Sale of Business After February 15, 2020 Does Not Bar Business from Obtaining PPP Loan

The SBA continues to slowly add questions to the frequently asked questions on the Payroll Protection Program (PPP) loans,[1] in this case giving guidance on what happens if a business had a change of ownership after February 15, 2020.

Question 38 clarifies that a transfer of ownership of the business after February 15, 2020 will not cause the business to be ineligible for a PPP loan.

Question: Section 1102 of the CARES Act provides that PPP loans are available only to applicants that were “in operation on February 15, 2020.”  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?

Answer:  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.


[1] “Payroll Protection Program Loans Frequently Asked Questions (FAQ),” April 29, 2020 version, https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf  (retrieved April 29, 2020)