Read more about the current Greenbook proposals. ...
This site uses cookies to ensure that we give you the best user experience. Cookies assist in navigation, analyzing traffic and in our marketing efforts as described in our Privacy Policy.
Last month I wrote about how a Paycheck Protection Program (PPP) loan might affect the sale of a business. Now, as we continue to track the evolving landscape of federal financial programs offered in the wake of the business disruption caused by the coronavirus crisis, comes a new procedural notice from the SBA that formalizes the requirements of borrowers and lenders that are going through a business sale.
First, the SBA has defined a “change of ownership” as a transaction that falls into one of three categories:
Transactions that don’t fall into one of those categories do not need to follow the new procedures, but there is a requirement to aggregate transactions to determine if sales or other transfers meet the definition of a change in ownership.
While the new procedures are being issued to lenders, many of the responsibilities are actually borne by the PPP borrower. That includes the requirement that the borrower notify the lender in writing of the potential transaction and provide the lender with a copy of the proposed agreement(s) or other documentation of the proposed transaction.
Regardless of any change in ownership, the PPP borrower remains responsible for: 1) the performance of all obligations under the PPP loan; 2) certifications made in connection with the PPP loan application, including certification of economic necessity; 3) compliance with all other applicable PPP requirements; and 4) obtaining, preparing and retaining all required PPP forms and supporting documentation.
There are distinct procedures, as well, depending on whether the PPP loan is fully satisfied:
Transactions that require the approval of the SBA:
Additionally, for a proposed transaction that involves the sale of 50 percent of more of assets, the SBA’s approval will be contingent on the purchasing entity assuming all of the borrower’s obligations under the PPP loan.
All proposed transactions require that if the new owner has a separate PPP loan, the borrower and the new owner are responsible for segregating and delineating PPP funds and expenses and providing documentation to demonstrate compliance with PPP requirements by each PPP borrower. In the case of a merger, the successor is responsible for segregating and delineating PPP funds and expenses and providing documentation to demonstrate compliance with PPP requirements with respect to both PPP loans.
If you need more information or assistance regarding your PPP loan or transaction assistance, visit our website, or reach out to any of your contacts at Schneider Downs, including Joel Rosenthal at [email protected].
Read more about the current Greenbook proposals. ...
Learn more about the regional and national supply chain implications of the Baltimore Key Bridge collapse. ...
We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.
Ask us
[email protected]
p:412.261.3644
f:412.261.4876
[email protected]
p:614.621.4060
f:614.621.4062
[email protected]
p:571.380.9003