Tag Archive for: SBA Loan Forgiveness

the sba denial is serious. partnering with an attorney helps your business find the best outcome

During the COVID-19 pandemic, the Small Business Administration (SBA) doled out Payment Protection Program (PPP) loans to qualified businesses. Over the course of the program, SBA granted over $809 billion in loans.

SBA is currently processing loan forgiveness and loan denials. Businesses that meet SBA PPP loan forgiveness terms are eligible for forgiveness of their PPP loans. 

SBA PPP Loan forgiveness is only eligible for businesses if they used the loan accordingly:

  • “Employee and compensation levels are maintained,
  • The loan proceeds are spent on payroll costs and other eligible expenses, and
  • At least 60% of the proceeds are spent on payroll costs.”

However, if a business fails to meet the forgiveness criteria, they are responsible for payment in full of the total loan amount. 

If your business applies for PPP loan forgiveness and it is denied, you have 30 days to appeal the denial. This deadline is unwavering, and appeals submitted after 30 days are not eligible, and your business will be responsible for paying back the loan amount in full.  

The agency is also selective on who can defend your business during an appeals process. The only people who can represent your business are:

  • An attorney 
  • The owner 
  • A company officer 

* A CPA cannot defend you nor can they appeal your forgiveness denial. 

What are the Different Types of Appeals?

The Office of Hearings and Appeals (OHA) has jurisdiction over SBA PPP loans. When they deny a loan forgiveness application, it’s due to the following: 

  1. The business is not eligible for the PPP loan
  2. The business is not eligible for the PPP loan amount received;
  3. The business used the loan proceeds for unauthorized expenses;
  4. The business is not eligible  for the PPP loan forgiveness amount determined by the lender in its full or partial approval decision issued to SBA; or
  5. The business is not eligible for PPP loan forgiveness when the lender has issued a full denial decision to SBA.

Loan Forgiveness Denial Appeal Process

If your business receives an SBA PPP Loan denial decision letter, act quickly.

The following steps are a guide for what to do if your business receives a letter of denial.

  1. Review “Final SBA Loan Review Decision Letter”
  2. Confirm your deadline to appeal the SBA decision
  3. Gather your documents and facts to identify issues to raise in your appeal
  4. We strongly recommend retaining a trusted attorney to represent your company because they will prepare, file, and defend your formal appeal.
  5. Review SBA’s prior legal decisions & rulings
  6. Draft your Appeal (max 20 pages) and include exhibits (your evidence) and SBA’s Final Loan Review Decision Letter
  • You must include your legal arguments, facts, and legal authority to support your position to show SBA’s denial was “clearly erroneous” (there are additional requirements – see SBA’s website)
  • The appeal must also include a copy of the SBA loan review decision being appealed, a statement as to why the denial is erroneous, and the contact information of the business and/or the business’s attorney.
  1. Create an online account at appeals.sba.gov
  2. Answer all questions truthfully and completely when responding to SBA’s online questionnaire.
  3. Identify a legal representative for your business to handle the SBA Appeal.
  4. Upload your appeal, exhibits, and SBA Final Decision Letter. 
  5. Wait for the final decision.

For more resources on how to appeal an SBA PPP forgiveness denial, read our article, here. Keep in mind that partnering with an attorney, like our team here at Milikowsky Tax Law, can help save your business from potential mistakes.


 If SBA sends a Final SBA Loan Review Decision Letter, you have 30 days to submit an appeal. Partner with an attorney to help defend your business.

A pile of coin

In the midst of the Coronavirus pandemic, the CARES Act provided the funding for the SBA to implement the Paycheck Protection Program (PPP) to provide financial assistance to businesses. While many jumped at the opportunity to receive financial support, the aftermath of business audits has made some regret they did. 

The CARES Act grants the government the flexibility to more easily audit businesses that received PPP loans. The positions that allow the government this power are known as supervisory entities and include the following 

  • Special Inspector General for Pandemic Recovery 
  • Pandemic Response Accountability Committee

Supervisory entities were put in place to prevent and detect fraud and abuse of PPP loans issued under the CARES Act. Businesses with discrepancies between their taxes and their loan requests are now facing serious repercussions.

The audits and investigations related to PPP loans will be conducted by the SBA. All documentation involved in these investigations must be retained for six years following. If it is determined that the recipient of a PPP loan was either ineligible or spent the loan on unapproved uses, they may be required to repay a portion, if not all, of the loan. Additionally, depending on the circumstances, the borrower’s case may be referred to the authorities for further civil or criminal punishment. 

On April 28th, Treasury Secretary Steven Mnuchin announced that ALL PPP loans over $2 million would experience a full investigative audit by the SBA. For many businesses, these SBA audits have become equally, if not more, daunting than IRS audits. 

The potential for criminal exposure has also become an issue with these SBA audits and investigations. The FBI has joined forces with SBA in conducting the audits and investigations of wrongly claimed PPP loans. While loan application discrepancies are likely to be the most common offenses, these audits bring light to various other concerns for some businesses. 

The government has a wide range of going after businesses that they suspect to have acted in bad faith. Businesses may face fraudulent charges connected to the CARES Act including:

Another option for businesses who received PPP loans is to begin the process of having their loan forgiven. As of October 8th, the U.S. Treasury in conjunction with the SBA released a simplified process for businesses that received $50,000 or less to have their loans forgiven. To qualify for such forgiveness the business must meet certain criteria to prove that they utilized the loan payment as it was intended, to support payments of employee payroll, and to pay other specified business expenses. 

If your business received a PPP loan and are unsure or think you may have filed incorrectly, contact John Milikowsky for support today! Prepare for an SBA business audit before it’s too late!

Woman smiling using a laptop

A new bill before the Senate proposes to allow anyone who applied for a PPP loan under $150,000 to get automatic forgiveness.

On Monday, July 27th Marco Rubio and Susan Collins proposed an act called the “Continuing Small Business Recovery and Paycheck Protection Program Act.” CSBR&PPPA. Among concerns over documentation and the mass of paperwork that banks will have to sift through to grant forgiveness to PPP small business loan recipients, many business owners are still struggling and hope to be able to apply for more loan funds through the SBA.

According to the new act, for a business to receive round 2 of SBA PPP funding they would need to verify the following:

  1. The borrower must demonstrate that there has been at least a 50% reduction in gross receipts from January 1 to March 31 or from April 1 through June 30 of 2020, as compared to gross receipts for the same time period in 2019.  Businesses who were not in business during the first and second quarters of 2019 will have other criteria.
  2. The borrower must employ no more than 300 employees.
  3. The new loan cannot exceed $2M in most cases, and cannot exceed $10M when combined with other SBA loans approved in the last 90 days (including PPP, EIDL, and Main Street loans).

Eligible businesses are: non-profit entities, veterans organizations, tribal businesses, self-employed individuals, sole proprietors, independent contractors or small agricultural cooperatives. Publicly traded businesses and entities affiliated with the People’s Republic of China cannot qualify.

Banks will be held harmless

The proposed act provides that there will be no “enforcement action” against a lender who acted in good faith in relying upon certification or documentation submitted by a borrower, and the banks will receive 3% of new loans for up to $350,000, and 1% of the excess above that.

Borrowers with loans under $150,000 would simply attest to their good faith effort to comply with PPP loan requirements.  

The SBA has reserved the right to audit any and all loan recipients who attest to the use of their PPP funds in this way.  Business owners are advised to retain records of their use of the PPP funds for 3 years even once forgiveness is granted.

For loans between $150K and $2M borrowers would have to certify the existence of the lender documentation and retain those records for 3 years after the Application for Forgiveness is filed.

The 8 to 24 week covered period during which a borrower has to spend sufficient amounts to receive forgiveness will now apply for a period of time selected by the borrower, which will start on the day after the borrower receives the funds, and will end on any day selected by the borrower, but no later than December 31, 2020.

The percentages remain at 60/40

60% of the loan amount must be spent on payroll, group health insurance, and pension contributions.  And, 40% can be spent on nonpayroll costs. Those nonpayroll costs have been expanded to include the following:

  • Covered operations expenditures.
  • Property damage costs.
  • Covered supplier costs.
  • Covered worker protection expenditure.

IRS Notice 2020-32 is still in force

IRS notice 2020-32 provided that PPP expenses that result in forgiveness will not be deductible for tax purposes.  IRS Notice 2020-32 will remain in effect. If, however, you choose to declare the loan funds as income, you can deduct expenses as usual.  Consult with your CPA to learn more about the benefits of declaring your loan funds and deducting expenses.

sba logo

In early May, Treasury Secretary Steven Mnuchin announced that all companies who receive loans of more than $2 million in government relief will be subject to full audits from IRS. The Payroll Protection Program allows companies to have their loans forgiven, provided they spend the funds on payroll, benefits, rent, and utilities. The decision was made in order to ensure these loans were justified after large public companies and big chains utilized the funds set aside for small businesses.

Mnuchin said the loans of as much as $10 million meant to keep workers on payrolls under the Paycheck Protection Program were intended for small firms — not public companies and big chains that have access to other means of funding. The SBA will check that borrowers who took large loans properly certified they were needed because of the coronavirus outbreak, he said.

“I want to be very clear it’s the borrowers who have criminal liability if they made this certification and it’s not true,” Mnuchin said Tuesday on CNBC. “We will make sure that what was the intent for taxpayers is fulfilled here.”

More than 220 public companies applied for at least $870 million from the government program, according to the Washington-based data analytics firm FactSquared. Those companies included Auto Nation and Ruth’s Hospitality Group. Ruth’s Hospitality Group, which owns Ruth’s Chris Steak House, took a $20 million PPP loan. AutoNation took a $77 million loan. Both companies have said they would return the money. 

The Los Angeles Lakers — the NBA’s second-most valuable team — announced last week that they decided to return the $4.6 million loan secured by the team in March after receiving a large amount of criticism from California citizens, politicians, and small business owners.

The relaunch of the Paycheck Protection Program with an additional $320 billion approved by Congress last week got off to a rocky start Monday, with lenders reporting being shut out of the overwhelmed SBA system amid a flood of loan applications and concerns about when struggling companies will get the funding they need. Mnuchin said the program is getting funding to small businesses with an average loan size of $206,000 so far, despite the attention the large firms that took relief at the expense of mom-and-pop shops are getting.