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Insights in Seniors Housing & Care

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By: Bill Kauffman  |  April 03, 2020

Potential New Source of Capital for Qualified Seniors Housing and Care Businesses

Business Environment  |  Regulatory Environment  |  Seniors Housing  |  Skilled Nursing

The CARES Act establishes a new $349 billion Paycheck Protection Program

As part of NIC’s mission to provide links between operators and sources of capital, one important new source of capital during this COVID-19 crisis is the Paycheck Protection Program from the Small Business Administration (SBA). The $2 trillion CARES Act signed into law by President Trump on March 27, 2020 established a new $349 billion Paycheck Protection Program, which will provide relief that is essential to millions of small businesses so they can sustain their businesses and keep their workers employed. The summary below provides information that business leaders in the seniors housing and care sector should be aware of. Business leaders are encouraged to go to the SBA link below or talk with their banking relationships for guidance.

The CARES Act offers aid to individuals and businesses that are impacted by the economic fallout from COVID-19. The Paycheck Protection Program specifically provides approximately $350 billion in loans to help small businesses with their payroll and other business operating expenses. The capital provided to businesses will be without any requirements for collateral, personal guarantees, or SBA fees and all with a 100% guarantee from SBA. Importantly, businesses eligible for the Paycheck Protections Program must have fewer than 500 employees, where employees are defined as those individuals employed on a full-time, part-time or other basis.

Seniors housing and care operators and businesses that qualify will notice some welcome aspects of the loans including the fact that all loan payments will be deferred for six months. More importantly, the portion of loan proceeds from the SBA that are used to cover the first eight weeks of payroll costs, rent, utilities, and mortgage interest will be forgiven. The new program will be retroactive from February 15, 2020 through June 30, 2020 so that employers can hire back the employees that were recently laid-off.

There are still questions about certain details and qualification but here are the loan terms and conditions:

  • Eligible businesses: All small businesses, including non-profits, Veterans organizations, Tribal concerns, sole proprietorships, self-employed individuals, and independent contractors, with 500 or fewer employees, or no greater than the number of employees set by the SBA as the size standard for certain industries
  • Maximum loan amount up to $10 million
  • Loan forgiveness if proceeds used for payroll costs and other designated business operating expenses in the 8 weeks following the date of loan origination (due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs)
  • All loans under this program will have the following identical features:
    • Interest rate of 1.0%
    • Maturity of 2 years
    • First payment deferred for six months
    • 100% guarantee by SBA
    • No collateral
    • No personal guarantees
    • No borrower or lender fees payable to SBA

As the government continues to get feedback from trade associations, businesses, and constituents, there are additional relief packages expected in the coming weeks. NIC will continue to communicate as necessary to the seniors housing and care sector as more information becomes available. The link below can be useful for information from the SBA:

https://www.sba.gov/funding-programs/loans/paycheck-protection-program-ppp

About Bill Kauffman

Senior Principal Bill Kauffman works with the research team in providing research and analysis in various areas including sales transactions and skilled nursing. He has lead roles in creating new and enhanced products and implementation of new processes. Prior to joining NIC he worked at Shelter Development in investing/acquiring, financing, and asset management for over $1 billion in assets. He also had key roles in the value creation and strategic planning and analysis for over 65 entities. He received his Bachelor of Business Administration in Finance from the College of Business and Economics at Radford University and his Master of Science in Finance from Loyola College in Maryland. He also holds the Chartered Financial Analyst Designation (CFA).

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