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SBA denied your PPP loan forgiveness? Here’s a step-by-step guide on how to appeal. (Courtesy of the Jacksonville Business Journal) — The Small Business Administration continues to forgive Paycheck Protection Program loans at a steady clip — with the agency making payments on 6.76 million applications so far.

And while the vast majority of loans are forgiven for all or nearly all of the loan amount, some are still denied forgiveness by the SBA. Out of the $561.5 billion in requested loan forgiveness, the SBA has paid out $542.3 billion, meaning billions of dollars in loans have not been forgiven at this point, according to SBA data as of Sept. 19.

And there are still millions more PPP loans waiting to be forgiven. While the SBA has seen more than 7 million applications — or 61% of all PPP loans across 2020 or 2021 — that still leaves millions more, since the SBA approved nearly 11.5 million PPP loans in total.

What to do if your PPP forgiveness was denied

Experts say issues can often be solved before the PPP loan is denied forgiveness, according to Justin Elanjian partner-in-charge of the Paycheck Protection Program and the Employee Retention Credit program at Atlanta accounting firm Aprio, in an email.

“When our clients have been subject to SBA loan review or other SBA inquiry, we have been able to reconcile the situation in a manner acceptable to the SBA,” Elanjian said. “We have found that the SBA, as vague as their questions or comments may be, has generally provided adequate opportunity for borrowers to remedy any concerns through the submission of additional information or explanation.  Fortunately, we have not had any clients having to appeal a decision made by the SBA.” 

Step-by-step guide for appealing PPP forgiveness denials

For those who have to appeal, here’s how it works:

  1. The small business gets an official written decision by the SBA that includes the reason for the denial, including whether the business was ineligible for a loan in the first place or used the money in an unauthorized manner, or if it was denied forgiveness for some part of the loan.
  2. The small business has 30 calendar days from receipt of the final loan review decision to file an appeal. This would be a good time to hire an attorney.
  3. Appeals must be filed with the SBA Office of Hearings and Appeals. Here is their website.
  4. Appeals must include (1) A copy of the final SBA loan review decision that is being appealed and the date it was received; (2) a full and specific statement (not exceeding 20 double-spaced pages, not including attachments) as to why the final SBA loan review decision is alleged to be erroneous, together with all factual information and legal arguments supporting the allegations; and (3) the name, address, telephone number, email address and signature of the appellant or its attorney.
  5. Borrowers should provide their lender with a copy of their appeal, because as long as the appeal is pending, their PPP loan payments from the unforgiven loan are deferred until a final decision is issued.
  6. Upon receipt of an appeal challenging a final SBA loan review decision, OHA will assign the matter to either an administrative law judge or an administrative judge. 
  7. Unless the appeal will be dismissed, the judge will issue a notice and order establishing a deadline for production of the administrative record and specifying the deadline by which SBA may respond to the appeal.
  8. An “administrative record” is due 20 calendar days after the issuance of a notice and order.  The SBA will file that record with OHA and give it to the appellant utilizing the OHA case portal. 
  9. Only SBA, though not required, may respond to an appeal. In addition, OHA can request SBA to respond for good cause shown by OHA. The response should set forth the relevant facts and legal arguments to the issues presented on appeal. If SBA elects not to respond to the appeal, such election shall not be interpreted to be an admission or waiver of any allegation of law or fact.
  10. The judge may not admit evidence beyond the written administrative record. Neither discovery nor oral hearings will be permitted in appeals from final SBA loan review decisions
  11. The standard of review is whether the final SBA loan review decision was based on clear error of fact or law. The appellant has the burden of proof.
  12. The judge will issue his or her decision within 45 calendar days after the close of record, as practicable.
  13. That judge’s decision is an initial decision and the small-business owner can request reconsideration of that decision. If the small business does not, it will become the final SBA decision in 30 calendar days.
  14. The small-business owner can ask for reconsideration, in which case the SBA will look over the decision one more time and issue a final decision.
  15. If the loan forgiveness is still denied, the small business has the right to appeal the decision to the appropriate federal district court.

“If a business owner receives written notice of a denial of its PPP loan from SBA, he or she needs to act fast if the company intends to appeal,” said Tenley Carp, an partner and PPP expert at law firm Arnall Golden Gregory LLP, who stressed that the deadlines for filing are short. “Theoretically, a business owner who delays taking action on this for one month after receiving notice from SBA could potentially cost his or her business millions of dollars.”

Changes to other Covid-19 relief options for small businesses

Meanwhile the SBA is officially raising the cap on its Economic Injury Disaster Loan program to $2 million. The SBA had quietly put out a new interim final rule, effective Sept. 8, that included a variety of other changes to the EIDL program, and that the SBA hoped would spur more businesses to turn to the program. We wrote about those changes here.

The EIDL and the associated grant program that comes with it is also set to expire at the end of the year. The agency said the last day any business can apply is Dec. 31, 2021, after which the program officially expires.