SBA Bankers To Discuss New Small Business Aid at Jan. 26 GABB Meeting
Bankers with expertise in handling SBA loans will take questions about applying for the next round of Paycheck Protection Program (PPP) funding at the Jan. 26 virtual meeting of the Georgia Association of Business Brokers.
GABB Affiliate Representative Kim Eells will lead a panel of SBA bankers who will take questions about the newest COVID relief package, including PPP. Eells is Senior Vice President of SBA Business Development at Georgia Primary Bank.
Others who will be on hand to answer questions are Thomas Rockwood, Senior Vice President of SBA Lending at Atlantic Capital Bank and Cadence Bank Vice President and SBA Banker Ryan Stoll.
The Paycheck Protection Program (PPP) will re-open the week of January 11 for new borrowers and certain existing PPP borrowers, according to the U.S. Small Business Association. This round of the PPP continues to prioritize millions of Americans employed by small businesses by authorizing up to $284 billion toward job retention and certain other expenses through March 31, 2021, and by allowing certain existing PPP borrowers to apply for a Second Draw PPP Loan, the SBA says.
The GABB meeting will be held online starting at 10 a.m. Register in advance for this meeting at this link. After registering, you will receive a confirmation email containing information about joining the meeting.
The SBA says a borrower is generally eligible for a Second Draw PPP Loan if the borrower:
- Previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses;
Has no more than 300 employees; and - Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.
- The GABB is the state’s premier organization devoted to buying and selling businesses and franchises, and operates the state’s only real estate school dedicated to business brokering.
For more information about GABB, please email diane.loupe@gabb.org or call or text 770-744-3639, or contact GABB president Judy Mims at judy@childcare.properties or 404-842-1997.
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SBA Extends COVID-19 EIDL Application Deadline through 2021
WASHINGTON— The U.S. Small Business Administration (SBA) announced that the deadline to apply for the Economic Injury Disaster Loan (EIDL) program for the COVID-19 Pandemic disaster declaration is extended to December 31, 2021. The deadline extension comes as a result of the recent bipartisan COVID-19 relief bill passed by Congress and enacted by the President on December 27, 2020.
To date, SBA has approved $197 billion in low-interest loans which provide U.S. small businesses, non-profits and agricultural businesses working capital funds to help America’s small businesses make it through this challenging time.
“Following the President’s declaration of the COVID-19 Pandemic, SBA has approved over 3.6 million loans through our Economic Injury Disaster Loan program nationwide,” Administrator Jovita Carranza said. “The EIDL program has assisted millions of small businesses, including non-profit organizations, sole proprietors and independent contractors, from a wide array of industries and business sectors, to survive this very difficult economic environment.”
EIDL loan applications will continue to be accepted through December 2021, pending the availability of funds. Loans are offered at very affordable terms, including a 3.75% interest rate for small businesses and 2.75% for non-profit organizations, a 30-year maturity, and an automatic deferment of one year before monthly payments begin. Every eligible small business and non-profit are encouraged to apply to get the resources they need.
About the U.S. Small Business Administration
The U.S. Small Business Administration makes the American dream of business ownership a reality. As the only go-to resource and voice for small businesses backed by the strength of the federal government, the SBA empowers entrepreneurs and small business owners with the resources and support they need to start, grow or expand their businesses, or recover from a declared disaster. It delivers services through an extensive network of SBA field offices and partnerships with public and private organizations. To learn more, visit www.sba.gov.
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Getting the Most Out of Confidentiality Agreements
When it comes to buying or selling a business, a solid confidentiality agreement is a must. A key way that business brokers and M&A advisors help buyers and sellers is through their extensive knowledge of confidentiality agreements and how best to implement them. In this article, we will give you an overview of what to expect out of your confidentiality agreements.
A confidentiality agreement is a legal agreement that essentially forbids both buyers and sellers, as well as related parties such as agents, from disclosing information regarding the transition. You should have a confidentiality agreement in place before discussing the business in any way and especially before divulging key information on the operation of the business or trade secrets.
While a confidentiality agreement can be used to keep the fact that a business is for sale private, that is only a small aspect of what modern confidentiality agreements generally seek to accomplish. Confidentiality agreements are used to ensure that a prospective buyer doesn’t use any proprietary data, knowledge, or trade secrets to benefit themselves or other parties.
When creating a confidentiality agreement, keep several variables in mind:
- What information will be excluded
- What information will be disclosed
- The term of the confidentiality agreement
- The remedy for breach, and
- The manner in which confidential information will be used and handled.
Any effective confidentiality agreement will contain a variety of key points. Sellers will want their confidentiality agreement to cover a fairly wide array of territory. or example, the confidentiality agreement will state that the potential buyer will not attempt to hire away employees. In general, this and many other details, will have a termination date.
The specifics of how confidentiality is to be maintained should also be included in the confidentiality agreement. Parties should agree to hold conversations in private; this point has become increasingly important due to the use of mobile phones and in particular the use of mobile phones in out-of-office locations. Additionally, it is prudent to specify that principal names should not be used in outside discussions and that a code name should be developed for the name of the proposed merger or acquisition.
Safeguarding documents is another area that should receive considerable attention. Digital files should be password protected. All paperwork should be kept in a safe location and locked away for maximum privacy when not in use.
In their enthusiasm to find a buyer for their business, many sellers have overlooked the confidentiality agreement stage of the process. Most have regretted doing so. A confidentiality agreement can help protect your business’s key information from being exploited during the sales process. Any experienced and capable business broker or M&A advisor will strongly recommend that buyers and sellers always depend on confidentiality agreements to establish information disclosure perimeters.
Copyright: Business Brokerage Press, Inc.
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Georgia Named Top State for Business
ATLANTA – The State of Georgia has shattered its own record by being named No. 1 for business climate for the eighth consecutive year by Site Selection magazine.
In 2019, Georgia became the only state to earn this distinction seven consecutive times in the history of Site Selection’s rankings, and it is now the only state to receive the honor eight times in a row. Governor Brian P. Kemp’s announcement on Nov. 12 followed a tour of Bridgestone Golf’s headquarters and research and development facility in Covington, Georgia, where the Governor was also presented with golf balls stamped with the “No. 1 State” artwork to commemorate the occasion.
“I’m so proud that Georgia has earned this top business distinction for a record-setting eight years, and it is an honor to accept this award from Site Selection magazine,” said Gov. Kemp. “Our top-notch workforce development programs and pro-business environment, along with our strong logistics infrastructure, have further solidified the Peach State as the best place in the nation to live, work, raise a family, and start or grow a business. I thank our partners in both the public and private sectors, our world-class economic development team, and the hardworking Georgians throughout the state who helped us beat our own record with this unprecedented achievement.”
Site Selection magazine is an internationally circulated business publication covering corporate real estate and economic development. The publication’s rankings are 50% based on an index of seven criteria and 50% on the input received from a survey of independent site location experts who are asked to rank states based on their recent project experiences. This year, Georgia shares this top ranking with North Carolina.
“Our readers are keenly interested in our annual state business climate ranking, because they seek locations with the greatest prospects for success,” said Site Selection Editor in Chief Mark Arend. “Georgia’s eighth consecutive Top State Business Climate win reminds them that a Georgia location will contribute to their productivity and profitability long term.”
In a survey published with the rankings, workforce skills were the most important criteria to site selectors for the fifth consecutive year, with workforce development programs coming in second place. Transportation infrastructure, ease of permitting and regulatory procedures, along with state and local taxes completed the top five issues of importance to the process.
President and CEO of Bridgestone Golf Dan Murphy hosted Governor Kemp, alongside First Lady Marty Kemp, and members from both the Georgia Department of Economic Development (GDEcD) and Site Selection magazine, as they safely celebrated these accolades. The event also highlighted Bridgestone Golf’s continued success in the state as they celebrate their 30th anniversary in Covington. The Georgia Made™ company employs nearly 160 Georgians and has continued to make new investments in research and development. Earlier this week, Bridgestone re-signed Tiger Woods and Bryson DeChambeau to long-term contract extensions, which includes DeChambeau significantly increasing his involvement in Bridgestone’s R&D processes for developing new golf ball technology.
“Georgia’s success is thanks to a long, proven track record of our state doing things the right way,” said GDEcD Commissioner Pat Wilson. “Whether entering or expanding in Georgia, it’s our goal to give every company we work with the peace of mind they need to know that they will have a long-term partner in the state.”
Site Selection magazine joins Area Development magazine in naming Georgia the top state for business for 2020 – the eighth and seventh consecutive year, respectively, that both publications have awarded Georgia the top ranking. Earlier this week, Governor Kemp also shared that Georgia remains on a record pace for economic development investments and job creation in the state during fiscal year 2021, increasing investments by 56% and jobs by 45% compared to the same timeframe last year.
About GDEcD
The Georgia Department of Economic Development (GDEcD) is the state’s sales and marketing arm, the lead agency for attracting new business investment, encouraging the expansion of existing industry and small businesses, locating new markets for Georgia products, attracting tourists to Georgia, and promoting the state as a destination for arts and location for film, music and digital entertainment projects, as well as planning and mobilizing state resources for economic development. Visit www.georgia.org for more information.
Guidelines on PPP Loans When Selling a Business
Kim Eells, Senior Vice President and Small Business Administration (SBA) Business Development Officer for Georgia Primary Bank.
Kim Eells, Senior Vice President and Small Business Administration (SBA) Business Development Officer for Georgia Primary Bank, discussed new SBA guidelines on dealing with Paycheck Protection Program loans when selling a business at the Nov. 10 GABB meeting. Kim is an Affiliate Board member of GABB.
The SBA issued guidelines on Oct. 2 that provide a framework to determine whether SBA consent is necessary when selling a business or other entity that has received PPP funds.
Listen to an audio recording of Ms. Eells’ remarks at this link.
She recommended that sellers with PPP loans should ask forgiveness, a process that could take up to five months, but in practice usually takes less time. The SBA is also issuing a new form, 3508s which will make it easier for entities with PPP loans under $50,000 to apply for forgiveness.
If a business has an EIDL loan, she recommends postponing an application for PPP forgiveness.
GABB Affiliate attorney Wendy Kraby said that for the sale of a business with an SBA loan, “I am seeing the banks want to see very specific language in the Purchase Agreements detailing the requirement of an Escrow Account. The bank then wants to see that Agreement (before it is signed) to make sure it meets the bank’s requirements. Because of this, it is very important to contact the bank at the very beginning of planning for sale AND before a PSA is signed.”
Ms. Kraby described a typical provision to handle a PPP loan in a Purchase Agreement. “The Seller has taken out a Paycheck Protection Program loan in the amount of $______________with XXX Bank. Seller has completed and submitted a PPP Forgiveness Application along with all supporting documentation. At Closing, Seller shall deposit into an Interest Bearing Escrow Account controlled by XXX Bank Corporation an amount equal to the outstanding balance of the PPP loan pursuant to the Escrow Agreement, attached hereto as Exhibit “D.”
The Georgia Association of Business Brokers, or GABB, is the state’s premier organization devoted to buying and selling businesses and franchises, and operates the state’s only real estate school dedicated to business brokering. For more information about GABB, please email diane.loupe@gabb.org, call or text 404-374-3990.
“The PPP has provided 5.2 million loans worth $525 billion to American small businesses, providing critical economic relief and supporting more than 51 million jobs,” said Treasury Secretary Steven T. Mnuchin in a press release.
The SBA specifies that “There are different procedures depending on the circumstances of the change of ownership, as set forth below. In all cases, the PPP Lender is required to continue submitting the monthly 1502 reports until the PPP loan is fully satisfied.”
- 1.The PPP Note is fully satisfied. 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
- The PPP Note is not fully satisfied. If the PPP Note is not fully satisfied prior to closing the sale or transfer, the following applies:
- Cases in which SBA prior approval is not required. If the following conditions are met for (i) a change of ownership structured as a sale or other transfer of common stock or other ownership interest or as a merger; or (ii) a change of ownership structured as an asset sale, the PPP Lender may approve the change of ownership and SBA’s prior approval is not required:
- 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:
- A. The sale or other transfer is of 50% or less of the common stock or other ownership interest of the PPP borrower3; or
- B. 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.
- In any of the circumstances described in a) or b) above, the procedures described in paragraph #2.c. below must also be followed.
- 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.
- Cases in which SBA prior approval is required. If a change of ownership of a PPP borrower does not meet the conditions in paragraph #2.a. above, prior SBA approval of the change of ownership is required and the PPP Lender may not unilaterally approve the change of 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:- the reason that the PPP borrower cannot fully satisfy the PPP Note as described in paragraph #1 above or escrow funds as described in paragraph #2.a above;
- the details of the requested transaction;
- a copy of the executed PPP Note;
- 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;
- disclosure of whether the buyer has an existing PPP loan and, if so, the SBA loan number; and
- 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.
- For all sales or other transfers of common stock or other ownership interest or mergers, whether or not the sale requires SBA’s prior approval. 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:
- identity of the new owner(s) of the common stock or other ownership interest;
- new owner(s)’ ownership percentage(s);
- tax identification number(s) for any owner(s) holding 20 percent or more of the equity in the business; and
- location of, and the amount of funds in, the escrow account under the control of the PPP Lender, if an escrow account is required.
PPP Loans Pledged in Paycheck Protection Program Liquidity Facility (PPPLF)
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.
Questions concerning this Notice may be directed to the Lender Relations Specialist in the local SBA Field Office, which can be found at https://www.sba.gov/tools/local– assistance/districtoffices.
SBA Procedural Notice: SBA PPP Loans and Change of Ownership
The Georgia Association of Business Brokers, or GABB, is the state’s premier organization devoted to buying and selling businesses and franchises, and operates the state’s only real estate school dedicated to business brokering. For more information about GABB, please email diane.loupe@gabb.org, call or text 404-374-3990, or contact GABB president Dean Burnette at dean@b3brokers.com or (912) 247-3209.
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