PPP Loan Guidance to Lenders a Positive for Sellers, Buyers and Business Brokers. Effective Immediately.

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PPP Loan Guidance to Lenders a Positive for Sellers, Buyers and Business Brokers. Effective Immediately.

New Paycheck Protection Program (PPP) loan guidance should provide relief to business owners currently selling, business buyers, and business brokers with prospective clients with a PPP loan.

Good news for PPP Loans under $50,000:

To be forgiven by the lender; not sent to SBA.

The SBA has deemed PPP loans under $50,000 obtained by businesses with at least one employee, even if the owner, to be de minimis - “too trivial or minor to merit consideration” by the SBA.

The PPP loan borrower must complete SBA Form 3508S. A borrower may use this form only if the borrower received a PPP loan of $50,000 or less. A Borrower that, together with its affiliates, received PPP loans totaling $2 million or greater cannot use this form.

The lender can authorize loan forgiveness and does not need to send to the SBA for further guidance per Interim Final Rule on Additional Revisions to Loan Forgiveness and Loan Review Procedures Interim Final Rules (10/8/2020) [Source: Treasury.gov]

Within this population of potentially affected loans, SBA believes that most borrowers would not be affected by the loan forgiveness reduction requirements because (1) the borrowers did not reduce FTE employees or reduce employee salaries or wages, or (2) the borrowers would qualify for one of the existing exemptions from loan forgiveness amount reductions. Excluding such borrowers, the aggregate dollar amount of PPP funds affected by these exemptions relative to the aggregate dollar amount of all PPP funds is de minimis.

Good news for PPP Loan borrowers selling their business:

New guidance mitigates risk to banks; clarifies obligations of sellers and buyers.

In addition to the simplification of forgiveness for PPP loans under $50,000, the SBA has issued guidance for small business ownership transfers. This guidance closely mirrors how our lenders have been solving murky PPP loan guidance rules — and is now documented.

SBA lenders do not need to seek permission from the SBA provided the following conditions have been met:

  • Prior to the closing of any change of ownership transaction, the PPP borrower must notify the PPP Lender in writing of the contemplated transaction and provide the PPP Lender with a copy of the proposed agreements or other documents that would effectuate the proposed transaction.
  • PPP Loan is paid in full or the borrower has completed the loan forgiveness process in accordance with the PPP requirements including simplified loan forgiveness as outlined earlier.
  • PPP borrower completes a forgiveness application reflecting its use of all of the PPP Loan proceeds and submits it, together with any required supporting documentation, 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.

SBA lenders will assist the borrower in meeting these obligations. The BizBuySell Finance Center can assist with SBA business acquisition loans between $350,000 and $5 million.

An article by BizBuySell, click here for the original article. 

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