As discussed in PilieroMazza’s previous alert, the Small Business Administration (SBA) released its Paycheck Protection Program (PPP) Loan Forgiveness application way back in May of 2020. Since then, PPP forgiveness continues to cause confusion among businesses, especially federal contractors. Since the release of the original forgiveness application, most PPP borrowers eligible for loan forgiveness have submitted for forgiveness and, most of those, have actually already received forgiveness as well. Unfortunately, we have started to recently see and uptick in loan forgiveness application denials. While this is a relatively new development that is quickly evolving as we see more, and more varied, denials, in most cases there are grounds to appeal SBA’s decision. This blog covers four important steps borrowers should be aware of to protect their rights when appealing a PPP denial.
After receipt of an SBA loan review decision, borrowers have 30 calendar days to file an appeal here with SBA’s Office of Hearings and Appeals (OHA). The appeal must contain the following:
- a copy of the final SBA loan review decision;
- a full and specific statement as to why the SBA loan review decision is alleged to be erroneous; and
- the name, address, telephone number, and email address of the borrower or the borrower’s attorney.
Bullet #2 above is the most important since you only get one shot to convince SBA that an error was made in issuing the denial. Borrowers must make as clear an argument as possible being sure to focus on the specific issues addressed in the denial. Remember, OHA will only review the SBA decision to determine if there was a clear error of fact or law. So focusing on how you may not be able to repay the loan or how much you have been harmed by the pandemic, or other issues will only be relevant if those points directly address the bases for SBA’s denial. Otherwise, while you can include background into your company and situation for “flavor,” you should not focus on those issues. Instead, you need to make legal arguments as to why you were qualified for the loan and for forgiveness and why SBA’s determination to the contrary was flawed.
Once the appeal is filed, it is assigned to an administrative law judge for review. Sometimes there could be requests for additional information but do not bank on that fact. Instead, make sure you provide every factual detail, supported by documentation and citations, in the original appeal because if you fail to include information or proof of your assertions in the Appeal itself, that may be your only shot. Further, the appeal can also be dismissed for a lack of completeness, being untimely, or other deficiencies, and SBA, itself, may also respond to the appeal and dispute your claims or file motions in support of their findings. Thus, it is important to have clear and accurate arguments, as well as be prepared to rebut claims by SBA during the appeal process itself. So, be prepared to have to not only file the appeal, but also fight with SBA about your eligibility before the OHA judge. While this is generally in writing, OHA may request hearings on complex subjects and, thus, that is something else borrowers and, more likely their counsel, may have to contend with.
Lastly, provide your lender with a copy of the appeal, as loan payments will be deferred until a final decision is issued. It may also help to have a conversation with the lender to assure them that you are disputing the decision. This is especially important if you might have trouble repaying the loan or have a long-standing relationship with the bank and you feel it may be damaged by the denial.