If you have a PPP loan and you’re selling your business or changing your business’ ownership, you may be responsible for getting certain pre-approvals from your lender or from the SBA.
You do not need to receive any pre-approvals or take any action if either of the following are true:
- You are selling less than 50% of your assets as measured by fair market value
- You are selling or transferring an ownership interest of less than 20% of your business
In both of these cases, you are still responsible for the obligations of your PPP loan, but you do not need to take any additional steps related to a change of ownership.
You do need to take steps with your lender it at least one of the below is true:
- At least 20% of the common stock or other ownership interest of your business is sold or otherwise transferred, whether in one or more transaction, including to an affiliate or an existing owner of the entity
- You are selling or otherwise transferring at least 50% of your business’ assets (measured by fair market value)
- Your business is merging with or into another entity
The SBA published details about this process here, but we have summarized below the steps that PPP borrowers need to take if their loans are serviced by Scratch.
What steps do I need to take regarding my PPP loan if my business is changing ownership?
- Notify Scratch in writing at firstname.lastname@example.org with the subject line “PPP Change of Ownership."
The SBA requires that prior to closing any change of ownership transactions, you notify Scratch in writing that your business will be changing ownership.
- Await Scratch’s response telling you what steps you need to take from there.
Your next steps will depend on your business’ PPP loan status, for example:
- If you applied for and received full forgiveness from the SBA on your loan and there is no remaining balance → you will not need to receive any pre-approvals
- If you received partial forgiveness and have already paid back any remaining balance → you will not need to receive any pre-approvals
- If your loan’s forgiveness status is still pending → depending on how your transaction is structured, we will advise you on what information you will need to provide to your lender
- Send the appropriate materials to the lender that originated your loan.
Depending on the details of your transaction, it may need to be pre-approved by your lender, pre-approved by the SBA, or may not need to be approved at all. We will provide information to help you determine what your situation is. Note that you will need to send any change of ownership materials to your lender, not to Scratch – we are your loan servicer.