PAYCHECK PROTECTION PROGRAM

There are no restrictions on a change of ownership if, prior to closing the sale or transfer, the PPP borrower has:

• Repaid the PPP Note in full; or
• Completed the loan forgiveness process in accordance with the PPP requirements and:
• SBA has remitted funds to the PPP Lender in full satisfaction of the PPP Note; or
• The PPP borrower has repaid any remaining balance on the PPP loan.

-Change of ownership is structured as a sale or other transfer of common stock or other ownership interest or as a merger. An individual or entity may sell or otherwise transfer common stock or other ownership interest in a PPP borrower without the prior approval of SBA only if:

• The sale or other transfer is of 50% or less of the common stock or other ownership interest of the PPP borrower (includes all sales and other transfers occurring since the date of approval of the PPP loan must be aggregated) ; or
• The PPP borrower completes a forgiveness application reflecting its use of all of the PPP loan proceeds and submits it, together with any required supporting documentation, to the PPP lender, and an interest-bearing escrow account controlled by the PPP lender is established with funds equal to the outstanding balance of the PPP loan. After the forgiveness process (including any appeal of SBA’s decision) is completed, the escrow funds must be disbursed first to repay any remaining PPP loan balance plus interest.

-Change of ownership is structured as an asset sale. A PPP borrower may sell 50 percent or more of its assets (measured by fair market value) without the prior approval of SBA only if the PPP borrower completes a forgiveness application reflecting its use of all of the PPP loan proceeds and submits it, together with any required supporting documentation, to the PPP lender, and an interest-bearing escrow account controlled by the PPP lender is established with funds equal to the outstanding balance of the PPP loan.

After the forgiveness process (including any appeal of SBA’s decision) is completed, the escrow funds must be disbursed first to repay any remaining PPP loan balance plus interest. The PPP lender must notify the appropriate SBA Loan Servicing Center of the location of, and the amount of funds in, the escrow account within 5 business days of completion of the transaction.

If the conditions above are not met, SBA prior approval is required, and the PPP lender may not unilaterally approve the change in ownership.

To obtain SBA’s prior approval of requests for changes of ownership, the PPP lender must submit the request to the appropriate SBA Loan Servicing Center. The request must include:

1. the reason that the PPP borrower cannot fully satisfy the PPP note as described in the previous question;
2. the details of the requested transaction;
3. a copy of the executed PPP Note;
4. any letter of intent and the purchase or sale agreement setting forth the responsibilities of the PPP borrower, seller (if different from the PPP borrower), and buyer;
5. disclosure of whether the buyer has an existing PPP loan and, if so, the SBA loan number; and
6. a list of all owners of 20 percent or more of the purchasing entity.

If deemed appropriate, SBA may require additional risk mitigation measures as a condition of its approval of the transaction. SBA approval of any change of ownership involving the sale of 50 percent or more of the assets (measured by fair market value) of a PPP borrower will be conditioned on the purchasing entity assuming all of the PPP borrower’s obligations under the PPP loan, including responsibility for compliance with the PPP loan terms.

In such cases, the purchase or sale agreement must include appropriate language regarding the assumption of the PPP borrower’s obligations under the PPP loan by the purchasing person or entity, or a separate assumption agreement must be submitted to SBA. SBA will review and provide a determination within 60 calendar days of receipt of a complete request.

In the event of a sale or other transfer of common stock or other ownership interest in the PPP borrower, or a merger of the PPP borrower with or into another entity, the PPP borrower (and, in the event of a merger of the PPP borrower into another entity, the successor to the PPP borrower) will remain subject to all obligations under the PPP loan. In addition, if the new owner(s) use PPP funds for unauthorized purposes, SBA will have recourse against the owner(s) for the unauthorized use.

If any of the new owners or the successor arising from such a transaction has a separate PPP loan, then, following consummation of the transaction: (1) in the case of a purchase or other transfer of common stock or other ownership interest, the PPP borrower and the new owner(s) are responsible for segregating and delineating PPP funds and expenses and providing documentation to demonstrate compliance with PPP requirements by each PPP borrower, and (2) in the case of a merger, the successor is responsible for segregating and delineating PPP funds and expenses and providing documentation to demonstrate compliance with PPP requirements with respect to both PPP loans.

The PPP lender must notify the appropriate SBA Loan Servicing Center, within 5 business days of completion of the transaction, of the:

1. identity of the new owner(s) of the common stock or other ownership interest;
2. new owner(s)’ ownership percentage(s);
3. tax identification number(s) for any owner(s) holding 20 percent or more of the equity in the business; and
4. location of, and the amount of funds in, the escrow account under the control of the PPP lender, if an escrow account is required.

If a PPP loan of a PPP borrower associated with a change of ownership transaction was pledged by the PPP lender to secure a loan under the Federal Reserve’s PPPLF, the lender is reminded to comply with any notification or other requirements of the PPPLF.

Yes, payments for the provision of group health care benefits include vision and dental benefits.

Forgiveness payments remitted to the bank by SBA should be treated in the same manner as loan prepayments by the borrower.  Banks should view the SBA as an additional counterparty to the loan agreement similar to a co-borrower. 

Recognition of deferred fees for loans classified as held-for-investment should be handled in the same manner as the bank's existing policies for deferred loan fee recognition in the event of prepayment. 

The payment or nonpayment of fees of an agent or other third party is not material to SBA’s guarantee of a PPP loan or to SBA’s payment of fees to lenders

Yes, if the payroll costs are paid on or before the next regular payroll date after the covered period or alternative payroll covered period.  Example: A borrower received its loan before June 5, 2020 and elects to use a 24-week covered period. The borrower’s covered period runs from Monday, April 20 through Sunday, October 4.

The borrower has a biweekly payroll cycle, with a pay period ending on Sunday, October 4. However, the borrower will not make the corresponding payroll payment until the next regular payroll date of Friday, October 9.

Under these circumstances, the borrower incurred payroll costs during the covered period and may seek loan forgiveness for the payroll costs paid on October 9 because the cost was incurred during the covered period and payment was made on the first regular payroll date after the covered period.

Yes.  Example: A borrower received its loan before June 5, 2020 and elects to use a 24-week covered period. The borrower’s covered period runs from Monday, April 20 through Sunday, October 4. The borrower has a biweekly payroll cycle, with a payroll cycle ending on Saturday, April 18.

The borrower will not make the corresponding payroll payment until Friday, April 24. While these payroll costs were not incurred during the covered period, they were paid during the covered period and are therefore eligible for loan forgiveness.

If the borrower uses a biweekly or more frequent (e.g., weekly) payroll cycle, the borrower may elect to calculate eligible payroll costs using the eight-week (for borrowers that received their loans before June 5, 2020 and elect this covered period length) or 24-week period that begins on the first day of the first payroll cycle following the PPP loan disbursement date (referred to as the alternative payroll covered period).

However, if a borrower pays twice a month or less frequently, it will need to calculate payroll costs for partial pay periods.

The covered period or alternative covered period for any borrower will end no later than December 31, 2020. Example: A borrower uses a biweekly payroll cycle. The borrower’s 24-week covered period begins on Monday, June 1 and ends on Sunday, November 15. The first day of the borrower’s first payroll cycle that starts in the covered period is June 7. The borrower may elect an alternative payroll covered period that starts on June 7 and ends on November 21 (167 days later).

Payroll costs incurred (i.e., the pay was earned on that day) during this alternative payroll covered period are eligible for loan forgiveness if the last payment is made on or before the first regular payroll date after November 21.

The gross amount should be used when calculating cash compensation.

Employer expenses for employee group health care benefits that are paid or incurred by the borrower during the covered period or the alternative payroll covered period are payroll costs eligible for loan forgiveness.

However, payroll costs do not include expenses for group health care benefits paid by employees (or beneficiaries of the plan) either pre-tax or after tax, such as the employee share of their health care premium.

Forgiveness is not provided for expenses for group health benefits accelerated from periods outside the covered period or alternative payroll covered period. If a borrower has an insured group health plan, insurance premiums paid or incurred during the covered period or alternative payroll covered period qualify as “payroll costs,” as long as the premiums are paid during the applicable period or by the next premium due date after the end of the applicable period.

As noted, only the portion of the premiums paid by the borrower for coverage during the applicable covered period or alternative payroll covered period is included, not any portion paid by employees or beneficiaries or any portion paid for coverage for periods outside the applicable period.

The amount of compensation of owners who work at their business that is eligible for forgiveness depends on the business type and whether the borrower is using an eight-week or 24-week covered period. In addition to the specific caps described below, the amount of loan forgiveness requested for owner-employees and self-employed individuals’ payroll compensation is capped at $20,833 per individual in total across all businesses in which he or she has an ownership stake.

For borrowers that received a PPP loan before June 5, 2020 and elect to use an eight-week covered period, this cap is $15,385. If their total compensation across businesses that receive a PPP loan exceeds the cap, owners can choose how to allocate the capped amount across different businesses. The examples below are for a borrower using a 24-week covered period.

C Corporations: The employee cash compensation of a C-corporation owner-employee, defined as an owner who is also an employee (including where the owner is the only employee), is eligible for loan forgiveness up to the amount of 2.5/12 of his or her 2019 employee cash compensation, with cash compensation defined as it is for all other employees.

Borrowers are also eligible for loan forgiveness for payments for employer state and local taxes paid by the borrowers and assessed on their compensation, for the amount paid by the borrower for employer contributions for their employee health insurance, and for employer retirement contributions to their employee retirement plans capped at the amount of 2.5/12 of the 2019 employer retirement contribution.

Payments other than for cash compensation should be included on lines 6-8 of PPP Schedule A of the loan forgiveness application (SBA Form 3508 or lender equivalent), for borrowers using that form, and do not count toward the $20,833 cap per individual.

S Corporations: The employee cash compensation of an S-corporation owner-employee, defined as an owner who is also an employee, is eligible for loan forgiveness up to the amount of 2.5/12 of their 2019 employee cash compensation, with cash compensation defined as it is for all other employees.

Borrowers are also eligible for loan forgiveness for payments for employer state and local taxes paid by the borrowers and assessed on their compensation, and for employer retirement contributions to their employee retirement plans capped at the amount of 2.5/12 of their 2019 employer retirement contribution.

Employer contributions for health insurance are not eligible for additional forgiveness for S-corporation employees with at least a 2% stake in the business, including for employees who are family members of an at least 2% owner under the family attribution rules of 26 U.S.C. 318, because those contributions are included in cash compensation. The eligible non-cash compensation payments should be included on lines 7 and 8 of PPP Schedule A of the Loan Forgiveness Application (SBA Form 3508), for borrowers using that form, and do not count toward the $20,833 cap per individual.

Self-employed Schedule C (or Schedule F) filers: The compensation of self-employed Schedule C (or Schedule F) individuals, including sole proprietors, self-employed individuals, and independent contractors, that is eligible for loan forgiveness is limited to 2.5/12 of 2019 net profit as reported on IRS Form 1040 Schedule C line 31 (or 2.5/12 of 2019 net farm profit, as reported on IRS Form 1040 Schedule F line 34) (or for new businesses, the estimated 2020 Schedule C (or Schedule F) referenced in question 10 of “Paycheck Protection Program: How to Calculate Maximum Loan Amounts – By Business Type” ).

Separate payments for health insurance, retirement, or state or local taxes are not eligible for additional loan forgiveness; health insurance and retirement expenses are paid out of their net self-employment income. If the borrower did not submit its 2019 IRS Form 1040 Schedule C (or F) to the lender when the borrower initially applied for the loan, it must be included with the borrower’s forgiveness application.

General Partners: The compensation of general partners that is eligible for loan forgiveness is limited to 2.5/12 of their 2019 net earnings from self-employment that is subject to self-employment tax, which is computed from 2019 IRS Form 1065 Schedule K-1 box 14a (reduced by box 12 section 179 expense deduction, unreimbursed partnership expenses deducted on their IRS Form 1040 Schedule SE, and depletion claimed on oil and gas properties) multiplied by 0.9235.

Compensation is only eligible for loan forgiveness if the payments to partners are made during the covered period or alternative payroll covered period. Separate payments for health insurance, retirement, or state or local taxes are not eligible for additional loan forgiveness. If the partnership did not submit its 2019 IRS Form 1065 K-1s when initially applying for the loan, it must be included with the partnership’s forgiveness application.

LLC owners: LLC owners must follow the instructions that apply to how their business was organized for tax filing purposes for tax year 2019, or if a new business, the expected tax filing situation for 2020.

Yes, owner-employees with less than a 5 percent ownership stake in a C- or S Corporation are not subject to the owner-employee compensation rule. This exemption is intended to cover owner-employees who have no meaningful ability to influence decisions over how loan proceeds are allocated.

Yes, eligible business mortgage interest costs, eligible business rent or lease costs, and eligible business utility costs incurred prior to the covered period and paid during the covered period are eligible for loan forgiveness. Example: A borrower’s 24-week covered period runs from April 20 through October 4.

On May 4, the borrower receives its electricity bill for April. The borrower pays its April electricity bill on May 8. Although a portion of the electricity costs were incurred before the covered period, these electricity costs are eligible for loan forgiveness because they were paid during the covered period.

Nonpayroll costs are eligible for loan forgiveness if they were incurred during the covered period and paid on or before the next regular billing date, even if the billing date is after the covered period. Example: A borrower’s 24-week covered period runs from April 20 through October 4. On October 6, the borrower receives its electricity bill for September.

The borrower pays its September electricity bill on October 16. These electricity costs are eligible for loan forgiveness because they were incurred during the covered period and paid on or before the next regular billing date (November 6).

No. The alternative payroll covered period applies only to payroll costs, not to nonpayroll costs. The covered period always starts on the date the lender makes a disbursement of the PPP loan.

Nonpayroll costs must be paid or incurred during the covered period to be eligible for loan forgiveness. For payroll costs only, the borrower may elect to use the alternative payroll covered period to align with its biweekly or more frequent payroll schedule.

No. Payments of interest on business mortgages on real or personal property (such as an auto loan) are eligible for loan forgiveness. Interest on unsecured credit is not eligible for loan forgiveness because the loan is not secured by real or personal property. Although interest on unsecured credit incurred before February 15, 2020 is a permissible use of PPP loan proceeds, this expense is not eligible for forgiveness.

Yes. If a lease that existed prior to February 15, 2020 expires on or after February 15, 2020 and is renewed, the lease payments made pursuant to the renewed lease during the covered period are eligible for loan forgiveness.

Similarly, if a mortgage loan on real or personal property that existed prior to February 15, 2020 is refinanced on or after February 15, 2020, the interest payments on the refinanced mortgage loan during the covered period are eligible for loan forgiveness.

Example: A borrower entered into a five-year lease for its retail space in March 2015. The lease was renewed in March 2020. For purposes of determining forgiveness of the borrower’s PPP loan, the March 2020 renewed lease is deemed to be an extension of the original lease, which was in force before February 15, 2020.

As a result, the lease payments made under the renewed lease during the covered period are eligible for loan forgiveness.

A service for the distribution of transportation refers to transportation utility fees assessed by state and local governments. Payment of these fees by the borrower is eligible for loan forgiveness.

Yes. The entire electricity bill payment is eligible for loan forgiveness (even if charges are invoiced separately), including supply charges, distribution charges, and other charges such as gross receipts taxes.

No, the amount of loan forgiveness requested for nonpayroll costs may not include any amount attributable to the business operation of a tenant or sub-tenant of the PPP borrower or, for home-based businesses, household expenses. The examples below illustrate this rule.

Example 1: A borrower rents an office building for $10,000 per month and subleases out a portion of the space to other businesses for $2,500 per month. Only $7,500 per month is eligible for loan forgiveness.

Example 2: A borrower has a mortgage on an office building it operates out of, and it leases out a portion of the space to other businesses. The portion of mortgage interest that is eligible for loan forgiveness is limited to the percent share of the fair market value of the space that is not leased out to other businesses. As an illustration, if the leased space represents 25% of the fair market value of the office building, then the borrower may only claim forgiveness on 75% of the mortgage interest.

Example 3: A borrower shares a rented space with another business. When determining the amount that is eligible for loan forgiveness, the borrower must prorate rent and utility payments in the same manner as on the borrower’s 2019 tax filings, or if a new business, the borrower’s expected 2020 tax filings.

Example 4: A borrower works out of his or her home. When determining the amount of nonpayroll costs that are eligible for loan forgiveness, the borrower may include only the share of covered expenses that were deductible on the borrower’s 2019 tax filings, or if a new business, the borrower’s expected 2020 tax filings.

Yes, as long as (1) the amount of loan forgiveness requested for rent or lease payments to a related party is no more than the amount of mortgage interest owed on the property during the covered period that is attributable to the space being rented by the business, and (2) the lease and the mortgage were entered into prior to February 15, 2020.  

Any ownership in common between the business and the property owner is a related party for these purposes. The borrower must provide its lender with mortgage interest documentation to substantiate these payments.

While rent or lease payments to a related party may be eligible for forgiveness, mortgage interest payments to a related party are not eligible for forgiveness. PPP loans are intended to help businesses cover certain nonpayroll obligations that are owed to third parties, not payments to a business’s owner that occur because of how the business is structured.

This will maintain equitable treatment between a business owner that holds property in a separate entity and one that holds the property in the same entity as its business operations.

A seasonal employer that elects to use a 12-week period between May 1, 2019 and September 15, 2019 to calculate its maximum PPP loan amount must use the same 12-week period as the reference period for calculation of any reduction in the amount of loan forgiveness.

In calculating its loan forgiveness amount, a borrower may exclude any reduction in FTE employees if the borrower is able to document in good faith the following: (1) an inability to rehire individuals who were employees of the borrower on February 15, 2020 and (2) an inability to hire similarly qualified individuals for unfilled positions on or before December 31, 2020.

Borrowers are required to inform the applicable state unemployment insurance office of any employee’s rejected rehire offer within 30 days of the employee’s rejection of the offer. The documents that borrowers should maintain to show compliance with this exemption include the written offer to rehire an individual, a written record of the offer’s rejection, and a written record of efforts to hire a similarly qualified individual.

Yes. The FTE reduction exceptions apply to all employees, not just those who would be listed in Table 1 of the Loan Forgiveness Application (SBA Form 3508 or lender equivalent). Borrowers should therefore include employees who made more than $100,000 in the FTE reduction exception line in Table 1 of the PPP Schedule A Worksheet.

Certain pay reductions during the covered period or the alternative payroll covered period may reduce the amount of loan forgiveness a borrower will receive. If the salary or hourly wage of a covered employee is reduced by more than 25% during the covered period or the alternative payroll covered period, the portion in excess of 25% reduces the eligible forgiveness amount unless the borrower satisfies the Salary/Hourly Wage Reduction Safe Harbor (as described in the Loan Forgiveness Application (SBA Form 3508 or lender equivalent)). The examples below assume that each employee is a “covered employee.”

Example 1: A borrower received its PPP loan before June 5, 2020 and elected to use an eight-week covered period. Its full-time salaried employee’s pay was reduced during the covered period from $52,000 per year to $36,400 per year on April 23, 2020 and not restored by December 31, 2020. The employee continued to work on a full-time basis with a full-time equivalency (FTE) of 1.0.

The borrower should refer to the “Salary/Hourly Wage Reduction” section under the “Instructions for PPP Schedule A Worksheet” in the PPP loan forgiveness application instructions. In Step 1, the borrower enters the figures in 1.a, 1.b, and 1.c, and because annual salary was reduced by more than 25%, the borrower proceeds to step 2. Under step 2, because the salary reduction was not remedied by December 31, 2020, the Salary/Hourly Wage Reduction Safe Harbor is not met, and the borrower is required to proceed to step 3. Under step 3.a., $39,000 (75% of $52,000) is the minimum salary that must be maintained to avoid a penalty. Salary was reduced to $36,400, and the excess reduction of $2,600 is entered in step 3.b.

Because this employee is salaried, in step 3.e., the borrower would multiply the excess reduction of $2,600 by 8 (if it had instead selected a 24-week covered period, it would multiply by 24) and divide by 52 to arrive at a loan forgiveness reduction amount of $400. The borrower would enter on the PPP Schedule A Worksheet, Table 1, $400 as the salary/hourly wage reduction in the column above box 3 for that employee.

Example 2: A borrower received its PPP loan before June 5, 2020 and elected to use a 24-week covered period. An hourly employee’s hourly wage was reduced from $20 per hour to $15 per hour during the covered period. The employee worked 10 hours per week between January 1, 2020 and March 31, 2020.

The borrower should refer to the “Salary/Hourly Wage Reduction” section under the “Instructions for PPP Schedule A Worksheet” in the PPP Loan Forgiveness Application Instructions. Because the employee’s hourly wage was reduced by exactly 25% (from $20 per hour to $15 per hour), the wage reduction does not reduce the eligible forgiveness amount.

The amount on line 1.c would be 0.75 or more, so the borrower would enter $0 in the Salary/Hourly Wage Reduction column for that employee on the PPP Schedule A Worksheet, Table 1. If the same employee’s hourly wage had been reduced to $14 per hour, the reduction would be more than 25%, and the borrower would proceed to step 2. If that reduction were not remedied as of December 31, 2020, the borrower would proceed to step 3.

This reduction in hourly wage in excess of 25% is $1 per hour. In step 3, the borrower would multiply $1 per hour by 10 hours per week to determine the weekly salary reduction. The borrower would then multiply the weekly salary reduction by 24 (because the borrower is using a 24-week covered period).

The borrower would enter $240 in the Salary/Hourly Wage Reduction column for that employee on the PPP Schedule A Worksheet, Table 1. If the borrower applies for forgiveness before the end of the 24-week covered period, it must account for the salary reduction (the excess reduction over 25%, or $240) for the full 24-week covered period.

Example 3: An employee earned a wage of $20 per hour between January 1, 2020 and March 31, 2020 and worked 40 hours per week. During the covered period, the employee’s wage was not changed, but his or her hours were reduced to 25 hours per week. In this case, the salary/hourly wage reduction for that employee is zero, because the hourly wage was unchanged.

As a result, the borrower would enter $0 in the Salary/Hourly Wage Reduction column for that employee on the PPP Schedule A Worksheet, Table 1. The employee’s reduction in hours would be taken into account in the borrower’s calculation of its FTE during the covered period, which is calculated separately and may result in a reduction of the borrower’s loan forgiveness amount.

For purposes of calculating reductions in the loan forgiveness amount, the borrower should only take into account decreases in salaries or wages.

As long as a borrower submits its loan forgiveness application within ten months of the completion of the covered period, the borrower is not required to make any payments until the forgiveness amount is remitted to the lender by SBA. If the loan is fully forgiven, the borrower is not responsible for any payments.

If only a portion of the loan is forgiven, or if the forgiveness application is denied, any remaining balance due on the loan must be repaid by the borrower on or before the maturity date of the loan. Interest accrues during the time between the disbursement of the loan and SBA remittance of the forgiveness amount.

The borrower is responsible for paying the accrued interest on any amount of the loan that is not forgiven. The lender is responsible for notifying the borrower of remittance by SBA of the loan forgiveness amount (or that SBA determined that no amount of the loan is eligible for forgiveness) and the date on which the borrower’s first payment is due, if applicable.

Yes. All PPP lenders may accept scanned copies of signed loan forgiveness applications and documents containing the information and certifications required by SBA Form 3508, 3508EZ, 3508S, or lender equivalent.

Lenders may accept any form of Econsent or E-signature that complies with the requirements of the Electronic Signatures in Global and National Commerce Act (P.L. 106-229). If electronic signatures are not feasible, then when obtaining a wet ink signature without in-person contact, lenders should take appropriate steps to ensure the proper party has executed the document.

This guidance does not supersede signature requirements imposed by other applicable law, including by the lender’s primary federal regulator.

1. Confirm receipt of the borrower certifications contained in the SBA Form 3508S or lender’s equivalent form.
2. Confirm receipt of the documentation the borrower must submit to aid in verifying payroll and nonpayroll costs, as specified in the instructions to the SBA Form 3508S or lender’s equivalent form.

Exclusive to the PPP, lenders that grant loan forgiveness because an eligible recipient satisfies the forgiveness requirements under the CARES Act should not file a Form 1099-C information return with the IRS or provide a payee statement to the eligible recipient for federal income tax purposes.

Loans issued under the Economic Injury Disaster Loan (EIDL) program over $25,000 require a blanket lien on the assets of the business.  The lien is a Universal Commercial Code (UCC-1) lien allowing the SBA to take an interest in the assets of the business. 

SBA has concluded that there is no prohibition on a lender with a superior lien position to the UCC-1 lien filed under the EIDL loan arrangement to continue to advance additional funds under an existing borrowing arrangement.  SBA originally required borrowers to obtain written consent from SBA before taking future advances. 

This requirement was rescinded and removed from the Requirement Relative to Collateral conditions in the EIDL lending arrangement effective June 18, 2020.  SBA will be modifying existing EIDL loans issued before this date through a loan modification letter.  Therefore, EIDL borrowers are permitted to continue to draw from and receive additional loan funds from a lender with a superior lien position without jeopardy. 

The EIDL loan agreements contain language requiring consent before selling or transferring collateral. SBA will not arbitrarily withhold consent which is generally granted upon request when the sale or transfer benefits the business and allows it to continue to operate.  The turnover of inventory is allowed in the ordinary course and does not require consent.

Borrowers seeking consent for subordination should contact the SBA through the following methods:

Mail
U.S. Small Business Administration
Processing and Disbursement Center
14925 Kingsport Road
Fort Worth, TX  76155-2243

Fax  (202) 481-5931

Email  pdc.reconsideration@sba.gov
Emails should have "COVID-Subordination Request" in the subject line. 

If a borrower received an EIDL advance, SBA is required to reduce the borrower’s loan forgiveness amount by the amount of the EIDL advance. SBA will deduct the amount of the EIDL advance from the forgiveness amount remitted by SBA to the lender.

The lender will be able to confirm the amount of the EIDL advance that will be automatically deducted by SBA from the forgiveness payment by reviewing the borrower’s EIDL advance information in the PPP Forgiveness Platform.

If a PPP loan is not forgiven in full (including if there has been a reduction in the forgiveness amount for an EIDL advance), any remaining balance due on the PPP loan must be repaid by the borrower.

The lender is responsible for notifying the borrower of the loan forgiveness amount remitted by SBA and the date on which the borrower’s first loan payment is due. The lender must continue to service the loan.

The borrower must repay the remaining loan balance by the maturity date of the PPP loan (either two or five years). If a borrower is determined to have been ineligible for a PPP loan for any reason, SBA may seek repayment of the outstanding PPP loan balance or pursue other available remedies.

A borrower that received an EIDL advance in excess of the amount of its PPP loan will not receive any forgiveness on the PPP loan, because the amount of an EIDL advance is deducted from the PPP loan forgiveness amount. The lender is responsible for notifying the borrower of the date on which the borrower’s first loan payment is due.

The lender must continue to service the loan. The borrower must repay the remaining loan balance by the maturity date of the PPP loan (either two or five years). If a borrower is determined to have been ineligible for a PPP loan for any reason, SBA may seek repayment of the outstanding PPP loan balance or pursue other available remedies.