The Paycheck Protection Program (PPP) loan was created to provide financial assistance to small businesses affected by the COVID-19 pandemic. However, there may be instances when a business is not able to use the entirety of the loan, or simply wants to sell the loan to another party. In such cases, a PPP loan asset purchase agreement may be necessary.

A PPP loan asset purchase agreement is a legal document that outlines the terms and conditions of the sale of a PPP loan to a third party. The agreement typically includes details such as the purchase price, payment terms, representations and warranties of both parties, and any other provisions deemed necessary.

One important factor to consider in a PPP loan asset purchase agreement is whether the loan is eligible for forgiveness. PPP loans can be forgiven if the business meets certain criteria such as using the loan proceeds for eligible expenses and maintaining employee headcount. If the loan is eligible for forgiveness, the agreement should specify how the parties will handle the forgiveness process and any resulting funds.

Another important consideration is the impact of the sale on the original borrower’s obligations under the loan. In most cases, the sale of a PPP loan does not release the borrower from their obligations to repay the loan. The borrower may still be responsible for any remaining loan balance, so it’s important to factor this into the purchase agreement.

Moreover, it is crucial to ensure that the purchase of the PPP loan complies with all applicable laws and regulations. The agreement should also include provisions for dispute resolution and indemnification.

In conclusion, a PPP loan asset purchase agreement is a necessary document for businesses looking to sell their PPP loan to a third party. Careful consideration should be given to factors such as forgiveness eligibility, borrower obligations, compliance with laws and regulations, and dispute resolution. Working with an experienced attorney can help ensure that the agreement is properly drafted and protects the interests of all parties involved.