. In particular, companies harmed by Covid-19 as early as Feb. 15 and with 500 or fewer workers can apply for Small Business Administration (SBA) 7(a) loans to be used for payroll and some other expenses, including mortgage payments and utilities. That includes senior living providers with fewer than 500 employees total, but likely not larger providers with more than 500 employees, even if those employees are spread across many different small locations.

The loans amount up to 250% of a company’s average monthly payroll costs, and are capped at $10 million. The new loan also has a maturity of two years, and an interest rate of .5%, according to the SBA.


Interest among potential borrowers is already high, and the initial pile of money up for grabs is substantial, according to Adam Sherman, who leads senior care lending as a senior vice president of Wilmington, North Carolina-based Live Oak Bank (Nasdaq: LOB).

“Even though it’s a massive amount of money, it’s hard to gauge how quickly it’s going to go,” Sherman said. “To put it in perspective, $350 billion is … 10 years’ worth of 7(a) loans in potentially a matter of a couple of weeks or months.”

Lenders may begin processing loan applications as soon as April 3, and the program will last until June 30, according to the SBA. That time frame makes it crucial for interested senior living providers to be organized and ready to apply when the time comes, Sherman said.


“Be prepared to work with a lender that you have confidence can get the deal done for you,” Sherman explained. “Because there are going to be thousands of lenders taking applications for people, and there are going to be all levels of experience there.”

The CARES Act, which U.S. President Donald Trump signed into law March 27, represents $2 trillion in aid for businesses and Americans affected financially by the Covid-19 pandemic. Perhaps most notably, the act directs the IRS to send one-time $1,200 checks to millions of taxpayers, among a host of other provisions.

Under the PPP, the SBA will forgive any portion of the new loans used for employee payroll, along with rent, mortgage interest and utilities, as long as the business has maintained its payroll through the pandemic. But, at least 75% of the forgiven amount must have been used for payroll, according to the SBA.

Ultimately, loan forgiveness is based on employers keeping or quickly rehiring their employees and maintaining salary levels, according to the SBA. And the SBA has said it will reduce the amount forgiven if an employer’s full-time headcount declines, or if they reduce salaries and wages.

“In order to qualify for forgiveness — which we think is going to be everybody’s goal — the money has to be used toward payroll, rent or mortgage interest or toward utility expenses,” Sherman said. “[Providers] are going to want to document that they spent that minimum amount on those items so they can apply for forgiveness.”

Loan payments will be deferred for six months, and no collateral or personal guarantees are required to obtain a loan, according to the SBA. And, the loan won’t come with any added fees for business owners who apply.

Already, the SBA’s more than 1,800 approved lenders are moving quickly to get the money in the hands of small businesses across the U.S. That includes Live Oak, which is preparing to start taking applications for the new loan program and is putting interested parties on a waiting list.

“We anticipate [there] is probably going to be a flood of interest from … both our customers and the broader market,” Sherman told Senior Housing News.

Other stimulus detailed

The PPP is just one way small businesses may benefit from the CARES Act. The stimulus package also allocated a $100 billion fund for health care providers, specifically those that provide health care, diagnoses or testing for Covid-19, according to an FAQ written by Senate Democrats and first obtained by Business Insider. By that definition, senior living companies are eligible for some of that funding. The money is set to be released on a rolling basis in contrast to a more traditional competitive grant process, meaning that providers will also want to act quickly there, as well.

Examples of non-reimbursable expenses eligible for this funding include “building or retrofitting new ICUs, increased staffing or training, personal protective equipment, the building of temporary structures and more,” the FAQ reads.

Industry associations ASHA and Argentum have been working in a joint effort to secure more financial relief for the long-term care industry, according to Jeanne McGlynn Delgado, vice president of government affairs for the American Seniors Housing Association (ASHA).

“We will work to advance proposals similar to this SBA loan program for [larger senior living providers], among other measures, in the next stimulus bill that is certain to be on the agenda in the coming months,” Delgado told SHN.

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