Earlier this year, the U.S. Small Business Administration (SBA) issued an interim final rule (IFR) regarding the process for appealing SBA loan decisions under the Paycheck Protection Program (PPP). This IFR sets forth the process for a PPP borrower to appeal certain SBA loan review decisions made in connection with a PPP loan to the SBA Office of Hearings and Appeals (OHA).

PIA National submitted comments in response to the IFR. Our comments addressed two main concerns: the deduction of economic injury disaster loan (EIDL) advances from loan forgiveness amounts and the undue burden of the loan forgiveness appeals process.

Repayment of EIDL Advances

In our previous comments, PIA National expressed unease about the deduction of the EIDL advance, because many small businessowners obtained emergency EIDL advances while their PPP loan applications were pending. Indeed, EIDL advances were essential for many businesses because they were familiar and readily available when the PPP application process was still new and complex. During that time, PPP borrowers who got EIDL advances didn’t know their advances would be deducted from the forgiveness of any PPP loans they would ultimately receive.

Even if the rest of their PPP loan is eventually forgiven, as it stands now, some borrowers will owe money to their lenders for repayment of the EIDL advance. Lenders, too, didn’t realize then that they may have to request money back from their borrowers.

Burdensome Appeals Process

A PPP borrower who is appealing an SBA loan forgiveness decision must include the following items in their appellate paperwork:

1. The basis for OHA jurisdiction, including proof that the appeal is being filed in a timely way
2. A copy of the SBA loan review decision being appealed, or a description of it, if the decision itself is not available
3. A specific statement about why the decision is wrong, including “all factual information and legal arguments supporting the allegations”
4. What the borrower is asking for
5. Signed copies of payroll tax filings
6. Signed copies of applicable federal tax returns
7. The name, contact information, and signature of the borrower or their attorney

Just collecting all this information is going to be hard for many small businessowners. First, small businesses that took PPP loans with an expectation of reimbursement aren’t likely to be able to afford to hire a lawyer to help with their appeal. But without an attorney, many small businessowners may be stumped when they’re asked to give the basis for OHA jurisdiction. Small businessowners who are not themselves attorneys may not know or be able to articulate the jurisdictional basis or legal arguments supporting their appeal, if such arguments exist. Plus, even asking for the contact information of the “appellant or its attorney” is a subtle admission by the SBA that this appeals process will be difficult for borrowers to navigate without counsel. Finally, the appeal itself must be served, with attachments, “on the Associate General Counsel for Litigation,” along with “a signed certificate of service.”

Failure to provide any one of the documents listed above allows an OHA judge to dismiss the appeal altogether. The appeal must be filed within 30 calendar days after the borrower receives the SBA’s loan review decision or after the lender notifies the borrower of said decision, whichever is earlier. The borrower then has, at most, a month in which to realize the SBA’s decision was wrong, assemble the documents or hire a lawyer to do so, and serve the SBA. The judge can dismiss an appeal that is beyond OHA’s jurisdiction. The judge can also dismiss an appeal if the appellant does not have standing or if the appeal is filed too early or too late.

Finally, small and large businesses alike have found the loan forgiveness application process complex, and many lenders report having to return forgiveness applications to businesses so that problems with the applications can be fixed. Considering lenders are already experiencing challenges with the loan forgiveness application process, it would make sense to further simplify the appeals process.

After the IFR: New Forgiveness Process for Small-Dollar Borrowers

Since the publication of the IFR described above, the SBA and Treasury Department have signaled at least some understanding that the appeals process shouldn’t be so burdensome that it effectively prohibits borrowers from appealing. Just last week, the SBA and Treasury issued a new interim final rule announcing a simplified loan forgiveness process for borrowers who are seeking forgiveness of loans amounting to $50,000 or less. The simpler application, which is a two-page form, can be accessed here. Additionally, the SBA website includes regularly-updated “Frequently Asked Questions” about the PPP loan forgiveness process.

The SBA’s loan forgiveness application portal opened to lenders on August 10, and the SBA began processing loan forgiveness applications earlier this month. In the meantime, the PPP borrowing portal closed in early August with more than $130 billion in the PPP loan allocation pot remaining unspent.

Next Steps

PIA National will continue to urge the SBA to ensure that the PPP loan forgiveness process and the appeals process of forgiveness decisions are not overly burdensome for small businessowners. We will also continue our advocacy in Congress for legislation that would provide small businesses with a straightforward and streamlined loan forgiveness process.