What to Do If SBA Denies Your PPP Forgiveness Application.

Borrowers may submit their PPP forgiveness applications through SBA’s direct forgiveness portal or through the lender that issued the PPP loan. Once you receive your lender’s decision, your next steps depend on whether your PPP loan is subject to SBA review. Lenders initially review PPP forgiveness applications. Depending on their assessment, lenders will either approve your application, deny your application, or refer your application to the SBA. The SBA may independently review any PPP loan, regardless of the amount of the loan, and the SBA may do so at any time. While PPP lenders may deny loan forgiveness applications for a variety of reasons, common grounds for denial include, but are not limited to:

• Ineligibility of the business for PPP loan forgiveness
• Calculation errors made on the PPP loan forgiveness application
• Missing documentation for PPP loan forgiveness
• Improper use of loan proceeds

Lenders’ initial assessments are frequently incorrect. If your lender denies your PPP loan forgiveness application, you have several options. You can ask your lender to reconsider its decision, ask your lender to refer your application to the SBA, or simply wait for a referral to the SBA and await an Official SBA denial.

However, a lender cannot issue the final SBA loan review decision that allows you to appeal. The SBA has the sole authority to issue the final loan review decision that allows you to appeal. This means that until you receive an Official SBA denial, you cannot legally appeal.

Once you receive the final SBA loan review decision, you have 30 calendar days after receipt of that decision to file an appeal with OHA. If you do not appeal the final SBA loan review decision within the 30-day appeal window, you can no longer appeal that decision to OHA. Because the window for filing your appeal is so short, it is imperative that you take action as soon as you receive your loan forgiveness denial letter.

Which denial-specific records can prove each PPP forgiveness requirement?

The SBA reviews four primary areas when considering whether to grant PPP loan forgiveness. Borrowers must meet two conditions to be eligible for PPP loan forgiveness. First, the borrower must satisfy the original eligibility requirements that the borrower needed to satisfy to obtain the PPP loan. Second, the borrower must satisfy the conditions for PPP loan forgiveness.

SBA PPP loan forgiveness is contingent on the borrower using the PPP loan proceeds for allowable purposes during the loan’s covered period. The SBA determines whether proceeds were spent on ineligible expenses such as payroll, rental costs, mortgage interest, utilities, and materials or equipment, as well as other covered business expenses.

The SBA also reviews the calculations on the PPP loan forgiveness application. The SBA’s review typically includes verifying the borrower’s stated calculations to ensure the accuracy of the borrower’s calculations.

While the SBA does not require PPP loan borrowers to maintain a specific record retention system for the purposes of PPP loan forgiveness review, SBA PPP loan borrowers are generally required to maintain all records related to their PPP loan for six years after receiving PPP loan forgiveness or making full payment of the PPP loan.

SBA PPP loan borrowers may be subject to SBA PPP loan review at any time. In the event of an SBA review, the SBA has the authority to require a PPP loan borrower to provide access to any information it deems relevant to conducting the review, including records maintained by a third party.

When determining which denial-specific records are required to prove compliance with the conditions for PPP loan forgiveness, the SBA takes into account the reason for denial. For example, if the SBA denies your PPP loan forgiveness application due to improper spending of proceeds, the SBA may issue an Information Request for all of your business’s financial records.

Ultimately, answering a PPP loan forgiveness denial is about identifying the most relevant records that are not otherwise subject to public disclosure.

Who may file a PPP appeal, and what must happen within 30 days?

If your PPP loan is denied, your last option is to appeal to the Office of Hearings and Appeals (OHA). OHA is the U.S. Small Business Administration’s Office of Hearings and Appeals, and it has authority to hear appeals within the jurisdiction granted by SBA regulations. To file a PPP appeal, you must file a PPP appeal petition with the OHA.

The most important issue in filing your PPP appeal is timing. You have the right to appeal your PPP review decision if, and only if, you file your PPP appeal petition within 30 calendar days after receipt of your final review decision. Do not count the day the decision is received, but count the last day; if the last day falls on a Saturday, Sunday, or federal holiday, the deadline moves to the next business day. If you file your PPP loan appeal petition with the OHA past the 30-day deadline, your appeal is subject to dismissal. While OHA sometimes grants extensions to resolve matters without formal action, generally, the 30-day deadline is non-negotiable.

Along with the timeline, the filing process is also specific. All PPP appeal petitions must be filed electronically through OHA’s online Case Portal. Finally, it is critical to remember that only the original borrower or legal successor to the borrower has the standing to appeal the denial of PPP loan forgiveness.

If you have questions or concerns about appealing a PPP denial, do not hesitate to contact us. Our PPP loan attorneys represent PPP loan borrowers nationwide. In order to help us best assist you, please reach out to us as soon as possible so we can file your appeal within the 30-day deadline.

• SBA PPP Review Denial Timeline -

What filing defects and record disputes can weaken an OHA petition?

The requirements to file a PPP appeal are also very specific. A PPP appeal petition with the OHA must:

• Include the final decision regarding the PPP loan forgiveness application and the date the decision was received. The appeal petition must also include a short statement explaining why the appellant is filing the appeal.
• Specifically explain the factual and legal reasons the SBA’s final decision was erroneous. The appeal petition must also explain the relief the appellant is seeking from the OHA.
• Include the appellant’s name, address, phone number, email address, and signature. The appeal petition must also include the name, address, phone number, email address, and signature of the appellant’s legal representative, if any.

The appeal petition must not exceed 20 pages (excluding attachments).

• Include labeled exhibits and attachments.

If your appeal petition has filing defects, it will not affect your ability to prove that you are entitled to loan forgiveness. Instead, your OHA appeal petition may be returned to you for correction. When filing an OHA appeal petition, the OHA may also request a copy of your loan’s initial forgiveness application or the record retention information from you. It is important that you maintain accurate records and keep all relevant records in order to prove that you are entitled to PPP loan forgiveness.

Even if you do not have any filing defects or concerns about your record retention, you still may not necessarily have any hope of overcoming your loan forgiveness denial. Along with your denial reasons, you should review the SBA’s final decision. The SBA’s final decision is a key step toward determining whether your loan forgiveness appeal is likely to succeed. If your PPP loan forgiveness appeal is likely to succeed, then, you should hire a law firm that can promptly handle your loan forgiveness appeal, with a particular focus on filing it within the 30-day deadline.

How long can the appeal take, and should repayment occur while it proceeds?

Once the OHA record closes, the OHA Judge presiding over your PPP loan forgiveness appeal will issue a decision. Typically, an Administrative Law Judge will issue a decision within 45 days after the record closes. The main issue in an OHA PPP loan forgiveness appeal is whether to affirm the SBA’s final decision. The OHA Judge reviews whether the final SBA loan review decision was based on a clear error of fact or law. Generally, to prevail, you have the burden to show a clear factual or legal error that justifies granting your PPP loan forgiveness. You must be prepared for the timelines during your OHA PPP loan forgiveness appeal. It is important that you understand the timeline for each OHA stage and understand the difference between the OHA’s decision timeline and the SBA’s final loan review timeline.

Along with the OHA’s decision timeline, you must also be prepared for the SBA’s loan review timeline. Depending on your loan’s amount and the reason for the denial of loan forgiveness, the SBA’s final loan review timeline could take six months, a year, or even more. Another issue when appealing to the OHA is when to repay the PPP loan. PPP FAQ 46, published on May 13, 2020 and later reserved, addressed the necessity certification for PPP loans; it was not an official SBA loan-review decision regarding repayment.

PPP FAQ 46 does not mention voluntary repayment within 45 days after a lender provides a notice of ineligible funds or establish that consequence. In light of the potential risks of receiving an adverse finding from the SBA during the PPP review process, lenders may strongly encourage loan repayment while the SBA conducts its review. In light of the potential consequences for failing to comply with all aspects of the PPP loan forgiveness requirements, borrowers may be inclined to voluntarily repay their PPP loans. These decisions are all influenced by the OIG’s interest in seeing PPP loan borrowers repay their PPP loans.

If You Want Someone to Look at Your Case

Reading about a charge is not the same as having someone read your file. Spodek Law Group keeps an attorney on call around the clock, and the first consultation costs nothing and runs as long as your questions do. The number is 888 348 8028.