Pub. 2 2020 Issue 2

M A R C H / A P R I L 2 0 2 0 12 nebraska cpas For more information, contact Jeff Schaffart or Benjamin Herbers at Koley Jessen at jeff. schaffart@koleyjessen.com or benjamin.herbers@koleyjessen.com , respectively. Schaffart solves complex tax and legal issues by providing timely, pragmatic advice to private equity sponsors, general counsel, management teams, and business owners. Herbers’ practice focuses on financing transactions, including construction financing, commercial real estate loans, revolving credit facilities, term loan facilities, and tax-exempt financings. The Rules set the interest rate on all loans made under the Paycheck Protection Program at 1% per annum. What is the maximum term for loans made under the Paycheck Protection Program? The Rules set the term for all loans made under the Paycheck Protection Program at two years. Are the loans under the Paycheck Protection Program required to be secured or personally guaranteed? No. Lenders may not require the borrower to pledge any collateral or require a personal guaranty. Are the loans under the Paycheck Protection Program non-recourse? The loans will be non-recourse to any holder of equity interests in a borrower, except to the extent such holder of equity interest uses the loans for a purpose not permitted under the program. What other conditions must be met to obtain a loan under the Paycheck Protection Program? A borrower must certif y in good faith that (a) the uncertainty of current economic conditions makes necessar y the loan request to suppor t the ongoing operations of the borrower, (b) the proceeds of the loan will be used for purposes permitted under the program, and (c) the borrower has not received duplicative amounts under this program. The requirement for a borrower to demonstrate that it cannot obtain credit elsewhere has been waived. In addition to the requirement listed above, the final application released by the Treasury Department requires borrowers to certify that (i) the United States is the principal place of residence for all employees of the borrower included in the borrower’s payroll application, (ii) the borrower is eligible under the CARES Act and the Rules, as in effect as of the date of the application, to receive a loan under the Paycheck Protection Program, (iii) the borrower meets the applicable size standards with respect to the number of employees, and (iv) any loan received under the SBA Disaster Loan program between Jan. 31, 2020, and April 3, 2020, was for a purpose other than paying payroll costs and other allowable uses under the Paycheck Protection Program. Under the Rules, lenders are entitled to rely on the certifications made by the borrower with respect to eligibility for the Paycheck Protection Program. Are payments of the loans under the Paycheck Protection Program deferred? Loans made under the Paycheck Protection Program are presumed to qualify for payment deferral for not less than six months to not more than one year. Congress has directed the SBA to provide additional guidance to lenders on this point. The Rules clarify that all payments on all loans made under the Paycheck Protection Program will be deferred for six months, but interest will continue to accrue on the loan during the deferment period. How are loans made under the Paycheck Protection Program guaranteed by the SBA? The Rules confirm that the SBA will provide a 100% guaranty of any loans made under the Paycheck Protection Program. t