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Are PPP loans considered in business valuation?

Like many Cincinnati-area business owners, you might have taken out a Paycheck Protection Program (PPP) loan in 2020 to help you stay afloat and retain your workforce during pandemic lockdowns and the resulting recession. As you recall, PPP loans were part of the CARES Act passed by Congress in response to the economic crisis that COVID triggered in the U.S.

Now you are getting divorced and your share of the company is potentially part of the martial property and subject to division. Part of the process requires a business valuation so you and your spouse know exactly what your interest in the business is worth. Is your company’s PPP loan part of that consideration?

How a PPP loan could impact your business’ valuation

A PPP loan might have affected the value of your business in one of two ways. Many businesses that accepted PPP loans ended up not requiring all or some of the money, so they held onto the funds. That would make the funds an asset along with other property the business owns.

Others that were badly affected by the recession used all the loan money to cover for periods of little to no business coming in. This was what the loans were intended to help with, but they also might have masked a downturn in the business’ value, at least temporarily. A business valuation expert hired as part of divorce proceedings would need to take this fact into consideration.

Something to be addressed

Thus, the CARES Act may have a major, though indirect, impact on property division for high-asset divorcing couples in Cincinnati and throughout the country. If you are a partner or sole proprietor of an employer that received a PPP loan, your divorce attorney should be made aware of this.


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