When Asking the SBA for PPP Forgiveness Don’t Take ‘No’ for an Answer

As part of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, the United States Small Business Administration (“SBA”) created the Paycheck Protection Program (“PPP”) that helped businesses keep their workforces employed during the COVID-19 pandemic. PPP loans were made through lenders (mostly traditional banks) to eligible borrowers, who were then able to achieve forgiveness on these loans by showing the lender or the SBA itself that the loan funds were used for certain purposes – most importantly, the retention of the business’ workforce. While the SBA ceased providing new PPP loans on May 31, 2021, existing borrowers are to this day still awaiting decisions from lenders or the SBA regarding forgiveness. Unfortunately, obtaining forgiveness comes with its challenges and can be an uphill and lengthy battle. Frier Levitt has successfully fought this battle and can likewise assist you.

PPP loans were designed to provide direct incentives for small businesses to keep their workers on payroll during the pandemic. The PPP was comprised of two draws. The first draw PPP loans were allocated and distributed to help fund payroll costs, including benefits, as well as mortgage interest, rent, utilities, worker protection costs related to COVID-19 and other categories. The second draw PPP loans allowed certain eligible borrowers that previously received a PPP loan to apply for a second loan, with the same general terms of the first. The terms of SBA loan forgiveness required all employee retention criteria to be met and all funds to have been used appropriately for eligible expenses. Once all PPP loan proceeds are used, borrowers are permitted to apply for forgiveness up until the maturity date of the loan. The requisite documentation for forgiveness is first submitted to the lender for its review pursuant to the SBA’s criteria. If the lender denies the forgiveness request, the borrower must then request a review of the decision by the SBA. If the SBA’s review affirms the lender’s decision, the borrower has a very limited timeframe to file an appeal of the decision with the SBA’s Office of Hearings and Appeals. The appeal must contain very specific information regarding the reasons why the SBA’s decision was made in “clear error” – without this information, the appeal can be dismissed without being heard.

Recently, Frier Levitt represented a client who received a PPP loan in excess of $3 million from a lender. The client applied for forgiveness, and provided copious detailed information to the lender proving that is satisfied the criteria for forgiveness. The lender denied the forgiveness request in full, so we worked with the borrower to ensure it properly requested an SBA review of the decision.  The SBA similarly found that the borrower was not entitled to forgiveness and gave no information regarding its basis for the determination. We assisted the borrower in preparing a timely, compliant appeal of the improper loan forgiveness denial to the SBA’s Office of Hearings and Appeals. After asserting various legal and factual arguments to support our client’s position and navigating additional procedural impediments that required in-depth knowledge of the SBA’s Office of Hearings and Appeals regulations, the Office of General Counsel at the SBA fully reversed their final loan review decision. As a result, we were able to obtain complete forgiveness of the $3 million loan for the borrower.

PPP loans issued during the height of the pandemic facilitated immediate financial relief and assistance to a wide range of businesses, including healthcare facilities. The unfortunate reality is that the burdens of the forgiveness process on borrowers, lenders, and the SBA have led to improper denials of loan forgiveness for businesses that complied with all the PPP requirements. The SBA appeals process provides an opportunity to dispute these erroneous decisions, but the time limits and procedural requirements must be strictly followed.

If you receive an unfavorable determination on a PPP loan review from your bank, it is crucial you immediately request an SBA review of that determination in order to preserve any appeal rights. The SBA’s limited resources may lead to its review being a “rubber stamp” of the lender’s decision, at which point the borrower’s only recourse is to file a timely and compliant appeal with the SBA’s Office of Hearings and Appeals. Therefore, if you receive an unfavorable SBA final loan review decision, we advise you to bring this to counsel’s attention immediately, as the appeal window to the SBA’s Office of Hearings and Appeals is limited to thirty (30) days.

Frier Levitt’s experience in navigating the appeal process has equipped us with knowledge to assist borrowers in appealing improper lender or SBA decisions. If you have received an unfavorable PPP forgiveness determination from your lender or the SBA, Frier Levitt is ready and willing to assist to best achieve a favorable outcome. Contact us to inquire about obtaining assistance with navigating the PPP loan appeal process.