SBA Denying Your PPP Loan Forgiveness: Legal Options and Appeals

Thanks for visiting Federal Lawyers – a second-generation law firm managed by our lead attorney, with over 40 years of combined experience handling federal cases. If the SBA denied your PPP loan forgiveness, you’re facing immediate repayment of the full loan amount plus interest – potentially tens or hundreds of thousands of dollars. Worse, the denial might be the first step toward criminal investigation if the SBA suspects fraud.

We help clients appeal SBA forgiveness denials and defend against fraud allegations that arise from those denials. You have legal options, but you must act within 30 days of receiving the denial decision. Miss that deadline and you lose your right to appeal.

Why the SBA Denies Forgiveness

The SBA denies forgiveness for several reasons. Insufficient documentation is most common – you didn’t provide adequate proof of how you spent PPP funds. The SBA requires bank statements, payroll records, tax filings, invoices. If your documentation is incomplete or unclear, they’ll deny forgiveness.

Failure to meet the 60/40 rule triggers denials. You needed to spend at least 60% on payroll costs. If your documentation shows you spent 55% on payroll and 45% on rent and utilities, the SBA will deny full forgiveness or reduce the forgiven amount.

Ineligibility findings deny forgiveness. The SBA reviews whether you were eligible for the loan in the first place. If they determine your business didn’t exist before February 15, 2020, or you weren’t affected by COVID, or you didn’t meet employee count requirements – they’ll deny forgiveness and demand full repayment.

Discrepancies between your application and documentation cause denials. Your forgiveness application claimed $80,000 in payroll costs. Your bank statements show $60,000 in payroll deposits. That $20,000 gap raises questions. The SBA will deny forgiveness for the unsupported amount or deny the entire application pending further review.

Fraud indicators result in denial and criminal referral. If the SBA sees evidence of falsified documents, inflated expenses, non-existent employees – they’ll deny forgiveness and refer your case to the Office of Inspector General for investigation. At that point, you’re not just fighting a civil denial, you’re potentially facing criminal charges.

The 30-Day Appeal Deadline

When the SBA issues a final loan review decision denying forgiveness, you have 30 days to appeal to the Office of Hearings and Appeals. This deadline is absolute. File your appeal on day 31, and OHA will dismiss it as untimely.

The 30 days starts from when you receive the decision, not when the SBA issues it. Receipt is critical – the date you actually got the final loan review decision document. If your lender notified you before you received the official SBA decision, the earlier date might control. Document when you received notice.

DEFENSE TEAM SPOTLIGHT

Todd Spodek

Lead Attorney & Founder

Featured on Netflix's "Inventing Anna," Todd Spodek brings decades of high-stakes criminal defense experience. His aggressive approach has secured dismissals and acquittals in cases others deemed unwinnable.

NY Bar Admitted Multi-State Licensed Federal Courts

Meet the Full Team

Legal Scenario: What Would You Do?

Scenario

You received a letter from the SBA stating that your PPP loan forgiveness application has been denied because they determined your business did not maintain adequate employee headcount during the covered period, even though you believe you met all the requirements. Your lender is now demanding full repayment of the $185,000 loan within 30 days, and you're worried that the denial could trigger a fraud investigation.

What legal options do I have to appeal the SBA's denial of my PPP loan forgiveness before I'm forced to repay the full amount?

Attorney's Answer

Under SBA Procedural Notice 5000-20057, you have the right to request an OHA (Office of Hearings and Appeals) review within 30 calendar days of receiving the final SBA loan review decision, and we would immediately file that appeal to preserve your rights. We would challenge the SBA's headcount calculation by presenting payroll records, rehiring documentation, and any good-faith exemptions under Section 1106(d) of the CARES Act that may apply to your situation. During the appeals process, loan repayment obligations are generally stayed, giving us time to build a strong case. If the SBA's denial also raises the specter of a criminal referral under 18 U.S.C. § 1014 for alleged false statements on a loan application, we would simultaneously prepare a defense strategy to protect you on that front.

This is general information only. Contact us for advice specific to your situation.

Filing an appeal automatically places your loan in deferment status. You don’t have to start repaying while the appeal is pending. This protection is valuable – it gives you time to gather evidence and build your case without making payments on a potentially invalid denial.

File your appeal at appeals.sba.gov. The OHA has specific procedures and forms. Your appeal must include: a copy of the SBA’s final loan review decision, a statement of why the decision was wrong, supporting documentation and evidence, and explanation of your legal arguments.

What You Can Appeal