Sell My Business With A Pending PPP Loan | What Is My Best Option?
Can I sell my business if I have a PPP Loan?
If you are a business owner and took a Payment Protection Program Loan or PPP Loan in California, and looking to sell your business or medical practice, you can exit your business ownership by complying with the SBA Procedural Notice.
According to the SBA or Small Business Administration PPP Loan Forgiveness, you can sell your business or transfer of ownership when:
- At least 20% of the common stock or ownership interest is transferred or sold;
- 50% or more of the assets are sold or transferred;
- Your business merges with another entity.
Before the closing of any change of ownership transaction, the PPP borrower must notify the PPP Lender in writing of the contemplated transaction and provide the PPP Lender with a copy to close the sale or transfer, the PPP borrower has:
- Completed the loan forgiveness process by the PPP requirements
- SBA has remitted funds to the PPP Lender in satisfaction of the PPP Note;
- The PPP borrower has repaid any remaining balance on the PPP loan.
Structured as an Asset Sale
The PPP Lender may approve the change of ownership and sell or otherwise transfer common stock or other ownership interest in a PPP if the change of ownership is required and the PPP Lender may not unilaterally obtain SBA’s prior approval of requests for changes of ownership.
The PPP Lender:
- The reasons that the PPP borrower cannot fully satisfy the PPP Note as described by the purchasing entity assuming all of the PPP borrower’s obligations under the PPP successor to the PPP borrower will remain subject to all obligations under the PPP;
- If a PPP loan of a PPP borrower associated with a change of ownership transaction was pledged.
These ownership changes typically require SBA approval, and the SBA has issued official guidance for how a sale can proceed when selling your business with PPP debt.
What is a PPP Loan?
It is a special relief program developed by the Small Business Administration to help business owners during the COVID 19 crisis. Note: the program ended on May 31, 2021. Existing borrowers may be eligible for PPP loan forgiveness. SBA also offers additional COVID-19 relief.
What is my Best Option for Selling my Business With a PPP Loan?
If you are like many business owners in California who applied for the PPP Loan during the COVID-19 Crisis, and now you’ve decided to sell and exit your business ownership, here are some of the possible options or pathways to consider:
- Apply for the PPP loan Forgiveness Program before selling your business. Doing so will help your chance to clear up some of the issues down the line with potentially interested buyers.
- Keep going with your business sale if you are selling an aggregated 50% or less in a stock sale. In this situation, you can proceed with the transaction without any issues.
- Selling more than 50% in an asset or stock sale. An amount equal to the full amount of the PPP loan (principal plus accrued interest) should be placed in escrow until the PPP loan forgiveness application is completed.
- If you can’t escrow, do this:
- Reach out to your SBA lender for approval
- After the approval, the SBA lender will submit your ownership transfer for approval to the SBA Loan Servicing Center.
Rogerson Business Services doesn’t guarantee the above paths, however, those are the best options to explore and get done once you have decided to sell your business and you have a PPP Loan pending.
There are also conflicts with the PPP loan forgiveness and other governmental assistance programs. Once again, you may not be eligible for the PPP loan forgiveness, requiring the sale proceeds to be used to retire the PPP loan as it would for any other outstanding debt.
Sell also: What happens if you default on an SBA Loan
Sell My Business With A Broker
If you’re planning to sell your business in California, here’s why you might want to hire a qualified and certified business broker or intermediary.
See also: How to sell my business
Business Brokers Can Help You Navigate The Selling Process Smoothly
- The California business owner, CFO, and the business broker will work together to assess the small business’ performance and help organize the financial statements as these are critical documents in both the business valuation and later when the business goes to the market to find a buyer.
- California business brokers should prepare a business valuation using various methods to arrive at the value of the company.
- Having a business broker for this step is especially important since they have to buy a privately-held business with non-disclosure data to help arrive at the most accurate and up-to-date value of the business.
- To succeed in the due diligence process, the business broker will work with the seller and buyer to review many documents.
- In escrow, business brokers can help in smoothly transfer your business ownership and close the deal successfully on your own terms.
Conclusion: Why Choose Rogerson Business Services to Sell My Business in California
Selling your business is a life-changing event. That’s why it’s essential to plan for this event carefully.
If you’re listing a business for sale in California, you’ll want to find a reliable business brokerage firm. At Rogerson Business Services a team of experienced professionals works to plan and carry out the buying and selling business process in California.
You can also consult with Andrew Rogerson on how to increase your overall value.
You might want to read further the Six Steps to Successfully Sell or Exit your Medical Practice in California
List of Resources That You Might Find Helpful
- Selling your business
- Get started on a seven-step process of selling my business.
- Get a business valuation
- Get started on a seven-step process of valuing my business.
- Selling your medical practice
- Selling your manufacturing business
- Selling wholesale distribution business
- Best calculations: How to value a wholesale distribution business
- Selling a professional services company or firm
- Selling a construction company
- Selling a trucking company
If you are considering valuing and selling your business or medical practice within six to twelve months, give Andrew Rogerson, a certified business broker based in Sacramento, California, a Call Toll-Free at (844) 414-9700 or email him at firstname.lastname@example.org services the whole state of California.
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