Changing Business Ownership

SBA Guidance issued if the business has an outstanding Paycheck Protection Program Loan

SBA issued guidance on October 2, 2020 about procedures for changes in ownership in an entity with a Paycheck Protection Program (PPP) loan outstanding.  The PPP borrower must:

  • notify the lender in writing before the proposed change in ownership and provide documents relating to the proposed transaction and
  • remain responsible for performance of all obligations of the PPP loan including the certifications of economic necessity. 

A change in ownership is considered to have occurred when (1) at least 20% of the ownership interest in the PPP borrower is sold, (2) the PPP borrower sells at least 50% of its assets measured by fair market value or (3) the PPP borrower is merged with or into another entity.  The ownership change can take any form.

The PPP lender may approve the change in ownership and the sale of 50% or more of the business assets without SBA approval if the PPP borrower completes a forgiveness application reflecting its use of the PPP loan proceeds and submits all required supporting documents to the PPP lender and an interest bearing escrow account controlled by the PPP lender is established with funds equal to the outstanding balance of the PPP loan. 

An ownership change of 50% or less can also be approved by the PPP lender without SBA approval.

Any other ownership changes require SBA approval.

See SBA Procedural Notice 5000-20057 for additional information, or contact us at 401-831-0200.

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