The Small Business Administration is now allowing lenders — under certain conditions — to approve the sale or merger of companies that took Paycheck Protection Program loans. The new guidance, issued Friday as part of a procedural notice by the agency, means that not all mergers or acquisitions have to receive SBA approval before going forward, though borrowers and buyers still need to adhere to specific rules. Here’s the rundown:

Borrowers and lenders no longer need to seek SBA approval if the sale or transaction is less than 50% of the company’s equity or assets, part of the SBA’s definition of a change in control or ownership. If it’s 50% or more of the equity or assets, SBA approval is no longer required if the borrower has completed a loan-forgiveness application and submitted it to the lender and also has set up an interest-bearing escrow account with that lender to cover the PPP loan. The escrow account then will be disbursed to the surviving entity, minus satisfaction of any outstanding PPP balances, the SBA said.

The SBA may also require other actions to mitigate the potential risk of not paying back the PPP loan, the guidance states, and it retains recourse in case of any issues. It’s also unclear if businesses that proceed without following the new guidance would risk the loss of loan-forgiveness eligibility for their PPP loans, or what happens to businesses that closed transactions before the new guidance came out.  Give us a call and have one of our experts answer your questions!

Click here to read the full article on the Dayton Business Journal’s Website:  Dayton Business Journal.