On October 2, 2020, the SBA released a notice concerning the required procedures for changes of ownership of an entity that received Paycheck Protection Program (PPP) funds.

For purposes of the PPP, a change of ownership will be considered to have occurred under one of the following three circumstances:

It is important to note that the sale or transfer of the business does not relieve the PPP borrower from his or her obligations that were originally agreed upon when the loan was originated. That is, regardless of the change of ownership, the PPP borrower remains responsible for all loan performance obligations, for all certifications made, including economic necessity, and for compliance with all other PPP requirements. The borrower must also maintain all required PPP forms and documentation and provide them to the SBA upon request, even after disposition of her or his ownership in the business.

Before any change of ownership can take place, the Borrower must inform the Lender of the contemplated transfer. If the PPP Loan has been fully satisfied before the sale or transfer, whether paid in full or fully forgiven, there are no restrictions on the change of ownership.

If the PPP Loan has not yet been fully satisfied, the SBA may allow the transfer without prior SBA approval under certain circumstances. General guidelines require the application for forgiveness to be completed and a fully funded escrow account in the amount of the loan to be established in the event of forgiveness disallowance. If these stipulations are not met, additional documentation will be required to be submitted to the SBA to receive approval. Specific requirements for approval, as well as some additional guidance on this topic, can be found on the SBA’s website here.