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Orthodontic Residents: Don’t Stop The Job Search

Shannon Patterson Ortho Resident Don's Stop The Job SearchIn the latest issue of Orthodontic Products Magazine, Shannon Patterson, Partner at Bentson Copple & Associates, provides advice to orthodontic residents as they navigate the COVID-19 crisis.

No one could have predicted what has happened in the world since mid-March, especially in the orthodontic world. Most offices were experiencing year-over-year growth spurred by advanced treatment technologies and a consumer push for cosmetic dentistry. Overnight we witnessed orthodontic offices across the country shut-down due to ADA regulations and recommendations. Approximately 9,000 orthodontists, their employees, and over 1,000 orthodontic residents are all on pause. Orthodontists who own offices had to make heart-wrenching decisions and tackle mounds of paperwork to apply for the stimulus loan package. Employed orthodontic associates are out of work not knowing if they will receive unemployment or will be rehired at a reduced schedule. Final-year residents who probably had a handful of potential opportunities are now experiencing radio silence on their phones.

There is a lot of uncertainty in the world, and as we watch media coverage of the virus it might feel selfish to be worrying about your potential career. However, the reality is you still need to find a job, and going dormant during this period may not the best scenario for job seekers.

Read the entire article in the April/May 2020 issue of Orthodontic Products.

Video: How COVID-19 is Impacting Orthodontic Residents

Shannon Patterson talks with Orthodontic Products’ Chief Editor, Alison Werner, about how the crisis is affecting residents – including the impact on classes, graduation, and licensure exams. She also focuses on how COVID-19 is affecting their job search and pending employment offers. Moreover, she offers advice to residents about how to manage this time and to established doctors who are wondering if they should be hiring now. Watch The Interview Here.

CARES Act Summary: What All Orthodontists Need to Know & FAQs

CARES_Act_ For_OrthodontistsBy: Doug Copple, CVA & Shannon Patterson, CPR, CMSR
Partners, Bentson Copple & Associates

The guidance regarding the CARES Act and specifically the PPP Loan is constantly being updated. The blog post below regarding the CARES Act and FAQs have been updated in the attached PDF document. Also, below is a link to the Small Business Administration’s Interim Final Rule issued on April 2, 2020, that provides additional guidance on the PPP loan.

Click Here to download a PDF of this article (as of April 3, 2020).

Read the Small Business Administration’s Interim Final Rule (issued April 2, 2020).

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On Friday, March 27th, the President signed the Coronavirus Aid, Relief, and Economic Security Act – or the “CARES Act”. The CARES Act is the largest stimulus package in the nation’s history, totaling approximately $2.3 trillion to assist individuals and businesses in the U.S. Our team at Bentson Copple & Associates has been reviewing drafts of the Act while it was being presented in the Senate and has continued to review it after the bill was signed into law this past Friday. It is an extremely long (880 pages) and complicated bill that provides many incentives and stimuli for individuals and businesses. Below is a summary of the sections that are of most importance to our clients and their teams, followed by FAQs related to the CARES Act and FAQs related to Practice Valuations and Transitions.

Also, please note that all sections of the CARES Act are still being interpreted by experts, and our interpretation and comments below are subject to change as additional information is obtained. Due to the complexity of the Act, all of this information is generalized, and all businesses and individuals that wish to take advantage of the benefits in the Act should consult their personal CPA and/or attorney. There are many other sections of the Act that are not covered below.

Read the Final CARES Act here: https://www.bentsoncopple.com/uploads/CARES_Act_Bill.pdf 

Section 1102: Paycheck Protection Program (“PPP”)
This section (and the related Section 1106 outlined later herein) is the provision most of our clients have heard about and many are asking how they can take advantage of this forgivable loan. This section provides for businesses with less than 500 employees to be provided a loan under section 7(a) of the Small Business Act (SBA) that is guaranteed by the government. If certain conditions per Section 1106 of the CARE Act are met, the loan is forgivable (i.e. does not have to be repaid). These loans are referred to as ‘PPP Loans.’ There are several definitions to be aware of in this section:

1. Covered period is between February 15, 2020 and June 30, 2020, which basically means the loan must be applied for and proceeds disbursed to the borrower prior to June 30, 2020. Although the bill was passed on March 27, the covered period starts on February 15, 2020 because if certain other SBA loans (e.g. an EIDL loan) were obtained prior to the Act going into effect, the bill covers such loans, and these loans may be converted to a PPP loan if certain criteria are met.

2. Payroll costs means the sum of salary, wages, paid time off (vacation, parental, medical or sick leave and severance), group health care benefits (only the portion that is paid by the practice on behalf of employees), payment of any retirement benefit (e.g. employer contribution on any retirement plan), and payment of state or local tax assessed on the compensation of employees. However, the compensation of an individual employee in excess of an annual salary of $100,000 shall not be included in the calculation of the maximum loan amount. Further, it does not include employer paid FICA taxes or taxes withheld on behalf of the employee for the payment of income or FICA taxes.

3.  Maximum loan amount is 2.5 times the average total monthly payroll costs (i.e. all items above) incurred during the one-year period before the date on which the loan is made (but other pay periods can be used in certain circumstances). Thus, if a practice’s total average monthly payroll costs are $50,000, the maximum amount of the PPP loan would be $125,000.

The PPP loan can then be used to pay the following allowable expenses:

  • All payroll costs outlined above.
  • Interest incurred on mortgages (not principal payments) in force before February 15, 2020.
  • Real estate leases/rent on agreements in force before February 15, 2020.
  • Utilities for services in force before February 15, 2020.
  • Interest (not principal) incurred on any other debt obligations that were outstanding prior to February 15, 2020.

To obtain the covered loan, the borrower must make a good faith certification that the business has suffered due to the Coronavirus and acknowledge that the loan proceeds will be used to retain workers and maintain payroll, and make mortgage payments, lease payments, and utility payments. It seems that every orthodontic practice in the country will qualify for this loan due to required shut downs in every state.

There is no personal guarantee for the loan, and the interest rate on the covered loan will be no more than 4.0%.

Interest and principal payments on the covered loan can be deferred for up to 12 months.

Section 1106: Loan Forgiveness
The PPP loan will be forgiven and the borrower will not be required to repay the loan if the funds are used for certain approved purposes during the 8-week period beginning on the date that the loan is obtained. Note that this 8-week period is defined as the “covered period” in this Section 1106. Also, note that the covered period for this loan forgiveness section is different than the covered period for the PPP loan itself. Basically, the PPP loan can be applied for anytime between February 15, 2020 and June 30, 2020 (the covered period for purposes of obtaining the PPP loan). The covered period for the loan forgiveness section means that the funds obtained from the PPP loan must be used on the allowable expenses during the covered period (i.e. the 8-week period after the PPP loan is obtained) in order for the loan to be forgiven.

As long as the PPP loan is used to pay payroll costs, interest on loans, rent, and utilities (electricity, gas, water, transportation, telephone or internet access) during the 8-week covered period, the loan is eligible to be forgiven. However, the compensation of an individual employee in excess of an annual salary of $100,000 is not an allowable use of the loan proceeds that can be forgiven (just as such excess earnings are not allowed to be included in the payroll costs when calculating the amount of the PPP loan).

The amount of the loan forgiveness will be reduced if the number of full-time equivalent employees is not maintained or if employee compensation levels are not maintained. Employees laid off or salaries reduced between February 15, 2020 and April 26, 2020 will not be factored in to the forgiveness reduction above if employee and compensation levels are corrected by June 30, 2020. In general, the goal of the loan forgiveness is to encourage businesses to rehire employees previously laid off/furloughed and/or maintain employee levels and compensation at levels prior to the start of the COVID-19 crises, and if such levels are not maintained, some portion of the PPP loan must be repaid. This is a very simplified explanation – see section 1106 of the Act for details on the calculation.

If the loan proceeds are not spent on approved expenses or employee counts/compensation is reduced below a certain level, a portion of the loan must be repaid and is not forgiven. The amount that is not forgiven must be repaid over a 10-year period with interest accruing at no more than 4.0%. The amount may be prepaid at any time.

The amount that is not forgiven shall not exceed the principal balance of the PPP loan. Accrued interest on the loan is not forgiven and must be paid, although the payment of the interest is deferred for up to 12 months rather than paid monthly.

Unlike all other debt forgiveness, the amount of the PPP loan forgiveness is not included in the gross income of the recipient and is not taxable. 

Section 2301: Employee Retention Credit for Employers Subject to Closure Due to COVID-19
The provision provides a refundable payroll tax credit for 50% of wages paid by employers to employees during the COVID-19 crisis. The credit is available to employers whose (1) operations were fully or partially suspended, due to a COVID-19-related shut-down order, or (2) gross receipts declined by more than 50% when compared to the same quarter in the prior year.

The credit is based on qualified wages paid to the employee. For eligible employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order. The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020 through December 31, 2020.

Section 2104: Emergency Increase in Unemployment Compensation Benefits
This section does not apply specifically to the doctor, but should be beneficial to practice employees that were or will be laid off or furloughed by the practice. Unemployment benefits (we have seen this referred to as unemployment insurance or ‘UI’) are administered by the states, and the weekly amounts and time periods that unemployed individuals can receive unemployment benefits vary from state the state. The CARES Act increases the time period that an employee can receive unemployment benefits by allowing the unemployed individual an additional 13 weeks of unemployment compensation from the federal government in the event the state does not extend the benefits by such time period.

This section also increases the unemployment compensation by $600 per week for up to 4 months – the period beginning on the effective date the CARES Act and ending on July 31, 2020. For example, if the state unemployment compensation is for 26 weeks at $350 per week, the unemployed individual is allowed to receive $950 per week ($350 from the state, plus $600 from the federal government) through July 31, 2020. The benefit then reverts to $350 per week after July 31, but will extend for an additional 13 weeks beyond the states’ typical 26-week period from the original date unemployment benefits were claimed.

Owner-doctors and family members receiving W-2 wages from their respective S-Corporations or C-Corporations may be eligible for state unemployment benefits. You should inquire with your respective state agency.

Section 2201: 2020 recovery rebates for individuals
This section also may not apply specifically to the doctor, but should be beneficial to practice employees. All U.S. residents with adjusted gross income up to $75,000 ($150,000 married), who are not a dependent of another taxpayer and have a work eligible social security number, are eligible for a $1,200 ($2,400 married) rebate. In addition, they are eligible for an additional $500 per child. This is true even for those who have no income, as well as those whose income comes entirely from non-taxable means-tested benefit programs, such as SSI benefits.

For the vast majority of Americans, no action on their part will be required in order to receive a rebate check as IRS will use a taxpayer’s 2019 tax return if filed, or in the alternative their 2018 return. This includes many low-income individuals who file a tax return in order to take advantage of the refundable Earned Income Tax Credit and Child Tax Credit. The rebate amount is reduced by $5 for each $100 that a taxpayer’s income exceeds the phase-out threshold. The amount is completely phased-out for single filers with incomes exceeding $99,000, $146,500 for head of household filers with one child, and $198,000 for joint filers with no children.

FAQ from Clients on the New CARES Act and Their Individual Transition Plans:

FAQ #1: Does my practice qualify for the forgivable PPP loan?
A: It seems that nearly every orthodontic practice would qualify for a PPP loan because of the ADA’s directive that all non-elective dental procedures be halted and because most states and state dental societies imposed similar shut-downs. All practice types are eligible for the loan – e.g. C- and S-corporations, sole proprietorships, independent contractors and eligible self-employed individuals.

FAQ #2: How do I apply for a PPP loan?
A: The loans will be handled through most traditional banks, and you should first speak with your local banker. As of this writing, there is not a process in place to apply for these loans. The forms to complete the PPP application are supposed to be a simplified 1 – 3-page form. It is also expected that funds will be disbursed quickly once the application is completed and evidence verifying the amount of the loan is provided. Stay in touch with your local banker to determine when the application process can be started.

FAQ #3: What should I do in preparation of applying for the PPP loan?
A: Start speaking with your local bank about the process and when the application will be available. Begin gathering all reports and invoices to calculate the total monthly payroll costs. These will include:

  • Monthly and/or quarterly payroll reports for calendar 2019 and first quarter of 2020 (actual time period used for loan amount calculations could vary per the Act). These reports should provide employee compensation, paid time off, and employer taxes paid on such compensation.
  • 2019 Employees – 1099’s for 2019 employees and independent contractors that would otherwise be an employee of your business.
  • Invoices for premiums on group health plans for 2019 and 2020. You will need to determine the amount the practice actually pays on behalf of the employees (gross premiums, minus the amounts withheld from employees’ pay to cover their portion of the premium).
  • Retirement plan reports for 2019 that detail the employer portion of retirement plan contributions.

By having all of this information available, you can calculate the expected amount of the PPP loan and ensure your application is processed quickly.

FAQ #4: When (or how quickly) should I apply for and obtain the PPP Loan?
A: This depends on your specific situation. You may want to consider waiting to obtain the loan until all stay at home mandates or directives by the ADA, local governments, state societies, etc. are lifted and your practice is allowed to operate freely. This is for the following reasons:

  • With increased unemployment benefits provided by the CARE Act (up to an additional $600 per week in addition to current state unemployment benefits), it may be just as beneficial to your employees for them to receive full unemployment benefits rather than to work part-time in your practice if not truly needed (as this drains your cash balance if little to no revenue is coming in during the mandated office closure). This unemployment benefit extends through July 31, 2020, but the start date when unemployed individuals will receive it may vary from state to state.
  • The PPP loan proceeds must be used during the ‘covered period’ which is the 8-week period immediately after the loan is funded. And, the loan proceeds must be used on allowable expenses, which includes payroll costs. If your practice is not up and running at or at least close to operating levels prior to the Coronavirus-related closures, there is no reason to obtain the PPP loan too early.
  • Practices have until June 30, 2020 to obtain the PPP loan.
  • Thus, waiting until the practice is open again may be the best option because your employees will be taken care of through the increased unemployment benefits, and you can take full advantage of the PPP loan proceeds and loan forgiveness once the practice is operating with a complete (or nearly complete) team.

In any event, you should not delay compiling all of the pertinent data to calculate the loan amount and prepare your application. However, you may want to wait to submit the application and obtain the funds until the practice is open again. One final caveat on timing – our understanding is that approximately $350 billion has been appropriated to support small business, and there is currently no clear guidance as to whether this amount will be extended once utilized.

FAQ #5: Can owners’ compensation be included in the payroll costs when calculating the amount of the PPP loan (payroll costs x 2.5)?
A: This is a bit of a gray area. It appears that owners’ W-2 wages, up to the maximum $100,000 per year, can be included when calculating the maximum PPP loan amount. The owners’ W-2 wages are readily available for practices that operate as S-corporations and C-Corporations. Section 1102(a)(2)(A)(viii)(I)(bb) states that “the term ‘payroll costs’ means the sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation and that is in an amount that is not more than $100,000 in 1 year…” The language does not specifically mention partnerships or limited liability companies (LLCs), although the language “net earnings from self-employment” may cover these types of entities. Thus, it appears that owners’ compensation can be included in the calculation of the maximum PPP loan amount for all types of operating entities, but this must be clarified and verified by your personal CPA or attorney.

Also, we have many clients that operate as a partnership of professional corporations. This is where the operating entity is a partnership or LLC (it collects the patient fees, employs the staff, pays expenses), and this partnership is owned by the individual doctor’s S-corporations. The partnership’s profits are distributed to the doctor’s S-corporations, and the doctors are then paid W-2 wages from their own S-corporations. Our understanding is that the multiple entities will be viewed as affiliated entities for purposes of calculating the payroll costs and the amount of the PPP loan. Thus, the payroll costs for the partnership and the owners’ S-corporations will be aggregated and used in the amount of the PPP loan the operating entity will receive. As with all of these examples, consult with your own tax advisor on your specific situation.

FAQ #6: Can the owners’ compensation be part of ‘payroll costs’ and considered an allowable use of the PPP loan proceeds that will be forgiven?
A: Similar to above, this is a bit of a gray area that needs additional clarification. ‘Payroll costs’ in section 1106-Loan Forgiveness has the same definition as ‘payroll costs’ in section 1102- Paycheck Protection Program. Thus, earnings for owners operating as partnerships and LLCs are not clearly included in payroll costs as allowable use of the PPP loan proceeds.

FAQ #7: I am an S-corporation orthodontist working as an independent contractor for another practice. Do I apply for the PPP Loan or does the practice for which I work apply for the PPP Loan?
A: This is a bit of a gray area in respect to the employer doctor paying the associate’s S-corporation. Our current position is that 1099s issued to a company are likely not includable in ‘payroll costs’ as defined, but that 1099s issued to individuals likely are includable. As noted above, section 1102(a)(2)(A)(viii)(I)(bb) defines payroll costs to include “the sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income…that is not more than $100,000 in 1 year…” Thus, the amount paid by an orthodontic practice to an independent contractor can be included in the calculation of the loan amount the orthodontic practice receives. Whether an independent contractor that is a company and an independent contractor that is an individual are treated the same remains to be seen.

The employee-entity (i.e. the S-corporation working as an associate through an independent contractor agreement) is likely to qualify for a PPP loan for the wages paid to the owner doctor (i.e. the associate). Section 1102(a)(2)(D)(ii) states: “Inclusion of sole proprietors, independent contractors, and eligible self-employed individuals – (I) In general – During the covered period, individuals who operate under a sole proprietorship or as an independent contractor and eligible self-employed individuals shall be eligible to receive a covered loan.”

Thus, it appears that the S-corporation working as an associate orthodontist should apply for the PPP loan and include the owner’s wages in payroll costs when calculating the maximum amount of the PPP loan. However, in the event the practice for which the S-corporation independent contractor works include such 1099 amounts in the calculation of its PPP loan (and such amount is allowed), it is clear that this amount should not be double-counted so the associate receives the benefit twice (once from its own S-corporation and once from the employer practice). Section 1102(a)(2)(G)(i)(III) & (IV) states: “that the eligible recipient does not have an application pending for a loan under this subsection for the same purpose and duplicative amounts applied for or received under a covered loan; and (IV) during the period beginning on February 15, 2020 and ending on December 31, 2020, that the eligible recipient has not received amounts under this subsection for the same purpose and duplicative amounts applied for or received under a covered loan.”

FAQ #8: I still have student loans outstanding. Can I defer my monthly student loan payments?
A: Section 3513 of the CARES Act includes temporary suspension of payments for federal student loans until September 30, 2020. During this time, interest will not accrue on the outstanding balance. In addition, the payments owed during this period of suspension are deemed paid, which reduces your outstanding loan balance. Involuntary collections related to the loan are also suspended during this time (e.g. wage garnishment). However, these provisions relate only to Direct Loans and Federal Family Education Loans (FFEL loans) that are currently owed by the U.S. Department of Education (i.e. federal loans). It does not apply to private loans. Regardless, loan borrowers should call their lender to verify eligibility.

For dentists who are currently paying down student loans, it’s possible that a private lender may offer the option to refinance your loans at a lower interest rate, providing that you qualify. Since only private lenders offer student loan refinancing, the decision to refinance and move any federal loans will make those obligations private loans. Be aware that those with private loans may miss out on the benefits in the CARES Act outlined above.

Transition Related FAQs:

FAQ #9: How will the Coronavirus pandemic and the mandated closure of my office affect the value of my practice?
A: This depends on many factors. There is no clear answer because it depends entirely on how much longer the pandemic causes practices to be closed and when you plan to sell your practice. If it passes quickly and offices are re-opened in mid to late April (unlikely), it is much more likely that the practice returns to normal, patient flow returns to normal, and thus, the practice value returns to normal. This is particularly true if you do not plan to sell your practice in the near term. However, if the crisis continues and practices are closed for several more months, it could affect patient behavior as more patients may not be able to afford discretionary orthodontic care or they may not be comfortable from a health perspective to have elective dental procedures performed. In any event, we feel time will correct this unprecedented anomaly, and practices will return to normal. How long that takes will obviously depend on the length of the crisis. If you need to sell your practice in the very near term (say, for health reasons), it is very likely that the value will be re-assessed and the purchase price reduced.

We have heard of some sellers wanting to sell in the very near future and are agreeable to a price reduction, but want to include an earn-out provision where the price can be increased to the original value if patient flow and production return to normal. In our opinion, it is unlikely that a buyer who is an individual orthodontist that plans to own and operate the practice him or herself will agree to such a model. They are not willing to include an earn-out that increases the price while they are taking on the risk of ownership and debt in such uncertain times and working harder than normal to rebuild the practice. However, such incentives or earn-outs may be likely in sales to DSO-type buyers or other orthodontic practices where the seller will continue to work for the buyer as an associate and take part in rebuilding and increasing production post-sale.

FAQ #10: If I am a younger doctor and planned to purchase a practice in the near future, what do I do?
A: The short answer is that you must delay the transaction, or consider renegotiating the purchase terms. The fact is that unless you are already approved for the loan and planned to close very soon, you likely cannot obtain financing for a purchase in the current environment (see FAQ on what lenders are saying below). However, in this environment, it is also nearly impossible to find an employment opportunity until practices throughout the country re-open. It is not an ideal situation (understatement of the century, I know!).

FAQ #11: If I planned to bring on an associate or younger partner into my practice in the near future, what should I do?
A: Again, the answer depends somewhat on timing. Many of the partnership transactions we are involved in typically have the younger orthodontist joining the practice as an associate in the summer. The associate will work in the practice as an associate for a year or so and then start buying into the practice. This situation is at least a 2-part question:

First, do you still have the orthodontist join the practice as an associate this summer? Depending on the size of your practice prior to the mandated closures (bigger practices can obviously handle a downturn and still take on an associate), your relationship with the planned associate (e.g. family member or great friend whose joining has been planned for a long time, vs. a casual relationship where each party wanted to test the possibility of a partnership), and your individual situation (Do you need a partner? Are you adding an associate to slow down and provide more flexibility? Can you take an income hit while the practice rebounds?), your decision to add the associate will vary greatly, and it will ultimately be up to you as to whether you want to proceed with the association period or not. We can only prompt you to contemplate the questions you need to consider to help you make your decision.

Some of our clients are proceeding with adding the associate, but at a reduced schedule and reduced pay until the practice rebounds. Also, the promise of a partnership is dependent almost entirely on the practice returning to its former production levels. This is because a partnership plan may not work if the practice declines rather than grows. One of the primary reasons our clients add a partner is because their practice is growing too much for them to handle by themselves. If growth is questionable, the partnership plan may no longer be viable purely from a financial and business standpoint.

The second part of the question is whether the partnership plan needs to be altered, or practice value decreased based on the current crises and temporary office closure. In general, our opinion in a partnership transaction is that the plan that has been created and agreed upon by the parties (or what the seller has been expecting if the plan has not yet been presented to the future partner) should not be altered materially. It may be best to delay the start of the buy-in/partnership rather than materially alter the terms. This is because, as stated above, most owners only entertain partnership transactions for specific reasons – most often that the practice is growing and adding a partner will allow the practice to continue to grow. If the Coronavirus crises causes the practice to decline and creates concern for future growth, the current owner will most likely only delay the plans rather than accept a materially lower price or enter into a partnership that simply decreases their compensation. By definition, when selling an ownership interest, the owner is giving up a portion of the future profits. If future profits are expected to be less than historical levels, the current owner is much less likely to want to give up the future profits. Time should allow the practice to return to normal, and a seller is not willing to accept a lower price or agree to concessions based on a short-term, once-in-a-lifetime anomaly that temporarily affects the practice’s operations and value.

We can discuss your individual transactions at your convenience as your specific situation and goals for considering the partnership in the first place will help guide us in deciding what to do.

FAQ #12: If both parties want to proceed with a transaction (whether a 100% buy-out or a partial buy-in and partnership arrangement), are banks still lending in the current environment?
A: We have spoken with several large dental lenders, and they are very cautious at the moment. They are still accepting applications for acquisition loans for future transactions, but most have halted closings that were planned to occur in April and May. They want to see when practices are allowed to re-open and see if patient flow returns to normal. Most lenders are also allowing current clients (e.g. a borrower who purchased a practice in the past and still has an outstanding acquisition loan) interest-free 90-day deferral on loan payments. New buyers would also need 90-day payment deferrals. Thus, it makes more sense to delay the transaction rather than close on the deal in the current environment. The lenders will also likely become stricter on borrower liquidity requirements, meaning the borrowers will need more savings, possibly up to 10% or more of the requested loan amount, and less credit card liabilities to qualify for future loans. The current crises may also mean that smaller, local banks are less aggressive in pursuing dental transactions going forward.

FAQ #13: I am a non-owner associate in an orthodontic practice and have been furloughed with no pay. What do I do?
A: The reality is that you are an employee (or independent contractor) just like every other practice employee. And, just like every other practice employee, when the office is closed, there is no work to do and you will most likely not be paid unless the owner makes a personal and discretionary decision to try to pay employees as future revenues dry up. Many associates have made the point that orthodontic practices are still collecting monthly revenue through automatic drafting of patient’s monthly fees. This may be true, but you have to realize that the offices are required to be closed per ADA guidelines and often state mandates. New case starts are not occurring, and it’s unclear when normal operations will resume or if monthly revenues will continue. Orthodontic practices, like any other business suffering from this crisis, must make a business decision on how to allocate resources and stretch their remaining cash balances to pay bills and ensure they can survive this crisis and eventually re-open. As an employee, you are eligible to file for unemployment to receive unemployment compensation (see summary above re: Section 2104 of the CARES Act) that will provide you some financial relief until the crises is over.

If you are an independent contractor rather than an employee, you may still be able to file for unemployment benefits under the expanded unemployment laws per the CARES Act.

Finally, the practice for which you work may be able to obtain the forgivable PPP loan and use a portion of the proceeds pay a portion of your salary and benefits once obtained. Also, see FAQ #7 above.

FAQ #14: What if I have accepted a job that starts this fall but I still need to take a licensure exam?
A: Due to state’s actions to slow the spread of COVID-19 many examinations are not being administered, and most testing agencies have postponed all school-based examinations starting March 16th until May 1st. At this time, the schedules of examinations for most agencies outside of the affected date window will not be impacted unless requested by the schools.

Most agencies will continue to monitor developments during this time and will continue to maintain flexibility for candidates with patient cancellations, and candidates will not be penalized or charged for patient cancellations during this time. Additionally, if testing sites are required to cancel or postpone examinations, most agencies will work with programs and candidates to provide an opportunity for the affected candidates to reschedule.

Most testing agencies are providing updates on their websites stating that information is subject to change at any time.

Click Here to download a PDF of this article.


Doug Copple, CVA is a Parter at Bentson Copple & Associates, LLC. Doug is a member of the National Association of Certified Valuation Analysts (NACVA). He ensures the firm’s practice valuations are properly performed and adhere to generally accepted valuation standards. Doug is also integral in structuring and negotiating orthodontic partnerships and purchase transactions and the related tax and structural issues between buyers and sellers.

Chris Bentson Featured on The Propreneur Podcast

The Propreneur Podcast Chris BentsonChris Bentson was recently featured on The Propreneur Podcast with Dino Watt. The 36-minute episode focuses on the question, “What Is Disruptive Innovation?” Chris shares insights regarding practice growth, profitability, and provides an overview of practice modality changes and shifts that are taking place in the orthodontics industry. Additionally, Chris chats about the forecasted 2020 dental industry trends. The tidbits of knowledge shared in the podcast provide listeners with an understanding of how practices are currently performing and encourage listeners to think strategically about changes needed in their practice to remain successful in the future.

Show Notes:
One of the greatest challenges that private practices are now facing is Growth. Here are three things that you can do to make your practice grow:
1. Communicate differently to your patients.
2. Create a culture in the office that feels like you.
3. Prepare two-tiered pricing.

The Propreneur Podcast:
The Propreneur Podcast is a show dedicated to building entrepreneurial skills in private practice owners. You’ll hear from industry experts, orthodontists, and dentists on topics like sales, marketing, leadership, and systems. For all the business and leadership strategies you wish they’d taught you in graduate school. New episodes are released every Tuesday and Thursday.

Click here to listen to the podcast.

What Is the Difference Between a Non-Disclosure Agreement and a Non-Compete Agreement?

What Is the Difference Between a Non-Disclosure Agreement and a Non-Compete Agreement?By: Shannon Patterson, CPR, CMSR
Kolbe Certified™ Consultant
Director of Practice Opportunities

As a recruiter, I often hear the question “What is the difference between a non-disclosure and non-compete?” from candidates who are seeking employment opportunities. It is important to understand the differences and what they mean for you as a candidate.

A non-disclosure agreement is a promise that you will not disclose any of the information shared with you about a potential practice opportunity. Often it will include practice and/or doctor name, location, patient information, expansion plans or any financial information about the practice. It does not mean you can’t work for a competitor; it simply means you can’t use proprietary or confidential information you learned or obtained from the practice with another practice. You will often be asked to sign this agreement by a client or representative of a client before they discuss the specifics about their practice opportunity. Importantly, non-disclosure agreements almost universally allow you to share confidential information with your attorney or other advisors in the buying process.

A non-competition (restrictive covenant) agreement means you agree not to directly compete or provide services within a certain proximity of the practice for a set period of time. The purpose of a non-compete is to protect the former practice employer against unfair competition. As a provider, you will have access to confidential business information and develop close relationships with patients and staff and could exploit the information to lure patients away from the practice. A non-compete is designed to protect the practice from this risk.

Who enforces a non-compete? The enforceability of non-compete agreements will vary from state to state. Most states have statutes or case law that either prevents or restricts the enforceability of a non-compete agreement. States that permit the enforcement of non-competes will do so only if the covenant is reasonable in scope (meaning it is limited to the services the provider actually rendered while employed by the practice), duration and geographical area.

What geographic area does a non-compete cover? A non-compete covenant should only prohibit a provider from continuing to provide services in the same general area where he or she provided services before disengaging with a previous practice. In most states, the restricted area should be no larger than the area from which the previous practice draws 80% of its patients. Therefore, a reasonable radius for a non-compete will depend heavily on the population density of a particular area – generally, a larger radius is enforceable in rural areas. The opposite is true in more urban areas.

How long do non-competes typically last? The time periods can vary, but generally, the covenants are in effect during the employment period and for a period of 12 to 24 months following the last day services are provided to the practice.

Non-competes and non-disclosure agreements are two important documents to understand each having a distinct but separate purpose.

Five Reason to Participate in the Annual Resident Survey

Bentson_Copple_Annual_Orthodontic_Resident_SurveyBy: Laura Overcash
Director of Marketing

Over the last eight years, our company has conducted a nationwide survey of orthodontic residents to collect, compile, and analyze useful data about orthodontics in the United States. We are currently collecting responses from orthodontic residents and we encourage you to click on this link and participate in this vital survey.

It may sound like just another survey but it’s more than just a data collection tool – the Annual Orthodontic Resident Survey is a critical tool to understanding and predicting future trends in the industry. Still not convinced the survey is worth your time? Here are five reasons to participate.

Offer Insights
Unfortunately, we can’t read minds, so we need help in understanding today’s resident journey. The survey’s primary objective is to provide its participants and those within the orthodontic industry with relevant, accurate, and useful data. The variety of questions asked helps gauge residents’ plans and how it will affect the overall orthodontic industry. We believe that understanding resident sentiment is important since this group of young doctors and the decisions they make will have a great impact on the profession going forward.

Minimal Time Commitment 
Feedback Habits Survey reports that 45% of survey respondents aren’t willing to spend more than five minutes completing a survey. You are in luck with our Resident Survey – our team understands the time constraints you have while enrolled in your program. This short survey should only take three minutes to complete and then you can get back to what’s important, honing the art of creating beautiful smiles and building patient confidence.

Participate Anytime 
It’s no secret we are all programmed differently when it comes to productivity. Some are early birds while others are night owls, some love schedules and others fly by the seat of their pants – whatever the case may be, the Resident Survey can be taken at your convenience. Take it online while drinking your morning Caramel Macchiato, waiting on your DoorDash lunch delivery, or after binging your favorite show on Netflix after midnight.

Be Part of a Legacy 
During the last eight years, the Annual Orthodontic Resident Survey has received more than 3,025 responses. This survey provides insight into some of the major issues residents face today, from income expectations to student debt loads. Doctors nearing retirement age commonly ask us about residents and their anticipated plans. The data collected in this survey, along with other industry publications, help create a well-rounded picture of the industry to share with all orthodontists. Being able to compare and contrast this information with the previous years of gathered data from this survey will, hopefully, allow current residents and doctors nearing retirement to gain knowledge and make wise decisions regarding their future.

Responses Remain Confidential 
The answers provided in the Annual Orthodontic Resident Survey remain completely confidential. We want your honest feedback when it comes to the amount of student debt you are accruing, your preparedness to operate a practice, and your expectations for first-year annual income.

Be sure to tell us about your future orthodontic career plans by participating in the Annual Orthodontic Resident Survey (if you have not already). So, give us your feedback; we want to know what you think. Help us help you and take the survey now!

Bentson Copple & Associates’ 2019 Holiday Video: We Are Grateful

We tend to call this season “the most wonderful time of the year,” but it’s often easy to forget that for a lot of people in our community, it’s not.

Our team decided to spread tidings of comfort and joy by adopting a local family with four children. We took the family’s wish list, divided into groups, and went on a shopping adventure – to provide them the best Christmas ever!

Follow our shopping and wrapping adventure in the Bentson Copple & Associates 2019 Annual Holiday Video!

Reflecting on 2019

Ortho_Insights_Reflecting_on_2019By: Mandy King
Client Support Associate

As 2019 is coming to a close, many of us are reflecting on this year and looking forward to a New Year in 2020! With that being said, I am certain you have new goals in mind.

What Made This Year Successful?
Focus on all that you have accomplished and allow that positivity to help you set your goals for this coming year. Many of us think about what we will do different, so instead of harping on the past and areas you might have failed, set your mind on what is to come and pave your path to achieving them in the new year.

Where Did You Grow This Year?
Some of you are still in orthodontic residency, some have recently graduated, and others have been practicing for a few years. Whatever stage of life you are in, evaluate how far you have come and reflect on the growth you are experiencing in your professional and personal life. Continue chasing your dreams and realize that you are growing every day.

Are You Committed to the Process?
Take a look within and ask yourself, ‘What is my plan for success? Am I fully committed to achieving the goals I have set?’ Sometimes, there are aspects of our lives that can get in the way of the goals we set for ourselves. Just take a moment and imagine the possibilities that this new year can bring and commit to making those possibilities your new reality!

What’s Next?
This is a loaded question for some of you. What big changes are ahead in your career? Will you be completing your residency this coming year? Will you be making the decision to transition from an associate to buying a practice? Whatever it may be, take the step with confidence that great things are in store for you!

This is a perfect opportunity for me to share with all of you what is next for me. I have thoroughly enjoyed my time here at Bentson Copple & Associates over the last few years but it is time for me to get back in the field as I have missed interacting with patients. I recently accepted a position as a Treatment Coordinator at an orthodontic practice in our area and I could not be more excited. I will be taking the wealth of knowledge I have gained in my time here with me and I am so grateful to have been given this opportunity to get to know so many of you. Good luck with all of your future endeavors!

Dr. Boomer & Dr. Millennial: Talent Acquisition

Dr. Boomer & Dr. Millennial: Generational Diversity Episode 4What do newspaper ads, chicken sandwiches, and customer engagement have in common? Talent acquisition. In today’s climate, there’s a lot of talk about the ways to recruit great talent. When the time arises to hire a new orthodontic team member, consider expanding your search as there are great people everywhere! Watch Episode 4 of Dr. Boomer & Dr. Millennial: Generational Diversity to learn more.

Each episode of the video series, examines generational diversity in the orthodontic workplace, reviews some of the benefits and issues associated with it, and shares some of the best practices based on our company’s experience. The ultimate goal of the series is to remove the age barrier by illustrating the differing viewpoints and asking viewers to take a step back and relate to it from the other side’s perspective.

Click here to watch, or visit Bentson Copple & Associates’ YouTube Channel!

What Metrics Should You Focus on During Your Initial Review of a Practice Opportunity?

What metrics should you focus on during your initial review of a practice opportunity?By: Anthony Copple, JD
Transition Specialist

Reviewing an opportunity to purchase a practice outright or to buy into a practice as a partner can be an overwhelming task. You may have been presented with a mountain of data about the subject practice: tax returns, profit and loss statements, and operational reports. What does it all mean? What should you focus on? What data is important in determining a fair value for the practice?

Well…the long answer is that all of the data and information surrounding a practice is important in determining its value. After all, an orthodontic practice is a unique asset and no two are exactly alike. However, there are a few things you can focus on that will provide a reasonable snapshot of any practice. Three of the most consequential are explained further below:

Practice Overhead Rate
The overhead rate of a practice is one of the most important factors in determining a practice’s value and the benefits that practice will provide to a buyer. After all, the overhead rate ultimately determines the amount of cash the owner can reap from the business. Generally, the lower the overhead rate, the more valuable the practice. So, a practice at 55% overhead will be more valuable than a practice at 65% overhead, all else being equal. The average practice overhead rate for an orthodontic practice is 58% of collections. If operating expenses are below this level, it can drive the price of a practice up while expenses above this threshold will generally have the opposite effect.

Practice Production
Production acts as a bellwether for practice collections; it tells us where we’re headed. If the practice produces $1,500,000 this year, we can expect that the practice will collect something close to $1,500,000 next year. Knowing this, we can use practice production, practice collections and their relationship to one another to identify trends within the practice. If practice collections have grown over the past two years and production in each particular year exceeds our collections in the same year, we can be fairly confident that the practice will see continued collections growth in the following year. This can be vital to practice value because a growing practice has more potential, and less risk, than a declining practice.

Practice Contracts Receivable
The contracts receivable balance is the total amount remaining to be billed to the active patients of a practice. This can be distinguished from accounts receivable because accounts receivable have already been billed to the patient and are currently due. The contracts receivable balance gives us an indication of the stability of the expected future cash flow of the practice and an idea of the number of active patients that are paid-in-full.  We know that we can expect cash flow from the contracts receivable balance as we treat current patients of the practice regardless of the number of new starts we have. On average, a practice’s contracts receivable balance is approximately 50% of prior year production. Below that level, and the practice likely has more paid-in-full patients than the average orthodontic practice. This would add risk for a buyer expected to continue to treat those paid-in-full patients after the closing without collecting patient fees. This additional risk tends to drive the practice price down. Of course, if the contracts receivable balance is above this threshold, it can add value to the practice.

As I said above, there are dozens of factors that go into determining the value of a practice. No one point of data will tell you everything you need to know about a practice. However, analysis of the three metrics above should give you a pretty solid idea of the type of practice you are looking at and whether it is worth pursuing further.

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