Updated: Nov 17, 2020
The SBA has released additional guidance for those holding a PPP loan.
The Small Business Administration (SBA) has released additional guidance regarding change of ownership procedures for borrowers holding a PPP loan. Many businesses in this situation have been attempting to push the forgiveness process forward, with the assistance of their lenders, due to an impending transfer of ownership.
What is considered a change of ownership?
According to the notice, a “change of ownership” occurs under the following situations:
At least 20% 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% of its assets (measured by fair market value), whether in one or more transactions, or
A PPP borrower is merged with or into another entity
All sales or transfers that have occurred since the date of PPP loan approval must be aggregated. For publicly-traded PPP borrowers, only sales or other transfers that result in one person or entity holding or owning at least 20% of the common stock or other ownership interest of the borrower must be aggregated.
If you obtained a PPP loan and are planning a transaction involving a change of ownership, what procedures must be followed?
Regardless of the change of ownership type, PPP borrowers will retain responsibility for the following, even after the change of ownership:
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
Obtaining, preparing, and retaining all required PPP forms and supporting documentation, and
Providing the required forms and supporting documentation to the PPP lender or lender servicing the PPP loan, or to the SBA upon request
In addition, there are different procedures depending on the circumstances of the change of ownership, as set forth below. In all cases, the PPP lender is required to continue submitting the monthly 1502 reports until the PPP loan is fully satisfied.