What to Know about PPP Appeals and Next Steps

Schwabe, Williamson & Wyatt PC

Update: On July 28, 2021, an Interim Final Rule on COVID-19 Revenue Reduction Score, Direct Borrower Forgiveness Process, and Appeals Deferment was posted. That Interim Final Rule conforms the applicable PPP rules to provide that a timely appeal by the PPP borrower of a final SBA loan review decision extends the deferment period of the PPP loan until the Office of Hearings and Appeals’ decision becomes final. See below: “Consequences of an Appeal.”

With recent updates to the Paycheck Protection Program (“PPP”) due to the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (the “Economic Aid Act” or “PPP2 Act”), new forgiveness application forms, and the Interim Final Rule on Loan Forgiveness Requirements and Loan Review Procedures as Amended by Economic Aid Act (“2021 Forgiveness IFR”), borrowers may have new PPP-related questions, and are encouraged to view articles from our recent four-part series, After the Economic Aid Act: An Updated Guide to the PPP Loan Forgiveness Review and Appeals Process:

· Initial Takeaways and Agency Guidance for the Latest PPP Updates

· Grounds for SBA Review, the SBA Loan Review Process, and Borrower Items

· The Lender’s Role in the PPP Loan Review Process

· What to Know about PPP Appeals and Next Steps

The below article may answer questions related to appeals of PPP decisions.

PPP Appeal Rules of Practice
The Interim Final Rule on Additional Revisions to Loan Forgiveness and Loan Review Procedures Interim Final Rules (originally posted 10/8/2020) contain the rules of practice for appeals of certain SBA loan review decisions under the PPP (the “PPP Appeal Rules of Practice”). The PPP Appeal Rules of Practice cover:

  • the scope of rules;
  • the appeal petition;
  • standing;
  • the deadline for filing appeal petition;
  • dismissal, notice, and order;
  • the administrative record;
  • response to an appeal petition;
  • evidence beyond the record, discovery, and oral hearings;
  • interlocutory appeals;
  • alternative dispute resolution procedures;
  • standard of review, decision on appeal;
  • effects of the decision;
  • Equal Access to Justice Act and no recovery of attorney’s fees;
  • exhaustion of administrative remedies; and
  • confidential information and protective order.

In addition, the following regulations apply: amendments and supplemental pleadings, representation in cases before Office of Hearings and Appeals (the “OHA”), requirement of signature (13 CFR 134.207 through 134.209), motions (134.211), summary judgment (134.212), and settlement, judges, sanctions, prohibition against ex parte communication, and prehearing conferences (134.217 through 134.221).

What Is Appealable?
A final SBA loan review decision that is appealable under the PPP Appeal Rules of Practice is an official written decision by the SBA, after the SBA completes a review of a PPP loan, that finds a borrower: (1) was ineligible for a PPP loan; (2) was ineligible for the PPP loan amount received or used the PPP loan proceeds for unauthorized uses; (3) is ineligible for PPP loan forgiveness in the amount determined by the lender in its full approval or partial approval decision issued to the SBA; and/or (4) is ineligible for PPP loan forgiveness in any amount when the lender has issued a full denial decision to the SBA.

What Cannot Be Appealed?
The following items cannot be appealed: (1) a borrower cannot file an OHA appeal of any decision made by a lender concerning a PPP loan (a borrower can request an SBA review of a lender decision to deny the borrower’s loan forgiveness application in full, but that request is for a review by the SBA, not an OHA appeal, and a borrower may exercise any other rights it has under applicable law against a PPP lender regarding a lender decision); (2) any determination by the SBA’s Office of Inspector General concerning a PPP loan; and (3) any SBA decision on any 7(a) loans other than PPP loans. The Rules of Practice for Appeals From Size Determinations and NAICS Code Designations do not apply to appeals of SBA loan review decisions or to the PPP.

Appeal Timing/Deadline and Eligible Appellant/Standing
An appeal petition must be filed with OHA within 30 calendar days after the earlier of: (i) the borrower’s receipt of the final SBA loan review decision, or (ii) notification by the lender of the final SBA loan review decision. Only the borrower on the loan for which the SBA has issued a final SBA loan review has standing to appeal the SBA loan review decision to OHA, meaning individual owners, shareholders, or members of the borrower do not have standing to file an OHA appeal.

Appeal Petition
The appeal petition must contain specific information, including: (1) the basis for the OHA’s jurisdiction; (2) a copy of the SBA loan review decision that is being appealed; (3) a full and specific statement as to why the SBA loan review is alleged to be erroneous, together with all factual information and legal arguments supporting the allegations; (4) the relief being sought; (5) signed copies of payroll tax filings and federal tax returns; and (6) contact information for the appellant or the appellant’s attorney.

Notice and Order
Upon receipt of the appeal, the OHA will assign the matter to an Administrative Law Judge (the “Judge”). The Judge will then issue a notice and order establishing a deadline for production of the administrative record and specify a date for the close of record. In general, the administrative record will be due 20 calendar days after issuance of the notice and order, unless additional time is requested and granted. The record will close 45 calendar days from the date of the OHA’s receipt of the appeal, unless additional time is requested and granted.

Administrative Record
The administrative record must “include relevant documents that [the] SBA considered in making its final decision or that were before [the] SBA at the time of the final decision.” The record, however, does not need to contain all documents pertaining to the appellant. The SBA may claim privilege as to certain materials. Moreover, the appellant may object to the absence of any document from the administrative record that the appellant believes should have been included in the administrative record or the appellant may object to a claim of privilege. The objections must be filed and served on the OHA no later than 10 calendar days after the appellant’s receipt of the administrative record. It is important to have a robust administrative record, as there generally will not be any evidence considered that is outside of the record.

Evidence Beyond the Record, Discovery, and Oral Hearing
Generally, the Judge may not admit evidence beyond the written administrative record or permit any form of discovery. Discovery will be permitted only if the Judge determines that the SBA, upon written submission, has made a showing of good cause for discovery. Oral hearings will not be held on an appeal, unless, following the motion of a party, or at the Judge’s own initiative, the Judge orders an oral hearing upon concluding that there is a genuine dispute of material fact that cannot be resolved except by the taking of testimony and the confrontation of witnesses.

Standard of Review, Burden of Proof, and Alternative Dispute Resolution
The standard of review is whether the SBA loan review decision was based on clear error of fact or law and the appellant has the burden of proof, by a preponderance of the evidence. At any time during the appeal, the parties may submit a joint motion for alternative dispute resolution.

Decision on Appeal

The Judge will issue his or her decision within 45 calendar days after the close of the record, as practicable. The decision is to contain findings of fact and conclusions of law, the reasons for such findings and conclusions, and any relief ordered. The Judge’s decision on the appeal is an initial decision, but the initial decision will become a final decision of the SBA 30 calendar days after its service, unless a request for review is filed pursuant to CFR 134.228(a), or a request for reconsideration is filed under 13 CFR 134.1213(c).

  • Request for Review: Within 30 calendar days after the service of an initial decision or a reconsidered initial decision of a Judge, any party, or the SBA’s Office of General Counsel, may file and serve a request for review by the SBA Administrator pursuant to § 134.228(a). In order for a borrower to exhaust its administrative remedies and preserve its right to seek judicial review of an SBA final decision in a federal district court, a borrower that disputes an initial decision or reconsidered initial decision must file and serve a request for review of the initial decision by the Administrator pursuant to 13 CFR 134.228(a). If a request for review is filed pursuant to 13 CFR 134.228(a), the provisions of 13 CFR 134.228(a) will apply.
  • Request for Reconsideration: An initial decision of the Judge may be reconsidered. Either the SBA or the appellant may request a reconsideration of the Judge’s initial decision by filing and serving a petition for reconsideration within 10 calendar days after the service of the written decision. Such a request must clearly show an error of fact or law material to the decision. The Judge may also reconsider a decision on his or her own initiative within 20 calendar days after service of the written decision.

Exhaustion of Administrative Remedies
An appeal to OHA and request for review by the SBA Administrator of a disputed initial decision or reconsidered initial decision are administrative remedies that must be exhausted before judicial review of an SBA loan review decision may be sought in a federal district court.

Confidential and Protective Order/Publication
If a filing or other submission made pursuant to an appeal contains confidential business and financial information (that is, personally identifiable information, source selection sensitive information, income tax returns, documents and information covered under § 120.1060, or any other exempt information), that information is not available to the public pursuant to the Freedom of Information Act (“FOIA”). The SBA or an appellant may seek a protective order over any document or information exchange in discovery. Please be aware that OHA decisions are normally published without redactions on OHA’s website and a decision may contain confidential business and financial information or personally identifiable information where that information is either significant to the decision or otherwise necessary for a comprehensible decision. Where no protection order is in place, a party may request a redacted public decision by contacting OHA. Where a protective order is in place, the Judge will usually issue the unredacted decision under the protective order and a redacted version for public release.

Consequences of an Appeal
As of July 28, 2021, a timely appeal of a final SBA loan review decision extends the deferment period on the PPP loan until the OHA issues a final decision on the appeal under 13 CFR 134.1211. The borrower should notify the lender of the appeal so that the lender can extend the deferment period. Previously, an appeal by a PPP borrower of any SBA loan review decision did not extend the deferral period of the PPP loan. Additionally, if the SBA remits to the lender the PPP loan forgiveness amount set forth in the decision issued by the lender to the SBA, the borrower may not file an appeal with OHA, and the borrower must begin repayment of any remaining balance of its PPP loan.

Suggested Next Steps

Because the above information about appeals, and the loan forgiveness application review process outlined in our articles “Initial Takeaways and Agency Guidance for the Latest PPP Updates,” “Grounds for SBA Review, the SBA Loan Review Process, and Borrower Items,” and “The Lender’s Role in the PPP Loan Review Process,” set out requirements for both borrowers and lenders, borrowers are encouraged to familiarize themselves with their requirements and work collaboratively with lenders to obtain approval of loan forgiveness applications.

In addition, the SBA states that it “may provide further guidance, if needed,” and we expect that further guidance will be issued.


As with previous client updates, borrowers are reminded to be aware of the different sources of statutory and regulatory guidance related to the loan forgiveness process. The statutory and regulatory landscape relating to the PPP is likely to continue to evolve in the coming months.

Schwabe is closely monitoring developments related to the PPP and other implications that COVID-19 may have on legal issues our clients face. For legal advice for your situation, you should contact an attorney.

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Schwabe, Williamson & Wyatt PC

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