Written by Dan Chodan, CPA
Businesses with an M&A transaction and a Paycheck Protection Program (PPP) Loan will likely have new requirements to satisfy.
On October 2, 2020, the Small Business Administration (SBA) released a notice for businesses that received a PPP Loan and have a change of ownership. This notice applies to M&A transactions where either:
If the notice applies to my business, what action needs to be taken?
Before closing a transaction, the PPP borrow must provide the lender with written notice of any ownership change. In addition, the borrower needs to provide the lender with the proposed agreements.
If the PPP loan is fully satisfied through repayment and/or forgiveness prior to closing, there are no restrictions on the M&A transaction. If the PPP loan is not fully satisfied, the borrower must either:
A business with an M&A transaction will likely try to have the PPP Loan forgiven quickly to avoid escrowing funds for this requirement. We recommended that PPP Loan borrowers with a M&A transaction review this notice with their lender to ensure the appropriate steps are taken.