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Today, we will cover what a PPP loan is and how it affects the sale of your business. Having outstanding loans is a tough-talking point during meetings with potential buyers, hopefully, this guide will give you some good counterpoints to use. Keep reading to find out more about PPP loans and selling your business in 2022!

What is a PPP Loan?

PPP stands for Paycheck Protection Program and was introduced as a loan in 2020 amidst the COVID-19 pandemic by the US government. The PPP loan can be used for a vast array of business expenses including payroll slots, rent, and much more. The PPP loan comes with a number of restrictions regarding the sale of a business. If you have repaid the PPP loan in full before the sale of the business closes, then you have nothing to worry about and the sale should go through. However, if you have not fully repaid the loan then the borrower must notify the PPP lender of the pending transaction. In order for the sale to complete the lender must grant their permission. 

Keep in mind that getting permission from the lender can take up to 60 days, make sure your potential buyer is aware of this ahead of time as well. Make sure you have collected any additional documentation required by the lender as well. This documentation may include: why the borrower cannot satisfy the loan obligations, details of the transactions leading to the sale of the business, PPP notes, and any other evidence that shows the transfer of loan obligations from one party to the other. Your lender should send you a list of all the documentation you will need. You will need time to get all of this paperwork together, so get ahead of it and don’t wait till the last minute as this could jeopardize the sale. 

Getting Ready to Sell

As you can see, an outstanding PPP loan in no way prevents you from selling your business. In fact, the loan will usually be converted to a term loan with regular payment installations after the completion of the sale. This can be a solid selling point when potential buyers question you about your company’s liabilities. Make sure they understand as well as you do that the PPP loan will not impact the sale outside of the 60-day waiting period for lender approval. To save time, ensure you have gathered all your documents before starting the approval process since this will increase the odds of approval taking less than 60 days to get approval. 

We’re Here to Help!

Looking to become a business owner in 2022? At Murphy Business, we understand how overwhelming and complicated buying or selling a business can seem. Finding the right business to buy or the right buyer to sell to is a lot of work. That’s where we come in. Our experienced team will help you find the right buyer for your business or the right business for your buck! 

Contact us for more information and connect with an expert today!