Appeals Process Established for the Paycheck Protection Program

Schneider Downs continues to track the evolving landscape of federal financial programs offered in the wake of the business disruption caused by the coronavirus crisis.  On August 8, 2020, the U.S. Small Business Administration (SBA) released a new Interim Final Rule (IFR), establishing rules of practice for appeals of certain SBA loan review decisions under the Paycheck Protection Program (PPP).

This IFR provides a process for borrowers to appeal to the SBA’s Office of Hearings and Appeals (OHA) regarding certain SBA loan review decisions under the PPP and any other PPP matter referred to OHA by the Administrator of the SBA.  This IFR defines the term “SBA Loan review decision” as an official written decision by the SBA, after the SBA completes a review of a PPP loan, that finds that 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 or partial approval decision issued to the SBA (with certain exceptions); and/or
4. is ineligible for PPP loan forgiveness in any amount when the lender has issued a full denial decision to the SBA.

A borrower may request a SBA review of a lender’s decision to deny the borrower’s loan forgiveness in full, however that review would be by the SBA and would not be an OHA appeal.  A borrower may only appeal a final SBA loan review decision to the OHA.   

Additionally, an appeal by a PPP borrower of any SBA loan decision does not extend the deferral period of the loan; rather, the borrower must begin making payments of principal and interest on the remaining balance of its PPP loan at the end of the loan payment deferral period or when SBA remits the loan forgiveness amount to the lender.  Lastly, 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.

If a borrower wishes to file an appeal of an SBA loan review decision as defined above, the appeal must be filed within 30 calendar days of the earlier of either the appellant’s receipt of the final SBA loan review decision or the notification by the lender of the final SBA loan review decision.

If a borrower files an appeal, the appeal petition must include:

1. the basis for OHA’s jurisdiction, including, but not limited to, evidence that the appeal is filed within the time period described above;
2. a copy of the SBA loan review decision that is being appealed;
3. a full and specific explanation as to why the decision is alleged to be erroneous, including factual information and legal arguments in support of the allegations;
4. the relief being sought;
5. signed copies of relevant payroll tax filings reported to the IRS and relevant state,  for the relevant periods of time, if not provided with the PPP loan forgiveness application;
6. signed copies of applicable federal tax returns filed with the IRS, with appropriate schedules, documenting income for self-employed individuals or partners in a partnership, if not provided with the PPP loan forgiveness application; and
7. the contact information and signature of the appellant or its attorney.

Only the borrower may file an appeal to the OHA of the SBA’s final loan review decision, which means that owners of businesses and lenders may not appeal the SBA’s final loan review decision.  Upon receipt of an appeal challenging a final SBA loan review decision, the OHA will assign the matter to either an Administrative Law Judge or an Administrative Judge in accordance with CFR §134.218.  Generally only the written information will be available to the judge to make a decision on the appeal, unless the judge feels that the circumstance requires an oral hearing.  The judge is required to issue his or her decision within 45 calendar days after the closing of the record, as practical.  The decisions may be affirmation, reversal or remand of an SBA loan review decision.  Prevailing appellants are not entitled to recover attorney fees. 

If you need more information or assistance regarding the PPP appeals process, please reach out to any of your contacts at Schneider Downs or contact Joel Rosenthal ([email protected]).