Update: On January 27, 2022, the Small Business Administration (“SBA”) issued SBA Procedural Notice 5000-82766, SBA Loan Reviews of Paycheck Protection Program Lender Partial Approval Forgiveness Decisions (“2022 Notice”) that outlined a new process to allow Paycheck Protection Program (“PPP”) borrowers to request an SBA loan review of partial approval forgiveness decisions issued by their PPP lenders. See “Partial Approval Forgiveness Decisions” below. Borrowers that received other denial forgiveness decisions from their lenders may continue to follow the process outlined below and in our other articles.

On September 16, 2021, the Final Rule on Borrower Appeals of Final SBA Loan Review Decisions was posted and became effective on September 14, 2021 (the “Final Rule”). Except as modified by the 2022 Notice for loan reviews of partial approval forgiveness decisions, the, the Final Rule applies to all appealable final SBA loan review decisions under the PPP and applies to all appeals filed after the effective date and to those appeals filed before the effective date for which a notice and order has not been made. The Final Rule adopted certain changes to the previously published interim rules, including: (a) certain technical amendments; (b) a procedural change to require appellants to use the OHA Case Portal to file and manage their appeals; (c) outlining a process of how and when an appeal must be filed; (d) removing the requirement that timeliness of the appeal could be based on a notification by the lender of a final SBA loan review decision rather than actual receipt of the final SBA loan review; (e) simplifying the information required to file an appeal; (f) clarifying that lenders and individual owners of a borrower entity do not have standing to file an appeal; and (g) adding new provisions for “notice and order” and other requirements and clarifications.

With the Final Rule posted, borrowers might have new PPP-related questions and are encouraged to view articles from our recent four-part series, After the Economic Aid Act: An Updated Guide to the PPP Loan Forgiveness Review and Appeals Process:

• Initial Takeaways and Agency Guidance for the Latest PPP Updates
• Grounds for SBA Review, the SBA Loan Review Process, and Borrower Items
• The Lender’s Role in the PPP Loan Review Process
• What to Know about PPP Appeals and Next Steps

1. Partial Approval Forgiveness Decisions

For the process for a borrower’s request for an SBA loan review of partial approval forgiveness decisions by their PPP lenders, see “The Lender’s Role in the PPP Loan Review Process” and the section entitled “New Process For Borrower Requests for SBA Loan Review of Partial Approval Forgiveness Decisions.”

2. Other Denial Forgiveness Decisions

The below article may answer questions related to appeals of other denial PPP forgiveness decisions, including the Final Rule changes.

PPP Appeal Rules of Practice (§ 134.1201) 
The Interim Final Rule on Additional Revisions to Loan Forgiveness and Loan Review Procedures Interim Final Rules (originally posted 10/8/2020) contain the rules of practice for appeals of certain SBA loan review decisions under the PPP (the “PPP Appeal Rules of Practice”). The PPP Appeal Rules of Practice cover:

• the scope of rules;
• the appeal petition;
• standing;
• the deadline for filing appeal petition;
• dismissal, notice, and order;
• the administrative record;
• response to an appeal petition;
• evidence beyond the record, discovery, and oral hearings;
• interlocutory appeals;
• alternative dispute resolution procedures;
• standard of review, decision on appeal;
• effects of the decision;
• Equal Access to Justice Act and no recovery of attorney’s fees;
• exhaustion of administrative remedies; and
• confidential information and protective order.

In addition, the following regulations apply: amendments and supplemental pleadings, representation in cases before Office of Hearings and Appeals (“OHA”), requirement of signature (13 CFR 134.207 through 134.209), motions (134.211), summary judgment (134.212), and settlement, judges, sanctions, and prohibition against ex parte communication (134.217 through 134.220).

What Is Appealable? (§ 134.1201) 
A final SBA loan review decision that is appealable under the PPP Appeal Rules of Practice is an official written decision by the SBA, after the 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 approval or partial approval decision issued to the SBA; and/or (4) is ineligible for PPP loan forgiveness in any amount when the lender has issued a full denial decision to the SBA.

What Cannot Be Appealed? (§ 134.1201) 
The following items cannot be appealed: (1) a borrower cannot file an OHA appeal of any decision made by a lender concerning a PPP loan (a borrower can request an SBA review of a lender decision to deny the borrower’s loan forgiveness application in full, but that request is for a review by SBA, not an OHA appeal, and a borrower may exercise any other rights it has under applicable law against a PPP lender regarding a lender decision); (2) any determination by the SBA’s Office of Inspector General concerning a PPP loan; and (3) any SBA decision on any 7(a) loans other than PPP loans. The Rules of Practice for Appeals From Size Determinations and NAICS Code Designations do not apply to appeals of SBA loan review decisions or to the PPP.

Commencement of Appeals of Final SBA Loan Review Decisions (§ 134.1202)
An appeal petition must be filed with OHA within 30 calendar days after the borrower’s receipt of the final SBA loan review decision. To file and manage an appeal of a final SBA loan review decision with OHA, refer to the OHA Case Portal. An appellant is required to use the OHA Case Portal to file and manage their appeal. An appellant must provide their 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 under § 134.1211. For purposes of determining dates, do not count the day the time period begins, but do count the last day of the time period. If the last day is Saturday, Sunday, or a federal holiday, the time period ends on the next business day. Example: On a Thursday, a borrower receives a final SBA loan review decision. The time period begins on Thursday, so the first day to count is Friday. Because the 30th calendar day after receipt of the decision is a Saturday, the appeal deadline extends to the next business day, which is Monday.  A judge may modify any time period or deadline, except: (a) the time period governing commencement of a case (i.e., when the appeal petition may be filed); and (b) a time period established by statute. A party may move for an extension of time pursuant to § 134.211. 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 under § 134.1211.

Standing (§134.1203)
Only the borrower on the loan, or its legal successor in interest, for which SBA has issued a final SBA loan review decision that makes a finding as described above as to what is appealable has standing to appeal the SBA loan review decision to OHA. Lenders and individual owners of a borrower do not have standing to appeal a final SBA loan review decision.

Appeal Petition (§134.1204)

• Content. The appeal petition must include the following information: (1) a copy of the final SBA loan review decision that is being appealed and the date it was received by the borrower (A Notice of Paycheck Protection Program Forgiveness Payment does not provide a borrower with a right to appeal to OHA); (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. There is no required format for an appeal petition; however, the appeal petition must meet the following requirements: (i) the maximum length of an appeal petition (not including attachments) is 20 pages. A table of authorities is required only for petitions citing more than twenty cases, regulations, or statutes; and (ii) clearly label any exhibits and attachments.
• Dismissal. An appeal petition that does not contain all of the information required in the preceding paragraph might be dismissed, with or without prejudice, at the Judge’s own initiative, or upon motion of SBA.
• Motion for more definite statement. SBA may, no later than five calendar days after receiving a Notice and Order on an appeal petition, move for an order to the appellant to provide a more definite appeal petition or otherwise comply with this section. A Judge may order a more definite appeal petition on his or her own initiative. A motion for a more definite appeal petition stays SBA’s time for filing a response. The Judge will establish the time for filing and serving a response and will extend the close of the record as appropriate. If the appellant does not comply with the Judge’s order to provide a definite appeal petition or otherwise fails to comply with applicable regulations in this subpart, the Judge may dismiss the petition with prejudice.

Dismissal (§134.1205)
The Judge must dismiss the appeal if: (1) the appeal is beyond OHA’s jurisdiction as set forth under § 134.1201; (2) the appeal is untimely under § 134.1202; (3) the appellant lacks standing to appeal under § 134.1203; or (4) the appeal is premature because SBA has not yet made a final SBA loan review decision. (b) The Judge may dismiss the appeal in accordance with § 134.1204(b) or (c)(3), or if the appeal does not, on its face, allege specific facts that if proven to be true, warrant reversal or remand of the final SBA loan review decision.

Notice and Order (§134.1206)
Upon receipt of an appeal challenging a final SBA loan review decision, OHA will assign the matter to either Administrative Law Judge or an Administrative Judge in accordance with §134.218. Unless the appeal is dismissed under §134.1205, the Judge will issue a notice and order, utilizing the OHA Case Portal, establishing a deadline for production of the administrative record and specifying a date by which SBA may respond to appeal.

Administrative Record (§134.1207)

• Time Limits. The administrative record will be due 20 calendar days after issuance of the notice of order unless additional time is requested and granted.
• Content. The administrative record must include non-privileged, relevant documents that SBA considered in making its final decision or that were before SBA at the time of the final decision. The administrative record need not, however, contain all documents pertaining to the appellant.
• Non-Waiver. In the event that privileged or confidential information is disclosed in the administrative record, such disclosure shall not operate as a waiver of any claim or privilege or confidentiality by SBA.
• Filing. SBA will file the administrative record with OHA and serve it on the appellant utilizing the OHA Case Portal.
• Objections. Any objection to the administrative record must be filed with OHA and served on SBA no later than 30 calendar days after the issuance of the notice and order, utilizing the OHA Case Portal appellant’s receipt of the administrative record. It is important to have a robust administrative record, as there generally will not be any evidence considered that is outside of the record. If additional time to file the administrative record was requested and granted by a Judge, the appellant will have 10 calendar days from the date SBA is required to file the administrative record under the judge’s order granting an extension in which to file an objection to the administrative record. The appellant may object to the absence of any document from the administrative record that the appellant believes should have been included in the administrative record. The Judge will rule upon such objections and may direct or permit that the administrative record be supplemented.

Response To An Appeal Petition (§ 134.1208)

• Who may respond. SBA may respond to an appeal as determined in its discretion, but SBA is not required to respond. If SBA elects not to respond, such election shall not be interpreted as an admission or waiver of any allegation of law or fact. In addition, after review of the appeal petition, OHA may request SBA to respond for good cause shown by OHA. Only SBA may respond. If filed, the response should set forth the relevant facts and legal arguments to the issues presented on appeal.
• Time limit. If an SBA response is filed, it must be filed within 45 calendar days after issuance of the notice and order.
• Close of record. The record will close 45 calendar days from the issuance of the notice and order, unless the judge decides otherwise. Generally, filings after the close of record will not be considered.
• Service. If a response is filed, SBA must file its response with OHA, and serve a copy of the response upon the appellant or its attorney, as applicable by utilizing the OHA Case Portal.
• Reply to response. Generally, a reply to a response is not permitted unless the Judge directs otherwise. See 134.206(e). However, upon motion (see § 134.211), and under terms needed to avoid prejudice to any non-moving party, the Judge may permit the filing and service of a supplemental pleading after review of SBA’s response and/or the administrative record. The proposed supplemental pleading must be filed and served with the motion utilizing the OHA Case Portal.

Evidence Beyond the Record, Discovery, and Oral Hearing (§ 134.1209)
Generally, the Judge may not admit evidence beyond the written administrative record. Neither discovery nor oral hearings will be permitted in appeals from final SBA loan review decisions. All appeals will be decided solely on a review of the administrative record, the appeal petition, any response, any reply or supplemental pleading, and filings related to objections to the administrative record.

Standard of Review (§ 134.1210)
The standard of review is whether the final SBA loan review decision was based on clear error of fact or law. The appellant has the burden of proof.

Decision on Appeal (§ 134.1211)

• (a) Time limits and contents. The Judge will issue his or her decision within 45 calendar days after the close of record, as practicable. The decision will contain findings of fact and conclusions of law, the reasons for such findings and conclusions, and any relief ordered. The decision will be served upon appellant and SBA utilizing the OHA Case Portal.
• (b) Initial decision. The Judge’s decision on the appeal is an initial decision. However, unless a request for reconsideration is filed pursuant to paragraph (c) below or the SBA Administrator, solely within the Administrator’s discretion, decides to review or reverse the initial decision pursuant to paragraph (d) below, an initial decision shall become the final decision of SBA 30 calendar after its service. The discretionary authority of the Administrator does not create any additional rights of appeal on the part of an appellant not otherwise specified in SBA regulations. Any decision pursuant to this subpart applies only to the PPP and does not apply to SBA’s 7(a) Loan Program generally or to any interpretation or application of the regulations in part 120 or 121.
• (c) An initial decision of the Judge may be reconsidered. If a request for reconsideration is filed and the SBA Administrator does not exercise discretion to review or reverse the initial decision under paragraph (d) below, OHA will decide the request for reconsideration and OHA’s decision on the request for reconsideration is a reconsidered initial OHA decision. Either SBA or appellant may request reconsideration by filing with the Judge and serving a petition for reconsideration within 10 calendar days after service of the Judge’s decision. The request for reconsideration must clearly show an error of fact or law material to the decision. SBA does not have to have filed a response to the borrower’s appeal petition to request reconsideration of the initial decision of the Judge. The Judge may also reconsider a decision on his or her own initiative within 20 calendar days after service of the Judge’s decision. A reconsidered initial OHA decision becomes the final decision of SBA 30 calendar days after its service unless the SBA Administrator, solely within the Administrator’s discretion, decides to review or reverse the reconsidered initial OHA decision under this paragraph (d). The discretionary authority of the Administrator does not create any additional rights of appeal on the part of an appellant not otherwise specified in SBA regulations.
• (d) Administrator review. 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. In the event that the Administrator elects to review and/or reverse an initial OHA decision and a timely request for reconsideration of a Judge’s initial decision is also filed by an appellant pursuant to paragraph (c), the Administrator will consider such request for reconsideration. The Administrator’s decision will become the final decision of SBA upon issuance.
• (e) Neither initial nor final decisions rendered by OHA are precedential.
• (f) Final decisions are normally published without redactions on OHA’s website. PPP decisions will likely contain confidential business and financial information and/or personally identifiable information. Therefore, OHA, within its full discretion, may publish final decisions issued under this section with any necessary redactions.
• (g) Appeal to Federal district court. Final decisions may be appealed to the appropriate Federal district court only.

Effects of the Decision (§ 134.1212)
OHA may affirm, reverse, or remand a final SBA loan review decision. If remanded, OHA no longer has jurisdiction over the matter unless a new appeal is filed as a result of a new final SBA loan review decision.

Equal Access to Justice Act (§ 134.1213)
A prevailing appellant is not entitled to recover attorney’s fees. Appeals to OHA from final SBA loan review decisions under the PPP are not proceedings that are required to be conducted by an Administrative Law Judge under § 134.603.

Confidential Information (§ 134.1214)

If a filing or other submission made pursuant to an appeal contains confidential business and financial information; personally identifiable information; source selection sensitive information; income tax returns; documents and information covered under § 120.1060; or any other exempt information, that information is not available to the public pursuant to the Freedom of Information Act (FOIA), 5 U.S.C. 552.

Suggested Next Steps

Because the above information about appeals, and the loan forgiveness application review process outlined in our articles “Initial Takeaways and Agency Guidance for the Latest PPP Updates,” “Grounds for SBA Review, the SBA Loan Review Process, and Borrower Items,” and “The Lender’s Role in the PPP Loan Review Process,” set out requirements for both borrowers and lenders, borrowers are encouraged to familiarize themselves with their requirements and work collaboratively with lenders to obtain approval of loan forgiveness applications. They might also consider consulting with their legal counsel.