Important PPP Updates

Simplified Forgiveness Application | Requirements for Changes of Ownership

October 16, 2020

This month, the U.S. Small Business Administration (SBA) and Treasury Department have provided important updates to the forgiveness process for certain Paycheck Protection Program (PPP) loan borrowers. First, borrowers who received a PPP loan of $50,000 or less now have access to a simplified forgiveness application. Second, requirements for PPP borrowers considering a change in ownership (M&A transaction) were established. Additional information on each of these updates is provided below.

Simplified Loan Forgiveness Application for PPP Loans of $50,000 or Less

A simplified loan forgiveness application for PPP loans of $50,000 or less was released on October 8, 2020. According to Secretary Mnuchin, this action streamlines the forgiveness process for both small PPP borrowers as well as the lenders who worked around the clock to process the loans quickly.

What You Need to Know

• The new application cuts the original application’s size down from five pages to two.
• The new application does not require calculations. The only requirement is that borrowers confirm that the loan proceeds were used for eligible costs, and provide documentation to support those expenses.
•  The new application cannot be used by small businesses that reduced their full-time employee headcount from pre-pandemic levels or have reduced pay rates by greater than 25%.

For more information on the simplified PPP forgiveness application, including links to access the application and application instructions, please click here.

HBE has a team dedicated to serving our clients with PPP loan matters. Please contact our office if you would like assistance with completing your PPP loan forgiveness application.

Businesses with an M&A Transaction and a PPP Loan May Have New Requirements to Satisfy

On October 2, 2020, the SBA released a notice for businesses that received a PPP Loan and have a change of ownership. This notice applies to M&A transactions where either:

1. 20% or more of ownership has transferred
2. 50% of the assets are sold
3.  A merger occurs

If any of these transactions are relevant for your business since you received the PPP loan, or if you are anticipating any of these transactions during the period before forgiveness is complete, please consider the requirements listed below.

Before closing a transaction, the PPP borrower must provide the lender with written notice of any ownership change. In addition, the borrower needs to provide the lender with the proposed agreements.

If the PPP loan is fully satisfied through repayment and/or forgiveness prior to closing, there are no restrictions on the M&A transaction. If the PPP loan is not fully satisfied, the borrower must either:

1. Have a transfer of 50% ownership or less approved by lender.
2. Have the M&A transaction approved by the lender, establish an escrow account to cover the loan, and submit a PPP Loan Forgiveness Application.
3. Have the M&A transaction approved by the SBA. The lender must submit a request and the SBA will provide a determination within 60 days. Please note, this option is only available if the borrower cannot satisfy the loan or escrow the necessary funds.

HBE can help you walk through the necessary steps to assure that your transition goes smoothly and according to plan. Our approach will always be to work with your attorney and lending institution as a team to make sure that you have the best results with your transaction.

This communication and any applicable contents pertaining to COVID-19 employer relief provisions is based on our professional judgment given the facts provided to us and the COVID-19 employer relief provisions guidance as of the date of the communication. Subsequent developments changing the facts provided to us, or differences in the final guidance and regulations once they are issued, may affect the advice provided. These effects may be material.