Provided by: Jennifer Kirschenbaum, Esq.
December 22, 2020
- Q: Is a business that was in operation on February 15, 2020 but had a change in ownership after February 15, 2020 eligible for a PPP loan? A: Yes. As long as the business was in operation on February 15, 2020, if it meets the other eligibility criteria, the business is eligible to apply for a PPP loan regardless of the change in ownership. In addition, where there is a change in ownership effectuated through a purchase of substantially all assets of a business that was in operation on February 15, the business acquiring the assets will be eligible to apply for a PPP loan even if the change in ownership results in the assignment of a new tax ID number and even if the acquiring business was not in operation until after February 15, 2020. If the acquiring business has maintained the operations of the pre-sale business, the acquiring business may rely on the historic payroll costs and headcount of the pre-sale business for the purposes of its PPP application, except where the pre-sale business had applied for and received a PPP loan. The Administrator, in consultation with the Secretary, has determined that the requirement that a business “was in operation on February 15, 2020” should be applied based on the economic realities of the business’s operations.
Some general comments re: PPP and sale - Beginning in August 2020, the buy sell market has taken off. Similar to the exodus from NYC and slammed residential real estate brokers, deal attorneys, such as our firm, are overrun with sellers looking to transition and buyers interested in opportunities. The demand in the market has wiped out any discount buyers were hoping to see and prices for practices are at pre-Covid levels for the most part. Navigating PPP as a closing issue raises concerns for buyers and sellers and new guidance has made clear while the PPP should not be a barrier, the lender may be a nuisance. In recent deals we are seeing escrow as a required step for some lenders, even being as bold as requiring a buyer unrelated to the seller/borrower PPP loan to take part in an escrow process. Unfortunately, navigating bank consent is a standard issue in transition for deals and will likely remain for the immediate future until forgiveness is achieved for many more practices over the next 6 months. If you are considering a transition, to make your life easier, apply for forgiveness in advance – do not wait.