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PPP Loans Can Add Complexities When Selling a Business

  • The Paycheck Protection Program and other COVID-19 relief measures may impact the purchase price when selling a business
  • Changing PPP rules, along with the upcoming presidential election and uncertainty over future relief measures, add complications
  • Pandemic also presents challenges to buyers and sellers seeking to do their due diligence

Whether you’re retiring after a long career in the company you started or looking to move on a few years after launching a startup, selling a business can be a complex decision. The COVID-19 pandemic and its associated relief bills have only complicated things further.

Businesses that received loans through the Paycheck Protection Program should keep up with the evolving rules regarding their forgiveness, and the federal government has also outlined rules on how a business can change ownership before forgiveness or a loan payoff. Other factors that potentially impact the purchase price of a business include modifications for net operating losses under the CARES Act, the possibility of payroll tax deferment, and increases to the capital gains tax rates proposed by Democratic presidential candidate Joe Biden.

Buyer due diligence can also be more difficult to accomplish during current conditions. Sellers may need to be more aware of various aspects of their business, ranging from supply chains to vendors, and how they may be affected in the coming months.

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