On October 2, the SBA released a Procedural Notice for PPP Loans regarding transfer guidelines.
For purposes of the PPP, a “change of ownership” will be considered to have occurred when:
- At least 20 percent of the common stock or other ownership interest of a PPP borrower (including a publicly-traded entity) is sold or otherwise transferred, whether in one or more transactions, including to an affiliate or an existing owner of the entity.
- The PPP borrower sells or otherwise transfers at least 50 percent of its assets (measured by fair market value), whether in one or more transactions.
- A PPP borrower is merged with or into another entity.
Regardless of any change of ownership, the PPP borrower remains responsible for:
- Performance of all obligations under the PPP loan
- The certifications made in connection with the PPP loan application, including the certification of economic necessity
- Compliance with all other applicable PPP requirements
Borrowers must notify their PPP lender in writing of the transaction and provide a copy of the proposed agreements before the change of ownership.
There are no restrictions on a change of ownership if prior to closing the sale or transfer, the PPP borrower has repaid the note in full or completed the loan forgiveness process and the SBA has remitted funds to the PPP lender.
If you have a PPP loan and are in the middle of or considering a change of ownership, please reach out to your advisor for further guidance.