COVID-19 lending relief for current small business customers

The Paycheck Protection Program (PPP) offers financial relief through the Small Business Administration (SBA) to small businesses across the U.S. that have been impacted by COVID-19. The federal government has set aside more than $350 billion through this and other programs. As an SBA-preferred lender, First Horizon may be able to help you access these essential funds for your business. The information below offers more details on these resources designed to provide financial relief between February 15, 2020 and June 30, 2020.

What are some of the eligibility requirements? Small businesses including non-profit 501(c)(3)s, sole proprietorships, independent contractors and self-employed individuals are invited to apply if meeting these requirements.

  • in operation as of 2/15/20
  • less than 500 employees*
  • reporting employees with paid payroll taxes or paid independent contractors reported on a 1099-MISC
  • hospitality or restaurant businesses qualify with under 500 employees per location

What can I borrow? The maximum loan amount for a covered loan is the average monthly payments for payroll costs incurred during the one year prior multiplied by 2.5, not to exceed $10 million.

  • For businesses that have been in operation for one year or more, the applicable period is 12 months preceding the date on which the loan is made.
  • You can include any refinancing of the balance on any Economic Injury Disaster Loan (EIDL) originated after January 30, 2020 that was not used for the same purpose.

What is included when calculating payroll costs?

For new guidance from SBA and Department of Treasury on how to calculate your loan amount, click here.

Payroll costs include:

  • salaries, wages, commissions or similar compensation
  • payment of cash tips or their equivalent
  • payment for vacation, parental, family medical or sick leave
  • allowance for dismissal or separation
  • payment for group health care benefits, including insurance premiums
  • payment of retirement benefits
  • payment of state/local tax assessed on the compensation of employees
  • the sum of payments, of any compensation to, or income of a sole proprietor or independent contractor that is compensation from self-employment (limited to $100,000 per year as prorated for the covered period)

Payroll costs cannot include:

  • individual compensation in excess of $100,000 per year as prorated for the covered period
  • federal payroll taxes (Chapters 21, 22 or 24 of the Internal Revenue Code)
  • employee compensation whose principal place of residence is outside the U.S.
  • qualified sick leave or family leave wages for which credit is allowed under the Families First Coronavirus Response Act

What can I use the PPP loan for?

  • Payroll costs (75% of the funds are to be used for payroll)
  • Costs related to continuation of group health care benefits during periods of paid sick, medical or family leave and insurance premiums
  • Employee salaries, commissions or similar compensation
  • Interest payments on any mortgage obligation (NOT any principal payments)
  • Rent/lease payments
  • Utilities
  • Interest on any other debt obligations that were incurred before February 15, 2020

Is the loan forgivable? Loan forgiveness is available. Here’s how to calculate:

  • Total amount forgivable equals what you pay in eligible payroll costs (covering eight week period starting on the loan origination date)
  • Cost can include:
    • payroll costs
    • rent payments
    • payments of interest on any covered mortgage obligation and utilities
  • Total forgiveness cannot exceed the principal financed
  • The forgiveness could be impacted if:
    • You reduce the number of employees compared to last year
    • You reduce the pay of any employee by more than 25% compared to last quarter
  • If you terminated, furloughed or laid off employees from February 15, 2020 through April 26, 2020, you will not be penalized if you rehire the employees by June 30, 2020

What are other important loan details to know?

  • The SBA guarantee is 100%
  • Payments will be deferred for six months, as determined by the lender
  • The requirements for collateral, personal guarantee and “no credit available elsewhere” are expressly waived
  • The interest rate is a 1% fixed rate with a term of two years

What fees apply? The SBA will not charge any annual or guarantee fees, and all prepayment penalties are waived. First Horizon will waive the packaging fees normally charged for 7(a) loans.

How can I get started? The SBA has released the PPP Loan Application. You can review it to better understand what business and financial records may be required to complete your application package. You can also get a head start by using the document checklist below.

Documentation for loan amount determination:

  • Payroll reports for the last 12 months showing the following broken down by employee (including owners) and by month:
    • Gross wages (including commission or similar compensation and cash tips or equivalent)
    • Paid time off
    • Paid vacation
    • Pay for family medical, parental, medical and sick leave
    • Separation or dismissal
    • State and local taxes (form 940, 941 or 944)
    • Payments for group health care benefits (including premiums)
    • Payment of any retirement benefits
    • For sole proprietors or independent contractors: wages, commissions, income, or net earnings from self-employment
    • Any amount paid to one person over $100,000 in one year must be excluded from loan calculation
    • Only applies to employees that reside in the U.S.
  • If applicable, evidence of funds received from an Economic Injury Disaster Loan (EIDL) since Jan. 31, 2020 and for what they were used and any amount of “advance” as it does not have to be repaid

Documentation for forgiveness application (will not be required at time of application):

  • Documentation verifying the number of full-time equivalent employees on payroll and pay rates for the eight weeks following loan origination and documentation verifying the number of full-time equivalent employees on payroll and pay rates for the same period of time for the year preceding the date of loan origination, which shall include:
    • Payroll tax filings reported to the IRS
    • State income, payroll and unemployment filings
  • Protects you by providing clear, accurate and actionable details for applying
  • Can provide validated loan number assignments from the SBA
  • Any other documentation the SBA determines necessary

Are additional resources available? Eligible borrowers may apply for an Economic Injury Disaster Loan (“EIDL”) directly with the SBA in addition to a PPP loan, provided that the loans are not used for the same purpose. If a borrower received an EIDL after January 31, 2020, the borrower may refinance the outstanding balance as part of the PPP loan. 

How do I learn more? Contact your banker for more information.  

The above information is accurate as of 4/4/20 and is subject to change.