The US Small Business Administration (SBA) is undertaking a sweeping review of many loans administered under the Paycheck Protection Program (PPP), impacting billions of dollars in loans and, in many cases, reviewing PPP loan forgiveness amounts that have already been recommended or approved. These loan reviews cover first draw PPP loans made under Section 7(a)(36) of the Small Business Act and second draw PPP loans made under Section 7(a)(37) of the act. SBA’s issuance of a final loan review decision under the PPP triggers administrative appeal rights and remedies governed by specific rules of practice.

1. Which loan decisions are appealable? A final SBA loan review decision is appealable to the SBA office of Hearing and Appeals (OHA). After SBA completes a review of a PPP loan, a final SBA loan review decision is an official written decision by SBA that finds a PPP loan 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; and/or (4) is ineligible for PPP loan forgiveness in any amount when the lender has issued a full denial decision to SBA. 13 C.F.R. § 134.1201(b). OHA, through an administrative law judge or an administrative judge, may affirm, reverse, or remand a final SBA loan review decision. 13 C.F.R. § 134.1212. A borrower cannot directly file an appeal of a decision made by a lender concerning a PPP loan with OHA. 13 C.F.R. § 134.1201(c).

2. What circumstances can lead to a final SBA loan review decision? A final SBA loan review decision could find that a borrower was ineligible for a PPP loan, ineligible for a certain loan amount, or ineligible for a certain loan forgiveness amount. For example, SBA could issue a decision finding that a borrower was ineligible for its PPP loan because the borrower was not a small business under SBA’s employee- or revenue-based size standards. Or SBA could find that although the borrower itself was a small business, some of the borrower’s affiliated entities, and those entities’ employee counts, must be considered when determining the borrower’s employee-based size. SBA could also find that proceeds of a PPP loan were not used for eligible expenses, such as payroll costs or payments for mortgage interest, rent, utilities, or other eligible expenses under the PPP. These are only some of the many justifications SBA may assert in issuing a decision.

3. When must an appeal be filed? An appeal petition must be filed with OHA within 30 calendar days after the appellant’s receipt of the final SBA loan review decision. An appellant is required to use the OHA Case Portal (https://appeals.sba.gov) to file and manage an appeal. 13 C.F.R. § 134.1202(a). A timely appeal by a PPP borrower of a final SBA loan review decision extends the deferment period of the PPP loan until a final decision is issued. 13 C.F.R. § 134.1202(d). An appellant must provide its lender with a copy of the timely appeal petition upon filing in order for the lender to extend the deferment period of the PPP loan until a final decision is issued. 13 C.F.R. § 134.1202(b).

4. Who can file the appeal? Only the borrower on a loan, or its legal successor in interest, has standing to appeal the final SBA loan review decision to OHA. Lenders and individual owners of a borrower entity do not have standing to appeal a final SBA loan review decision. 13 C.F.R. § 134.1203.

5. What information must be included with the appeal? An appeal petition must include: (1) a copy of the final SBA loan review decision that is being appealed and the date it was received by the borrower; (2) a full and specific statement as to why the final SBA loan review decision is alleged to be erroneous, together with all factual information and legal arguments supporting the allegations; and (3) the name, address, telephone number, email address, and signature of the appellant or its attorney. 13 C.F.R. § 134.1204. An appeal petition that does not contain all the required information may be dismissed, with or without prejudice, at the judge’s own initiative or upon motion of SBA.

6. Which documents and information are considered on appeal? The administrative record will include nonprivileged, relevant documents that SBA considered in making its final loan review decision or that were before SBA at the time of the final loan review decision. 13 C.F.R. §§ 134.1206 and 134.1207. Generally, the judge may not admit evidence beyond the administrative record. 13 C.F.R. § 134.1209(a). Neither discovery nor oral hearings will be permitted in appeals from final SBA loan review decisions. 13 C.F.R. § 134.1209(b). Appeals will be decided solely on a review of the administrative record, the appeal petition, any response by SBA, any reply or supplemental pleading, and filings related to objections to the administrative record. 13 C.F.R. § 134.1209(c).

7. What must be proven on appeal? The appellant has the burden of proof, and the standard of review is whether the final SBA loan review decision was based on clear error of fact or law. 13 C.F.R. § 134.1210.

8. How long with the appeal take? The judge will issue a decision within 45 calendar days after the close of record, as practicable. 13 C.F.R. § 134.1211. The record will close 45 calendar days from the issuance of the judge’s notice and order that follow the appeal petition, unless the judge decides otherwise. 13 C.F.R. § 134.1206.

9. Is the judge’s decision final? The judge’s decision on the appeal is an initial decision, which will become the final decision of SBA 30 calendar days after its service, unless the appellant files a request for reconsideration or seeks review by an SBA administrator. 13 C.F.R. § 134.1211(b). Either SBA or the appellant may request reconsideration of an initial decision by filing with the judge and serving a petition for reconsideration within 10 calendar days after service of the judge’s decision. 13 C.F.R. § 134.1211(c). The request for reconsideration must clearly show an error of fact or law material to the decision. Id. The judge may also reconsider a decision on his or her own initiative within 20 calendar days after service of the judge’s decision. Id. Further, within 30 calendar days after the service of an initial OHA decision or a reconsidered initial OHA decision of a judge, the SBA administrator, solely within the administrator’s discretion, may elect to review and/or reverse an initial OHA decision or a reconsidered initial OHA decision. 13 C.F.R. § 134.1211(d). Final decisions may be appealed to the appropriate federal district court. 13 C.F.R. § 134.1211(g). An appeal to OHA is an administrative remedy that must be exhausted before judicial review of a final SBA loan review decision may be sought in a federal district court. 13 C.F.R. § 134.1201(d).

Borrowers should carefully consider these and other applicable rules and consult counsel when considering rights related to an appeal from an SBA loan review decision under the PPP.