Generally, the Small Business Administration (SBA) and Paycheck Protection Program (PPP) lenders must consent to certain changes in a borrower’s ownership that occur within one year of the borrower’s PPP loan disbursement. Failure to obtain the necessary consent could prove costly for a borrower, as PPP lenders and the SBA ong other remedies, deny PPP loan forgiveness applications, declare the full PPP loan immediately due and payable, and even hold the borrower’s successor liable for the PPP loan funds.

Until recently, borrowers were left guessing at what was meant by a change of ownership transaction. On , the SBA released guidance that provided further clarity on changes of ownership and how to obtain PPP lender and SBA consent.

What is a change of ownership?

• a transfer of 20% or more of the ownership interest in one or more transactions to an independent third party or an affiliate of the borrower;
• a transfer of 50% or more of the borrower’s assets in one or more transactions; or
• a merger of the borrower with or into another entity. Read the rest of this entry »