SBA PPP APPEALS: The Inside Scoop

In the realm of supporting American businesses, the U.S. Small Business Administration (SBA) has been a pillar since its establishment in 1953. Tasked with aiding, counseling, assisting, and safeguarding the interests of small business concerns, the SBA plays a vital role in fostering a robust entrepreneurial landscape while bolstering the nation’s economic foundations.

The Inside Scoop on SBA PPP Loan Forgiveness Appeals

The SBA continues to actively address appeals for Paycheck Protection Program (PPP) loan forgiveness denials. Our extensive experience in navigating the appeal process alongside SBA attorneys underscores the SBA’s commitment to helping borrowers secure forgiveness, provided the facts align with the agency’s rules and regulations. In the pursuit of loan forgiveness, we have identified instances where critical facts were sometimes overlooked by the SBA. For example, one case successfully justified a higher forgiveness amount by utilizing 2020 payroll figures instead of those from 2019. It’s important to note that SBA’s internal administrative court, the Office of Hearings and Appeals (OHA), operates under stringent rules.

Key Tip: If your bank initially granted forgiveness for your SBA PPP loan but it was subsequently denied by the SBA, it is imperative not to procrastinate in responding to the loan forgiveness denial letter. You have a 30-day window to initiate an appeal to a Federal Court in order to have your case heard. Seeking professional assistance to meticulously review your payroll records can uncover any inadvertently omitted “payroll costs,” potentially strengthening your appeal.

Essential Steps to Initiate Your SBA Loan Forgiveness Appeal

When facing an SBA loan forgiveness denial, it’s crucial to take decisive actions to appeal the decision. Below is a summary of key steps to guide you through this critical process:

1. Review the “Final SBA Loan Review Decision Letter”

Begin by carefully examining the “Final SBA Loan Review Decision Letter” you received. This document outlines the basis for the denial and provides essential insights into the SBA’s reasoning.

2. Confirm Your Appeal Deadline

Take note of the deadline to submit your appeal. Missing this deadline could jeopardize your chance to have your case heard. Timeliness is paramount.

3. Gather Your Documents and Facts

Assemble all relevant documents and facts related to your PPP loan and forgiveness application. Identify any issues or discrepancies that warrant attention in your appeal.

4. Study SBA’s Prior Legal Decisions and Rulings

Familiarize yourself with the SBA’s previous legal decisions and rulings, particularly those that align with your situation. This knowledge can inform your legal arguments during the appeal process.

5. Draft Your Appeal (Maximum 20 Pages)

Craft a compelling appeal document, ensuring it does not exceed 20 pages in length. Include exhibits, which serve as your evidence to support your claims. Your appeal should feature:

  • Clear legal arguments.
  • A presentation of pertinent facts.
  • Citing relevant legal authorities to bolster your position.
  • Demonstrating that the SBA’s denial was “clearly erroneous,” backed by appropriate evidence. (Additional requirements may apply; consult the SBA’s website for details.)

6. Create an Online Account at

Register for an online account at, the SBA’s designated platform for appeals. Accurate and complete responses to the online questionnaire are vital.

7. Identify a Legal Representative

Designate a legal representative to handle the SBA appeal on behalf of your business. Legal expertise is invaluable during this process.

8. Upload Your Appeal Package

Upload your prepared appeal, exhibits, and the “Final SBA Loan Review Decision Letter” via the portal. Ensure that all documents are complete and well-organized.

By diligently following these steps, you’ll be well-equipped to initiate your SBA loan forgiveness appeal and work toward a favorable resolution for your business. Remember that meticulous preparation and adherence to deadlines are key to a successful appeal.

SBA PPP Loan FAQs & Tips

Navigating the intricacies of the SBA’s Paycheck Protection Program (PPP) can be a daunting task, especially with questions arising about compliance, deductions, forgiveness, employees, and the CARES Act. At Milikowsky Tax Law, our experienced team is dedicated to simplifying the information landscape, providing you with essential facts and actionable strategies to help your business successfully navigate the SBA loan forgiveness process.

1. Can I Deduct Expenses Paid with My Forgiven PPP Loan on My Tax Return?

Presently, the IRS, through Notice 2020-32, restricts the deduction of expenses if they were paid using forgiven PPP loan funds.

2. Does the CARES Act Limit Payroll Costs for Compensation over $100k?

Yes, the CARES Act excludes compensation exceeding $100k from payroll costs. However, this exclusion pertains only to cash compensation, and not to employee benefits such as contributions to retirement plans, group health care coverage, and state/local tax payments related to compensation.

3. Can Payments to Independent Contractors or Sole Proprietors Be Included in Payroll Cost Calculations?

No, payments to independent contractors or sole proprietors cannot be included in payroll cost calculations. These entities are potentially eligible for their own PPP loans if they meet the requirements.

4. What Rules Should I Rely on for PPP Compliance?

Borrowers should rely on the laws, rules, and guidance available at the time of their loan application submission through the acceptance of their application.

5. Are There Restrictions on Which Employees Can Be Paid with PPP Loan Funds?

Yes, employees must have their “principal place of residence” in the United States to be eligible for payroll expenses using PPP loan funds.

6. How Should I Calculate Employee Count for Eligibility and Forgiveness?

For determining loan eligibility, count all employees, including part-time ones. For calculating “loan forgiveness,” use “full-time equivalent” employees to assess any reduction in the forgiveness amount due to workforce reductions.

7. Will the SBA Review All Loans for Eligibility?

Yes, SBA, in collaboration with the Department of the Treasury, will scrutinize all loans exceeding $2 million, as well as select other loans, following the submission of loan forgiveness applications to ensure compliance with eligibility criteria.

8. What Happens If a Borrower Certified Inaccurately About Loan Necessity?

A safe harbor provision applies to loans below $2 million, deeming their necessity certification as made in good faith. Loans exceeding $2 million must substantiate their good-faith certification. If the SBA concludes a lack of adequate basis, repayment may be required, and while administrative enforcement or referrals may not be pursued, there is currently no specified timeframe for repayment.

9. Can Partnerships or LLCs File Separate PPP Loan Applications?

No, PPP loan applications must be submitted by the partnership or LLC itself. Only self-employed individuals or sole proprietors, who filed a 2019 Form 1040 Schedule C, were operational on February 15, 2020, and resided in the U.S., can independently apply for a PPP loan.

By adhering to these FAQs and tips, you can confidently navigate the complexities of PPP loan compliance and forgiveness, ensuring your business’s financial well-being during these challenging times.

Final Notes

Navigating the PPP-2 loan forgiveness process demands attention to detail and an understanding of potential challenges. Addressing discrepancies in payroll records, grasping ERC intricacies, maintaining document consistency, comprehending intricate calculations, and seeking expert assistance are all pivotal steps toward securing the favorable loan forgiveness outcome you rightfully deserve. 

At Milikowsky Tax Law, we are steadfastly committed to aiding businesses like yours in successfully navigating these challenges. 

Contact Milikowsky Tax Law and learn how we can help.