Small Business Administration Issues New Guidance That Impacts M&A Transactions Involving PPP Loan Recipients

By Matthew L. Mitchell and Scott R. Bleier

MLM Headshot Photo 2019 (M1341570xB1386)   M0846500

On October 2, 2020, the Small Business Administration (SBA) announced new guidelines that apply the SBA “Change of Ownership” procedures to the PPP context. As a 7(a) loan program, the PPP loans are subject to the same regulations that apply to 7(a) loans. These regulations include, among other rules, procedures that require lenders, in certain circumstances, to obtain SBA consent before permitting a borrower to complete a “Change of Ownership” transaction.  The purpose of this consent is to provide the SBA with an enforcement mechanism to better ensure repayment of loans. For any M&A transaction in which the seller or buyer is a PPP borrower, these new guidelines should be considered.

Details can be found in our COVID-19 Alert.