PPP Borrowers May Require SBA Consent or Escrowing of PPP Loan Balance in Connection with "Change of Ownership" Transactions

Crowell & Moring – On October 2, 2020 (almost two months after the August 10, 2020 commencement of the acceptance period for forgiveness applications), the Small Business Administration (SBA) released an SBA Procedural Notice (the “Notice”) concerning required procedures for change of ownership of an entity that has received PPP loans (the “PPP Borrower”). Under the Notice, SBA approval or funding PPP loan balances into escrow may be required in connection with a change of ownership transaction and purchasers may be required to assume the PPP Borrower’s obligations, in addition to PPP Lender notice and approval.