SBA publishes procedure outlining a procedure for appealing a denial of a PPP loan forgiveness request
On August 25, 2020, the United States Small Business Administration (“SBA”) issued a new Interim Final Rule to establish an appeal process for a denial of loan forgiveness under the Paycheck Protection Program (“PPP “). As noted in previous updates, a borrower submits their loan forgiveness request to their lender. The lender then makes the decision to approve, deny or deny without prejudice pending the SBA’s review of the forgiveness request. If the lender refuses for any reason, the borrower should ask the SBA to review the pardon application. In the event that the SBA’s review results in a denial of forgiveness, the borrower should follow the procedures set out in the newly issued Interim Final Rule, which is found here.
Reasons for denial may include the ineligibility of the PPP loan, the ineligibility of an amount received, the ineligibility of all or part of the amount of the requested rebate (such as embezzlement), or a violation of one. certifications made in the loan application or pardon application.
The procedure for appealing a loan forgiveness refusal is as follows:
1. Upon receipt of a denial from the SBA, the borrower must file an appeal with the SBA Office of Hearings and Appeals within thirty (30) days. The clock begins with the earlier occurrence of the SBA’s determination of its final denial, or the lender’s notification of the SBA’s final denial.
2. The borrower must be represented by a lawyer of record to appeal.
3. The maximum length of the request for appeal may not exceed twenty (20) pages, not including documents or attachments.
4. The appeal must include the following exhibits or attachments (i) the SBA’s final denial decision; (ii) a statement explaining why the decision is wrong; (iii) the relief requested; (iv) the initial loan request and the note; (v) request for loan forgiveness; (vi) signed copies of all payroll tax returns with the IRS and the state; (vii) federal tax returns and schedules; (viii) payroll reports, employee salary reports and unemployment insurance income statements; (ix) receipts for all non-salary costs; and (x) the name, address, telephone number and e-mail address of the lawyer on file. The appeal must also include all documentation to support the claim that the SBA’s conclusion was in error.
Upon receipt of the appeal, the SBA Hearings and Appeals Office will assign the appeal to an administrative judge. The administrative judge will render a first decision within forty-five (45) days. The administrative judge limits himself to determining whether the decision of the ASB was based on a manifest error of fact or of law, and the borrower has the burden of proof. The administrative judge will confirm, overturn or dismiss the decision of the SBA.
If the administrative judge dismisses the appeal, the borrower must request a review by the administrator of the ASB or a reconsideration within thirty (30) days. If you do not request this review, the initial decision will become final and exclude any right of judicial review.
Finally, the rule excludes the right of a borrower to recover attorney fees, even in the event of success.