Facts for requesting full or partial denial of PPP forgiveness

Public data from the Small Business Administration (SBA) shows that more than 98% of the total Paycheck Protection Program (PPP) loan value requested by borrowers was forgiven by the SBA (approximately $692 million of the $700 million requested dollars were released). ). Over the past month, however, the number of applications for remission denied by the SBA has increased. Borrowers should be aware that such denials are subject to appeal and consider appealing the denial of forgiveness if they believe the SBA’s decision was a mistake.

For borrowers who receive a full or partial denial of their PPP waiver request, here are six things to consider:


1. Do not assume that the SBA has carefully reviewed its documentation or correctly applied its rules and guidelines.

With more than 11 million PPP loans originated in 2020 and 2021, it was inevitable that a significant number of forgiveness requests would be rejected. Likewise, it was inevitable that the SBA would make mistakes in reviewing such an influx of credit and forgiveness requests. The SBA appears to be denying PPP enactment requests at an increased pace in 2022, and many of those denials appear to contradict the SBA’s own rules and guidelines. Borrowers have received denial letters alleging the SBA’s misapplication of its own Interim Final Rules (IFRs), misapplication of the SBA’s affiliation rules, communication problems between the SBA and lenders, and even mistaking a borrower’s information for a independent borrower by the SBA. Accordingly, borrowers should not simply accept the SBA’s decision when there is a possibility that it was made in error.

2. There is a 30-day period to appeal denials of pardon to the SBA’s Office of Hearings and Appeals (OHA).

If the SBA decides to deny all or part of a borrower’s forgiveness application, the SBA sends the borrower’s lender a final decision for credit review. Lenders must then communicate this decision to the borrower within five business days. The SBAs last rule on “Borrower Appeals Against Final SBA Loan Approval Decisions Under Paycheck Protection Program” provides that a borrower has 30 calendar days after “Receipt of Final SBA Loan Approval Decision” to appeal the SBA’s decision to the OHA. See 13 CFR § 134.1202(a). Accordingly, the 30-day clock begins to run from the date a borrower receives the decision from their lender, rather than the date listed in the final credit review decision.

3. Appeals to the SBA’s final decisions are filed through the OHA’s Case Portal and must include specific information.

Borrowers wishing to appeal the SBA’s final credit review decision must do so by filing an appeal through the OHAs case portal. There is no set format for the appeal, so borrowers or their attorneys can prepare a letter or written description setting out the reasons for the appeal. However, the objection must meet the following minimum requirements:

  1. Provide a full, specific explanation of why the SBA’s final credit review decision is erroneous, along with all factual information and legal arguments supporting the explanation;

  2. No longer than 20 pages (excluding attachments). A government directory is only required for complaints citing more than 20 cases, regulations or laws; and

  3. All exhibits and supplements must be clearly marked.

Along with the appeal, borrowers must upload the SBA’s final credit review decision and provide the name, address, phone number, email address, and signature of the borrower or the borrower’s attorney.

4. The appeal process should take approximately 90 days but could take much longer.

After a borrower files an objection, the OHA issues a notice and order setting a time limit for SBA to submit the administrative record and a date by which SBA may respond to the objection. The SBA Borrower’s Guide assumes that the Notice & Order should be issued within three days; however, the issuance of the Notice & Order is likely to take much longer. Pursuant to 13 CFR §134.1207, the SBA has 20 calendar days from the issuance of the Notice & Order to prepare an administrative record unless additional time is requested and granted.

Borrowers should review administrative records and object to the contents generally within 30 days of the notice and order being submitted. For example, the borrower may object to the omission of certain documents or request that the documents be corrected.

In addition to filing the Administrative Record, the SBA has 45 days from the issuance of the Notice & Order to respond to the complaint, but the agency is under no obligation to do so. The borrower does not typically have an opportunity to respond to a response from the SBA, but may do so in certain circumstances.

Unless the OHA extends the time limit, the record will expire 45 calendar days after the notice and order is issued. The OHA then has 45 days after the completion of the records to consider the merits of the appeal and make a decision through its case portal. If the OHA’s decision is not favorable, borrowers have 30 calendar days to request a re-examination by the OHA. Alternatively, borrowers can lodge a complaint with the competent federal court.

5. If a borrower appeals to the OHA, the loan repayment will continue to be deferred.

Once a borrower has filed a timely appeal against the SBA’s denial of forgiveness, payment of the PPP loan will be deferred until the OHA makes a final decision. The borrower must provide their lender with a copy of the timely appeal request in order for the lender to extend the forbearance. Borrowers should note, however, that interest on the loan will continue to accrue during the deferral.

6. If a decision to deny forgiveness is made by a lender and not by the SBA, the borrower may appeal the lender’s decision to the SBA.

On January 27, 2022, procedural note entitled “SBA Loan Reviews of Paycheck Protection Program Lender Partial Approval Forgiveness Decisions,” the SBA established the process for appeals when the lender– not the SBA – makes the decision to refuse forgiveness. In such cases, the borrower has 30 days to file a request through the lender with the SBA to review the lender’s decision. Unlike a complaint to the OHA, borrowers must make payments on the balance of the PPP loan while the SBA reviews the complaint. If the SBA ultimately grants full forgiveness, the lender must return those payments.

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