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By Robert J. Waine, Esquire
Rothman Gordon
Pittsburgh, Pennsylvania

On October 2, 2020, the SBA issued a notice regarding the required procedures to follow when a PPP borrower has a change of ownership. For purposes of PPP loans, a change of ownership occurs when: (1) at least 20% of the ownership interest of a PPP borrower is transferred, whether in one or more transactions, including to an affiliate or an existing owner of the entity; (2) the PPP borrower transfers at least 50% of its assets, measured by fair market value, in one or more transactions; or (3) the PPP borrower is merged into another entity.

Pursuant to the Notice, the SBA is requiring the PPP borrower, prior to the closing of any change of ownership transaction, to notify its PPP lender in writing of the contemplated transaction and provide the lender with a copy of the proposed agreement or other documents that would effectuate the proposed transaction. Then, there are different procedures to be followed depending on the circumstance surrounding the change of ownership.

If the PPP loan is fully satisfied prior to the closing of the change of ownership transaction, there are no restrictions on a change of ownership. If the PPP borrower is seeking forgiveness of all, or a portion of the PPP loan, the SBA must have remitted the funds to the PPP lender and the PPP lender must have repaid any outstanding balance for the PPP loan to be fully satisfied.

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