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Employers Guide to COVID-19

April 9, 2020

Spiralight Group understands there is a lot of information regarding federal loans to help your business manage the COVID Crisis.  This information provided below is not legal or tax advice but is provided as a good faith understanding of the programs available. 

We created this quick self-service Prezi Presentation which provides details, guidance, and links to resources all in one place. It should take you 10-15 minutes to view.

Summary of the Payroll Protection Program

You can take a Payroll Protection Program loan (PPP) equal to 2.5x the average monthly payroll over the prior 12 months.  They will forgive some of the PPP loan, and the amount of forgiveness will be equal to the amount of money you spend in the 8 weeks after the loan is issued. The balance (unforgiven) will be part of the payable loan with 0.5% interest, amortized over 2 years.  Forgiveness is also reduced by any loss of FTE headcount when measured on June 30, 2020.

So let’s say you request a loan for $200,000 (based on 2.5x monthly payroll).  In the 8 weeks following the loan, you spend 80,000 per month (160K total) for payroll, 401k, health insurance, and business lease/mortgage (all are eligible), you would get $160,000 forgiven. The balance of $40,000 would not be forgiven but would be a low-interest loan (0.5%), amortized for up to 2 years (with no prepayment penalty). Forgiveness may be eroded if your average number of employees falls or if you fail to spend it on qualified items in the initial 8 weeks (see Prezi Presentation for forgiveness details).

Please note, as stated above, that this is not legal, financial or tax advise. Please consult your tax advisor, bank representative and attorney before making any decisions. 

I’m considering these options for my business:

  1. Get the EIDL Grant of $10,000. This is not a loan; it’s a grant. No payback is required.  Funding happens in 3-5 days. Here is the link, These are obtained direct from the SBA (not your bank)
  2. Get the maximum amount of loan dollars available for the Payroll Protection Program (PPP Loans) as quickly as possible because when the money runs out, it’s gone. This is done through your Bank (then from your bank to the SBA). No collateral required.
  3. Use the PPP Loan money to make payroll, 401k, health insurance, pay leases and mortgages – nearly all of this money spent in the 1st 8 weeks is forgivable.  The balance turns into a 0.5% loan.  Principal and Interest can be deferred for 6-12 months.  Start this process with your local bank or SBA approved lender. No collateral needed, no prepayment penalty.
  4. Simultaneous with the PPP loans, apply for an Economic Injury Disaster Loan (EIDL).  The amount available is not to exceed $2M, in most cases, is up to 50% of your prior years’ gross receipts. These monies are NOT forgivable and carry a 3.75% interest rate and can be spread out over up to 30 years.  These are obtained direct from the SBA (not your bank).  These may require collateral.   The application for this appears to be the same as the one for the EDIL grant link above,
  5. Use ONLY what you need to make it past this crisis which could impact your business for up to a year.  Even if you think this will be done in 2-3 months, prepare like it could last much longer.

Once your business is back to normal, you’ll have a choice – keep the low interest loan or return it with no prepayment penalty.

I hope you find this useful.  We are always here to help.  If you’d like to schedule a phone call to discuss specifics, use this link