One of the most attractive aspects of the Paycheck Protection Program loans included in the Aid, Relief and Economic Security Act 2020 (CARES Act) was the ability for an employer to request cancellation. of his loan at the end of the term.
But what if the lender or the Small Business Administration (SBA) denies a borrower’s forgiveness request? All is not lost. Businesses can appeal the decision, but it’s important to act quickly and with the advice of legal counsel.
The process is complex and time sensitive.
Loan remission of the CARES law
Under the CARES Act, the SBA was empowered to grant a discount up to the total amount of eligible loans guaranteed under the PPP if certain conditions were met. And to this day, you could say that lenders have generally been very forgiving.
According to the SBA weekly abstract, as of October 24, 2021, the federal government had issued nearly 11.5 million P3 loans worth more than $ 792 billion. To date, 70% (8,058,418) of all PPP loans have submitted forgiveness requests and 68% of all PPP loans have been fully or partially forgiven, for a total of $ 587.3 billion in forgiveness.
But it also means that over 30% of all PPP loans have not been fully or partially canceled.
Borrowers whose loan forgiveness requests have been refused have recourse. On September 16, 2021, the SBA released a final rule titled “Borrower Appeals of Final SBA Loan Review Decisions Under Paycheck Protection Program, Providing the procedures for appealing a final SBA loan review decision.
Who can appeal
Borrowers who have received a final loan review decision from the SBA can appeal the decision within 30 calendar days of receiving the final notice. For the decision to be appealable, the decision must be that the borrower is:
- was not eligible for a PPP loan
- was not eligible for the loan amount received, or used the proceeds for “unauthorized uses”
- is not eligible for a PPP loan discount for the amount determined by the lender in their full or partial approval decision issued to the SBA
- is not eligible for a PPP loan discount regardless of the amount when the lender has issued a total denial decision to the SBA
The appeal should be filed with the SBA’s Office of Hearings and Appeals (OHA). However, a borrower cannot appeal a lender’s decision regarding their PPP loan cancellation request directly to the OHA. The OHA does not have jurisdiction over decisions made by lenders regarding a PPP loan. To challenge a decision made by the lender, the borrower must contact the lender directly. The SBA will then review the application and make a final loan review decision. The OHA has jurisdiction over appeals when the SBA has provided the borrower with a final decision to review the PPP loan.
Call conditions
When filing an appeal with the OHA, the borrower will be asked to provide the Following:
- a copy of the final SBA loan review decision being appealed
- a complete and specific statement as to why the SBA’s loan review decision is alleged to be wrong, with all factual information and legal arguments to support the allegations
- the name, address, phone number and email address of the borrower or the borrower’s lawyer
ASB has determined that an OHA decision should be based on a review of the administrative record, the appeal motion, any response, any response or additional argument, and filings relating to the objection to the administrative record. Neither discovery nor oral hearings will be permitted. For this reason, it is essential that the appeal be complete. The maximum length of an appeal request (excluding attachments) is 20 pages. A table of sources is only required for petitions citing more than 20 cases, regulations or laws.
After filing the appeal, the borrower should receive the first order from the OHA. The borrower may also be instructed to provide more information, with a strict deadline.
It is important to note that the OHA can reject any incomplete appeal, out of time, beyond its competence, does not allege, at first sight, specific facts which, if they are proven to be true, justify the annulment. or the referral of the SBA’s loan review decision, or is otherwise deficient.
Unless it appears that the appeal will be dismissed, the OHA judge assigned to the borrower’s appeal will issue a notice and order setting a date for:
- the production of the Administrative File by the ASB
- the date on which the borrower can object to the Administrative File
- the date on which the SBA can respond to the appeal (the file closing date)
Decision timeline
Within 45 calendar days of the case being closed, the judge will render their decision and it will be served on the borrower and the SBA through the OHA business portal. The decision will contain the findings of fact and conclusions of law, the reasons for the findings and conclusions and any remedies ordered. The decision becomes final if there is no request for reconsideration or reconsideration by the SBA administrator within 30 calendar days of the judge’s initial decision.
The SBA or the borrower has 10 calendar days after service of the decision to file a request for reconsideration with the judge. The judge can also reconsider a decision ex officio within 20 calendar days of service.
A reconsidered original OHA decision becomes the final decision of the SBA 30 calendar days after notification, unless the SBA administrator decides to review and / or reverse the original OHA decision.
The SBA administrator has the ability to review and / or reverse the original and reconsidered decisions of the OHA within 30 days of the date of service. If the administrator chooses to review and / or rescind an original OHA decision and a timely request for reconsideration of the judge’s initial decision is also filed by the borrower, the administrator will consider the request. . In either case, the decision of the Administrator will become the final decision of the SBA upon issuance, within 30 calendar days of service of each such decision. Final decisions can only be appealed to the competent Federal District Court.
Timely appeal filing
It is essential that any business seeking to appeal a loan forgiveness denial act promptly and with the advice of a knowledgeable lawyer. The process is complex and quick, and any mistakes can compromise your ability to get a PPP loan forgiveness.
For this reason, borrowers who have received an SBA loan decision should consult an attorney immediately. In light of the SBA’s requirements, it is important to ensure that any appeal is complete, filed on time, and is not otherwise deficient. Minor errors could lead to a complete denial of the PPP loan cancellation.
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