According to an SBA press release, the agency has forgiven over $100 billion in PPP loans as of January 12, 2021, and has approved forgiveness for nearly 85% of the applications that it has received. That’s great, but what should you do if your client is in the other 15%? A Dorsey & Whitney memo says that a borrower’s only recourse is the SBA appeals process, and this excerpt says that it should expect an uphill battle:
The only appeal process allowed by law is set out in the SBA regulations found at 13 CFR § 134.1204, et seq. The decision on the appeal will be made by an administrative law judge (ALJ) who will review the petition filed by the borrower, the response of the SBA, and the “record,” that is the documentation submitted by the borrower and the SBA. However, in order to obtain a reversal of the denial of loan forgiveness, the borrower must convince the ALJ that “the SBA loan review decision was based on clear error of fact or law.” 13 CFR § 134.1212.
That is very difficult to prove because courts have ruled that “clear error of fact or law” means that “although there is evidence to support [the decision], the [administrative law judge] . . . is left with the definite and firm conviction that a mistake has been committed.” Concrete Pipe & Prods. of California, Inc. v. Constr. Laborers Pension Tr. for S. California, 508 U.S. 602, 622, 113 S. Ct. 2264, 124 L. Ed. 2d 539 (1993); see also, PGBA, LLC v. United States, 389 F.3d 1219, 1224 (Fed. Cir. 2004). All of that means that thorough preparation and diligent prosecution of the appeal is absolutely necessary.
The memo reviews the appeals process, including deadlines and the matters that must be addressed in an appeal petition. The most important part of the process to keep in mind is that deadlines are very tight – an appeal must be perfected within 30 days of the SBA’s final decision on forgiveness, and it is applied rigidly. That means that even if a company expects that its forgiveness application will be approved, it needs to prepare to move quickly in case it receives an unpleasant surprise.
-John Jenkins, TheCorporateConsel.net February 4, 2021