How to Appeal If Your Request for Forgiveness of a PPP Loan Is Rejected – Finance and Banking


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From: Ellen London, Derek Adams and Himani Nadgouda *

As of May 2021, the Payroll Protection Program (PPP) has provided nearly $ 800 billion in funding, with $ 520 billion still to be saved. We understand that although this has not been publicly announced, the US Small Business Administration (SBA) has hired Deloitte to assist in the massive undertaking required to process and resolve millions of loan forgiveness requests. This article discusses what actions you can take if your loan forgiveness request is denied by the SBA.

The SBA has developed a formal and legal process for appealing SBA decisions not to forgive a PPP loan. Below is a general overview. However, the process is complex and detail-oriented and will continue to evolve as appeals are received.

At the outset, the basic background to the loan forgiveness process is as follows: lenders receive a loan forgiveness application, make a decision on the loan forgiveness amount, and issue a loan forgiveness decision to the SBA. The SBA returns the loan forgiveness amount requested by the lender and / or verifies the loan. The SBA’s Office of Hearings and Appeals (OHA) accepts timely appeals from borrowers (also called appellants in this article).

What exactly can the borrower appeal?

Only certain types of SBA revision decisions on PPP loans can be appealed. Decisions that can be appealed must be final, which means that they are formal written decisions issued by the SBA after it completed a PPP loan review, in which the SBA found that the borrower was not eligible for a PPP loan received or the amount received, or that proceeds from a PPP loan have gone to unauthorized use.

What is the deadline for filing an appeal?

The deadline for filing an appeal is one of two scenarios, the earlier of two: 1) within 30 calendar days after the appellant receives a final SBA loan review decision, or 2) within 30 calendar days after notifying the lender of the final SBA loan review decision. This is a short time limit for filing an appeal; Therefore, it is important to take immediate action if your loan forgiveness request is rejected.

What is included in an appeal?

Organizations planning to file an appeal must complete an appeal petition. (Note that some businesses may resort to alternative dispute resolution instead.) The appeal must state the basis of OHA’s jurisdiction; a copy of the contested decision to review the loan; a statement of why the decision was wrong; and looking for relief. The petition must also include signed copies of payroll tax returns filed with the IRS and the state; various federal tax returns and tables, such as Form 1040 with tables C or F; as well as individual employee salary reports and unemployment insurance tax returns filed to the respective state for the relevant time periods, unless they are provided with a PPP loan forgiveness statement or an explanation as to why they are not relevant or available. The petition for an appeal is important because it details your legal and factual reasons why the SBA’s decision is wrong or wrong. It is very important that you seek the help of an experienced legal advisor in drafting this petition.

What standard will be used in the appeal?

In the appeal process, the appellant bears the burden of proof in order to demonstrate by the prevalence of evidence that there is a clear error of fact or law.

Appeal process:


Upon appeal, the OHA will refer the case to an ALJ or ALJ. The judge will then issue a notice and order setting a deadline for the production of an administrative record and indicating the closing date of the record. Generally, the administrative record must be filed 20 calendar days after the notice and order is issued (unless additional time is requested and granted), and the record will be closed 45 calendar days from the date the OHA appeal is received (unless additional time is requested and provided). The administrative report must include relevant documents that the SBA considered in making its final decision, or that were submitted to the SBA at the time it made its final decision. The administrative record must be certified and confirmed as complete and correct.

Submitting documents after filing a petition

The SBA may file an answer to the appeal prior to the closure of the OHA record. Unless the judge specifies otherwise, applicants are not allowed to file an answer to the SBA’s answer.

Objections, opening and oral hearing

Applicants may submit objections regarding the absence in the administrative record of any document that, in the applicant’s opinion, should have been included. Applicants can also object to any SBA claims that documents in the administrative record are privileged. These objections must be filed with the OHA and referred to the SBA. The judge decides on such objections and may instruct or authorize the addition of the administrative record.

Discovery outside of the administrative record is generally not allowed unless the SBA has provided compelling reasons to do so.

An oral hearing may be ordered by a judge or at the request of a party if there is a real dispute of material fact that requires testimony. Otherwise, there will be no oral appeal hearing.

Appeal decision

If practicable, the judge will issue his or her decision within 45 calendar days of the closing date. The decision will contain the facts and conclusions of the law, the reasons for such findings and conclusions, and any prescribed court decisions.

What if you lose?

The judge’s decision on appeal is initial. An initial decision is considered final within 30 days unless a request for review or a request for review is filed.

If a borrower asks for a reconsideration, he could potentially appeal the judge’s decision to a federal district court. The borrower must submit a request for reconsideration within 30 calendar days after the initial decision was served. The Administrator will review the original decision and confirm it unless it is based on a faulty finding of fact or an erroneous interpretation or application of SBA’s case law, statute, ruling or policy. The Administrator’s conclusion is considered final. Thus, the borrower will exhaust its administrative remedies, so the borrower can seek judicial review of the final SBA decision in a federal district court.

The borrower may also petition the original judge for a review of the decision within 10 calendar days after the written decision is served. This request must identify a factual or legal error that is relevant to the decision.

How does filing an appeal affect the maturity dates?

It is important to note that filing an appeal does not delay the borrower’s maturity. The borrower must begin paying principal and interest on the remaining balance of the PPP loan at the following times:

  1. at the end of the deferred loan payment period; or
  2. when the SBA transfers a partial amount of the loan forgiveness to a PPP lender; or
  3. when the SBA notifies the lender that no loan forgiveness is allowed.

As this is a new process, additional instructions may be issued from the SBA. We are closely following the development of events.

* Ellen London is a partner at Alto Litigation in San Francisco, Derek Adams is a partner at Potomac Law Group in Washington DC, and Himani Nadgouda is a summer partner at Alto Litigation.

The content of this article is intended to provide general guidance on the subject. You should seek professional advice regarding your specific circumstances.

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