SBA issues notice on PPP loan ownership changes

Federal Issues SBA Covid-19 Small Business Lending CARES Act

On October 2, the Small Business Administration issued a procedural notice providing guidance for Paycheck Protection Program (PPP) lenders when a recipient of a PPP loan experiences a change in ownership. According to the guidance, a “change of ownership” occurs when (i) at least 20 percent of common stock or other ownership interest of a PPP borrower is sold or transferred; (ii) the PPP borrower sells or transfers at least 50 percent of its assets; or (iii) the PPP borrower merges with or into another entity. Borrowers must notify their PPP lenders in writing before the closing of any change in ownership. The guidance specifies that, regardless of the change of ownership circumstances, the loan terms still apply and PPP lenders are “required to continue submitting the monthly 1502 reports until the PPP loan is fully satisfied.” Among other things, the guidance explains that the PPP borrower remains responsible for performing all PPP loan obligations and PPP-related certifications (including the certification of economic necessity), as well as complying with all other applicable PPP requirements. Additionally, PPP borrowers are still required to obtain, prepare, retain, and provide all required documentation to their PPP lender or lender responsible for servicing the PPP loan or to the SBA upon request.