This past year has been anything but easy or normal for individuals and businesses alike in the Boston area. To adjust to the unprecedented times, the government and banks did what they could to keep the economy as strong as it could be. One method of doing this was distributing Paycheck Protection Program (PPP) loans to small businesses. Much like the name suggests, a PPP loan was created to incentivize small businesses (300 or fewer employees) to keep their workers on the payroll and with benefits, even during seasons of lockdown and limited hours. Doing this, the unemployment rate could be managed – to a degree. In Massachusetts alone, small businesses received more than $14 billion in PPP loans.
If you are a small business owner in the area and received a PPP loan in the last year, you still may be able to sell your business, but there are additional steps to be taken.
How to sell your Boston business with a PPP loan
When selling your business in Boston, you have to understand what defines a change of ownership under the following guidelines set by the Small Business Administration (SBA):
1. At least 20% of ownership interest is sold or transferred including inside transactions to an affiliate or another owner
2. The borrower (you) sells or transfers at least 50% of its assets at Fair Market Value (FMV)
3. The borrower (you) is merged with or into another entity
In this case, all ownership transactions that occur must happen as one event – they cannot be split into smaller transactions to stay within the limits. In addition, you, as the borrower, remain responsible for the PPP loan. And, in all cases, the SBA must approve of the transaction.
Can the PPP loan be forgiven?
The simple answer is yes. The first small businesses to have received a PPP loan may be eligible for full loan forgiveness if during the 8- to 24-week covered period following the loan disbursement if:
· Employee and compensation levels were maintained
· The loans processed are spent on payroll costs and eligible expenses (i.e., healthcare and other benefits)
· At least 60% of the proceeds are spent on payroll costs
Should I ask for help with my PPP loan if I’m selling my business?
The process of selling your business that has a PPP loan is not impossible but can be a little tricky. To ensure you are performing the necessary steps or to see if you are eligible for loan forgiveness, it is best to consult with an experienced business broker. At Transworld Business Advisors North Boston, our team of local business brokers is very familiar with the guidelines and regulations set by the SBA, especially during the last calendar year. With guidance from our team, you can be well on your way to selling your Boston business regardless of whether or not your PPP loan has been fully paid off.
Contact Transworld Business Advisors North Boston today – let’s start the discussion about selling your business!