It’s no secret that the COVID-19 pandemic has had a significant impact on businesses of all sizes. To help small businesses struggling in these tough times, the US government introduced the Paycheck Protection Program (PPP) loan in 2020. This type of loan can be used to cover payroll costs, rent, and other expenses during difficult times. So what happens when you want to sell your business? Does this loan make it harder to sell a business than if you didn’t have one? Here’s an overview of the process of selling a business with a PPP loan.
What Are The Restrictions?
When it comes to selling a business that has a PPP loan, there are a few things to keep in mind. If the PPP loan is repaid in full prior to closing, there are no conditions or restrictions on completing the transaction on the business. However, if you’re selling the business to another party, in part or entirety, the borrower must notify the PPP lender of the pending transaction, and approval from the lender must be granted to proceed with the sale. The lender’s review and response may take up to 60 days, and will require additional documentation as requested by the PPP lender, including why the borrower cannot satisfy the PPP loan obligations, transaction details, PPP Note, plus any evidence of transfer of obligation from borrower to non-borrower, if transfer is required, or payoff part of the transaction closing.
While performing the sale of a business with a PPP loan does require more paperwork and may extend the timeline, it does not make the business unsaleable while an outstanding balance remains. In many cases, the PPP loan will convert to a term loan with regular payments after the business is sold, and the new owner will be responsible for making these payments.
Ready to Sell Your Business with a PPP Loan?
With over 400 successful business transactions, we’ve seen it all and have the experience necessary to guide you through a successful sale of your business. Don’t let a PPP loan stop you from moving forward with a business transaction. With some advance planning and understanding of the process, you can still complete a successful sale. If you have more questions about selling a business with a PPP loan, please schedule a free confidential consultation with one of our experienced business sale brokers.