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CCBA Feature
By Gordon W. Prince, Esquire
Attorney at Gawthrop Greenwood


Guidance for
PPP Borrowers
and Lenders


ince the conception of the Paycheck Protection
Program (PPP) loan program back in March of
2020, the Small Business Administration (SBA) has
continued to issue new information and guidance related
to the administration of the loans. Information from the
SBA, issued in Procedural Notice No. 5000-20057, has
important implications for PPP recipients who have, are
in the midst of, or are contemplating effecting a change
in ownership of their entity. Of importance, certain
changes of ownership will require the approval of the
SBA, or, at the very least, notice to the SBA.
What is a Change of Ownership?
The SBA has provided that, for PPP loan purposes, a
change of ownership occurs when:
(1) at least 20% of the common stock or other ownership
interest of a PPP borrower is sold or otherwise
transferred, whether in one or more transactions,
including to an affiliate or an existing owner of the
(2) the PPP borrower sells or otherwise transfers at least
50% of its assets (measured by fair market value),
whether in one or more transactions; or
(3) a PPP borrower is merged with or into another entity.
Transactions Outside the Scope of the Change
of Ownership Definition
Even if the PPP borrower's transaction does not fit into
the definition of a change of ownership, the borrower still
has responsibilities going forward. The SBA makes clear
that, regardless of whether a change of ownership has
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occurred, the PPP borrower remains responsible for:
(1) performance of all obligations under the PPP loan;
(2) the certifications made in connection with the
PPP loan application, including the certification of
economic necessity;
(3) compliance with all other applicable PPP
requirements; and
(4) obtaining, preparing, and retaining all required PPP
forms and supporting documentation and providing
those forms and supporting documentation to the
PPP Lender (or lender servicing the PPP loan) or to
the SBA upon request.
SBA Approval
Even if the borrower's transaction fits into the
definition of a change of ownership, the borrower
can take steps to avoid seeking SBA approval of the
transaction by meeting certain conditions.
SBA approval is not needed if the PPP Note (the
promissory note evidencing the PPP loan) is fully
satisfied. A PPP Note is considered fully satisfied if, prior
to closing the transaction:
* The borrower has paid the PPP Note in full; or
* The borrower has completed the PPP loan
forgiveness process. This includes the SBA paying
funds to the PPP Lender in full satisfaction of the
PPP Note or the borrower repaying any remaining
balance on the PPP loan.
Approval of the transaction by the SBA can still be
avoided, regardless of whether or not the PPP Note is



Table of Contents for the Digital Edition of ChesterNewMatter_1stQtr2021

ChesterNewMatter_1stQtr2021 - 1
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