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Transfer Paycheck Protection Program (PPP) Loan In A Business Sale – New Guidance From The SBA

Wondering how to transfer Paycheck Protection Program (PPP) Loan in a business sale? New guidance from the Small Business Administration (SBA)’s Procedural Notice explains what happens upon a business change of ownership. This new rule applies to all asset-based business sales where the assets of the business, rather than the business entity itself, are sold to a business buyer.

If The PPP Has Been Paid In Full

The SBA notes that there are NO restrictions on a business sale where the PPP is paid in full by the business seller prior to the closing of the sale. This applies where the PPP is paid in full or where the seller completed the PPP loan forgiveness process.

If The PPP Is NOT Paid In Full

If the PPP is not paid in full, the next question to consider is whether SBA prior approval is required. If the business sale is structured as an asset sale, then the PPP lender may approve the change of ownership and SBA prior approval is NOT required ONLY IF the PPP borrower/Business Seller completes a forgiveness application which shows that all PPP loan proceeds were used.

The PPP borrower/Business Seller must complete a forgiveness application reflecting its use of all of the PPP loan proceeds. The forgiveness application, along with any required supporting documentation, is then submitted to the PPP Lender. The PPP Lender then creates an interest-bearing escrow account which is controlled by the PPP Lender.

After the forgiveness process (including any appeal of SBA’s decision) is completed, the escrow funds must be disbursed first to repay any remaining PPP loan balance plus interest.

Where loan forgiveness is not granted, the PPP Lender can still approve the PPP loan transfer along with the business. Keep in mind that the PPP borrower/Business Seller is still legally obligated should the Business Buyer default or misuse PPP funds.

For more information to transfer paycheck protection program (PPP) Loan in a business sale, check the Lender Relations Specialist in your local SBA Field Office. Also, feel free to contact Mission Peak Brokers to discuss a PPP loan transfer as part of your business sale.

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