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On August 11, the SBA released an Interim Final Rule detailing its process for appealing PPP loan decisions. 

The PPP is structured so that individual lenders disburse the funds, while the SBA backs those funds. If the lender denies some or all of a business’s loan forgiveness, the borrower can request to have the decision reviewed by the SBA. The SBA review of a lender’s decision, however, is different from the formal appeal process. A borrower can only appeal a decision made by the SBA itself. This occurs when the SBA reviews a PPP loan and issues one of the below decisions: 

  1. The borrower was ineligible for a PPP loan, was ineligible for the amount received, or used the loan for improper purposes.
  2. The lender decided to give the borrower partial or full forgiveness, but the SBA determines the borrower was ineligible for the amount of forgiveness determined by the lender; or the lender denied loan forgiveness and the SBA concurred.

What happens if a borrower feels the SBA made a mistake in denying some or all of its loan forgiveness and issuing one of the above decisions? Here is a summary of the PPP appeal process.

The Appeal Petition

The borrower only has 30 days after receiving a decision from the SBA to submit its appeal to the SBA Office of Hearings and Appeals (OHA). It must include the following:

  • Why the case is under the OHA’s jurisdiction
    • This must include a statement that the appeal has been filed within 30 days of the receipt of the loan decision.
  • A copy of the SBA’s loan decision
  • A statement describing why the SBA’s decision is alleged to be wrong
    • This should include all of the facts and legal arguments relevant to the appeal.
  • The relief the borrower is seeking
  • Payroll tax filings as reported to the IRS and State wage reporting and unemployment insurance tax filings (if they are not already included with the loan forgiveness application)
  • Federal tax returns that document the income for partners of the borrower’s business or self-employed owners of the business
  • Contact information for the appellant or its attorney

If the borrower chooses not to include any of the documents, it must provide a statement as to why the said documents are irrelevant to the case or why they are unavailable. The petition should be put together carefully so as to avoid dismissal.

Judicial Process

Next, the OHA assigns each case to a judge. If the appeal is not dismissed, the judge will order the SBA to produce all of the documents that contributed to its decision, which is called an administrative record. The administrative record will typically be due 20 days after the judge orders its production. The appellant has 10 days after receiving the record to object to any documents that have been left out that they assert should be included. 

The SBA then files a response to the appeal before the closing of the record, which will typically occur 45 days after the OHA receives the appeal. The appellant may not reply to the SBA’s response unless the judge allows.

Furthermore, to ensure a speedy process, additional discovery and/or oral arguments will only be permitted if they are ordered by the judge. The main occasion for oral arguments would be a dispute of facts that cannot be resolved without testimony or witnesses.

Judge’s Decision and Next Steps

The judge will release their initial decision on or before 45 days after the closing of the record. The initial decision becomes final 30 days after the decision is served. Within those 30 days, the borrower, the SBA, or the Judge can request reconsideration. The case can only be brought to federal court after all of the above remedies have been exhausted. The borrower waives their right to review the decision in court if they do not submit the OHA’s decision for review.

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