Pharmacy Resources During the COVID-19 Outbreak
Does My Pharmacy Qualify?
The Paycheck Protection Program (PPP) is intended to help small businesses with under 500 employees maintain their regular business operations during the COVID-19 pandemic. All pharmacies that have less than 500 employees should qualify. Pharmacies need to know that applicants DO NOT need to show proof of economic damage.
PPP Link on sba.govUnderstand the Paycheck Protection Program
How Does the PPP Program Work?
The Paycheck Protection Program was designed to help small business under 500 employees weather the storm. There are really no other restrictions for most pharmacies. The government is providing $349 Billion on a "first come, first serve" basis to keep employees working irregardless of financial condition of the company. The loan would be obtained through a bank and there is no fee to apply.
The loan can be used for the following which are considered qualified expenses:
Payroll and Commission Payments, Group Health Care and Insurance Premiums, Mortgage Interest Payments, Rent and Lease Payments, Utilities, Interest and any other debt obligations that were incurred before the covered period.
Why is this such a great opportunity for pharmacies? The loan can be forgiven meaning you don't have to pay it back for those qualified expenses incurred for the 8 weeks after obtaining the loan. In other words free money!
PPP Link on sba.govNext Steps for Paycheck Protection Program
What Should the Pharmacy Do Next?
The pharmacy should gather the following information: Payroll Expenses for that last 12 months which include wages, commissions, retirement matching contributions, employer paid insurance premiums, rents, morgage interest payments, utility payments, and interest payments on any debt obligations that were incurred before February 15, 2020.
The next step is to call your bank or find a bank that can offer a PPP loan. The above information will be given to the bank who can provide the PPP loan. The bank will then take the monthly average of those costs provided and may then provide 250% of the average monthly expenses in the form of a PPP loan.
After the loan is obtained, the pharmacy would need to keep track of eligible expenses for eight weeks to be able to submit that information for loan forgiveness.
Benefits of Paycheck Protection Program
What could be the Impact to my Pharmacy?
LTC Pharmacy Example (For Informational Purposes Only)
Pharmacy has the following expenses April 1, 2019 to March 31, 2020:
$1,200,000 in payroll, $36,000 in 401k employer match, $144,000 employer paid insurance premiums
$96,000 in rent
$60,000 in utilities
Total 1 year of qualified expenses = $1,536,000 / 12 months
Average qualified monthly expenses = $128,000
PPP Loan Amount is 250% of $128,000 = $320,000
For the immediate 8 weeks following the PPP loan the Pharmacy expenses are as follows: $240,000 for Payroll, $7,200 for 401k match, $26,000 for employer paid insurance premiums
$16,000 for Rent
$10,000 for Utilities
Eligible Expenses to BE FORGIVEN = $299,200 (FREE MONEY)
Loan Payback = $20,800 which is interest free for 6 to 12 months. Afterwards, the loan would carry a 4% interest rate on the remaining balance after the free interest rate period.
