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Tax Monitor

Borrowers now have an appeal process when adversely impacted by PPP loan reviews

August 13, 2020

By: Mark A. Mangano

The Small Business Administration (SBA) has issued a rule providing a limited appeal process under the Paycheck Protection Program (PPP) for borrowers adversely impacted by SBA reviews. The appeal process is available only after the SBA has engaged in a review of a PPP loan and only for a limited number of issues.

On August 11, 2020, the SBA issued an interim final rule titled “Appeals of SBA Loan Review Decisions Under the Paycheck Protection Program” (IFR)1.The IFR supplements the interim final rules issued May 22, 20202 and June 22, 20203 addressing SBA review of PPP loans and forgiveness applications. Jackson Kelly articles discussing the May 22 and June 22 rules can be accessed on the firm’s Tax Monitor Blog.4

The IFR establishes a new subpart to the regulation setting forth rules of procedure governing cases before the SBA Office of Hearing Appeals (OHA).5 The IFR sets up a process to appeal a loan review decision. A loan review decision is defined as an official written decision by SBA, after 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 or partial approval decision issued to SBA (except for the deduction of any Economic Injury Disaster Loan advance in accordance with section 1110(e)(6) of the CARES Act);
  4. Is ineligible for PPP loan forgiveness in any amount when the lender has issued a full denial decision to SBA.

The SBA loan review process remains unchanged by the IFR. The SBA may initiate a PPP loan review at any time at its sole discretion. A borrower may request review of a lender decision submitted to the SBA denying the borrower’s forgiveness application. Borrowers are not afforded the option to appeal or request review of lender determinations of partial forgiveness. Significantly, once the SBA review is concluded, payment deferment ends. The deferment of PPP loan payments does not continue during an appeal.

Only the borrower on a PPP loan has standing to appeal the SBA review decision to the OHA. Neither the individual owners of a borrower nor the lender can appeal. Appeal petitions must be filed within 30 calendar days after the appellant’s receipt of the final SBA loan review decision, or notification by the lender of the final loan review decision, whichever is earlier.

Judges in the OHA are required to dismiss an appeal if the appeal is beyond the OHA’s jurisdiction, the appellant lacks standing, the appeal is untimely or premature because the SBA has not yet made a final loan review decision. The judge may also dismiss the appeal if it does not on its face, allege specific facts that if proven to be true, warrant reversal or remand of the SBA loan review decision.

The standard of review, for the OHA is whether the SBA loan review decision was based on clear error of fact or law. The appellant has the burden of proof, by a preponderance of the evidence. The OHA may affirm, reverse, or remand an SBA loan review decision.

The IFR addresses other procedural details related to the appeals process including requests for review by the SBA Administrator of OHA judge initial decisions, alternative dispute resolution, and judicial review.

The SBA activated its PPP loan forgiveness application portal on August 10. The IFR has filled in the missing pieces of the forgiveness process.


1  https://home.treasury.gov/system/files/136/PPP-IFR-Appeals-of-SBA-Loan-Review-Decisions-Under-the-PPP.pdf
2  https://home.treasury.gov/system/files/136/PPP-IFR-Loan-Forgiveness.pdf 
3  https://home.treasury.gov/system/files/136/PPP--IFR--Revisions-to-Loan-Forgiveness-Interim-Final-Rule-and-SBA-Loan-Review-Procedures-Interim-Final-Rule.pdf
4  https://www.jacksonkelly.com/tax-monitor-blog/sba-ppp-loan-reviews-pose-risks-for-both-borrowers-and-lenders
5  13 CFR 134


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