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Exit the PPP Catch-22 loan: Travel Weekly


Marc Pestronk

Question: I know that until my agency Paycheck Protection Program (PPP) loan is canceled, I am not supposed to sell my agency unless I place the equivalent of the full loan amount in an escrow account with the bank, as you explained in your October report. 12 column: “Narrow path to a sales agency with a PPP loan”. Of course, I don’t have a lot of money; if I had, I wouldn’t have needed the PPP loan in the first place. So it looks like I’m going to go bankrupt because I can’t sell or get forgiveness quickly even though I have a few interested buyers. Do you know of a way to get around the escrow rule?

A: There is no doubt that the Small Business Administration has created a Catch-22 for potential sellers because they can’t sell without escrow, and they can’t afford escrow unless they sell. However, in representing sellers or buyers over the past eight months, I have come across at least four ways to possibly avoid SBA roadblocks.

I say “maybe” because, except in one sense, there is no guarantee that your bank or the SBA would allow these transactions, even assuming it is necessary to notify them, so you should consult your own. avocado before trying them.

First, the safest method to resolve your issue is to ask the potential buyer to lend you the money for escrow. Once you have obtained the money and submitted your PPP forgiveness request, you are ready to proceed with the acquisition.

While this buyer loan method works, I imagine that not many buyers would be willing to lend you money, as they may run out of money themselves, and once they acquire you after the cancellation Of the PPP loan, there is really no assurance that they will be able to collect the loan after paying you the purchase price.

The other transactions are an interim management contract, a 19% buyout with an option to buy the remainder, and a lease or license contract. Under the management agreement, you appoint the potential buyer’s company as the “manager” of your agency, and the manager must inject the necessary working capital to keep you afloat until the cancellation of the PPP is obtained.

The manager’s compensation would consist of any profit your agency made, and the manager would have to absorb the losses in the future. Once the pardon has been obtained, you can close the transaction.

Under the 19% redemption method, you would only sell 19% of your shares or assets as this transaction would not trigger the escrow requirement as it applies to sales of at least 20% of the stock. society. The buyer would then have the option of purchasing the remainder after the discount is obtained, but in the meantime the buyer would pay the purchase price.

Under the lease or license method, you can lease your staff, or license an asset, to the buyer in exchange for what would have been part of the purchase price and close the deal once the discount is obtained. .


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