Could your PPP loan affect the sale of your business?

Are you considering selling your business and did you receive support from the Federal government under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) Paycheck Protection Program (PPP)? If you received the latter you’re probably focused on ensuring that your business receives the most forgiveness possible under the terms of the program.  Visit our Paycheck Protection Program Advisory webpage for further assistance.

But what if both are relevant to you?

When was the last time you looked at your loan agreement?  The PPP loan was likely structured similar to a traditional loan agreement that includes certain events of default which may accelerate the payment provisions of the agreement.  One event in particular that we’re seeing in PPP loan agreements is that reorganizations, mergers, consolidation or changes in ownership or business structure without the lender’s prior written consent constitute an event of default.  Business owners should be aware of these provisions so there are not issues with the deal late in the process.

Another area that may impact the sale of your business is the timing of forgiveness acceptance, since many lenders are still not accepting forgiveness applications.  Many businesses that are being sold prefer to have this arrangement behind them, but what if that’s not an option.  Sellers and buyers should consider what could happen if the lender or the SBA upon their review disallow a portion of forgiveness or any forgiveness.  Both parties should make sure they’re both protected in any result of the review by the lender or SBA.

Have you considered the impact of the current IRS’s position on deductibility of costs covered by the PPP?  As of September 4, 2020, the IRS holds that expenses that have been reimbursed through the PPP are not deductible.  The timing of when these expenses are not deductible will impact the value of the business and the purchase price.  That position may also change between now and the filing of the business’s tax return.  Communication is even more important when it comes to circumstances like these, to make sure the party entitled to the benefit truly receives it.

So what should business owners being doing in the meantime? If you can; complete the forgiveness application to start your lender’s clock on their review of the application.  That might not be the most beneficial option.  So it’s important to be informed of the impact of the PPP loan.  Communication is essential with your business advisors, including the CPA, tax professional and counsel, to limit if not eliminate the surprise and have a successful transaction.

Paycheck Protection Program Assessment

If you are participating in the Paycheck Protection Program (PPP) or have questions related to your forgiveness circumstances or the application, our Paycheck Protection Program Advisory team can help.  We have developed an online loan forgiveness assessment questionnaire to help identify key variables in your organization’s forgiveness assessment.  Your answers will be sent directly to our team who can help you through your forgiveness assessment.  You can visit our assessment questionnaire at

Additionally, we recently launched a new PPP Services page to help you remain current on the PPP guidance at  The page contains all of our previously-developed webinars and Our Thoughts On articles, presented in an organized fashion to help our clients answer any questions they may have.

If you need more information or assistance regarding your PPP loan or transaction assistance, visit our website, reach out to any of your contacts at Schneider Downs or contact Joel Rosenthal ([email protected]).

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2024 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

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