By: Eric J. Beecher
On Friday, October 2, 2020, the U.S. Small Business Administration (SBA) issued SBA Procedural Notice 5000-20057 (Notice), which provides long-awaited guidance regarding pre-forgiveness restructures and ownership changes of borrowers under the Paycheck Protection Program (PPP). PPP borrowers must comply with the specified requirements and procedures before engaging in any merger, transfer of at least 50% of the borrower’s assets or transfer of at least 20% of the borrower’s ownership—including internal transfers between the borrower’s existing owners. As such, any borrower that has completed, or is considering engaging in, such a merger or transfer before the forgiveness or payoff of its PPP loan should review the Notice carefully and consider consulting with an attorney to help determine the required course of action, which may include establishment of a special escrow account or obtaining the SBA’s written consent to the transaction.
Eric Beecher’s practice focuses on representing privately owned companies in mergers and acquisitions and other events—both routine and extraordinary, expected and out-of-the-blue—relating to the planning, formation, operations and succession or exit of a business. He is licensed in Kentucky, Ohio and Minnesota.