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On August 12, 2020, the Small Business Administration (SBA) issued a new interim final rule that provides guidance for borrowers and lenders on the appeal procedure for SBA loan review decisions for loans under the Paycheck Protection Program (PPP).

The PPP is part of the Coronavirus Aid, Relief and Economic Security (CARES) Act, which was enacted in March 2020 to allow small employers to seek a PPP loan to help bridge the cost of maintaining employees during the COVID-19 crisis.

The CARES Act was amended by the Paycheck Flexibility Act to increase flexibility in eligibility for PPP loan forgiveness by increasing the timeframe of the period covered by the loan from 8 weeks to 24 weeks, adding exemptions based on employee availability, reducing the payroll cost requirement from 75% to 60%, and extending the period to pay the loan.

The first interim final rule was posted on April 2, 2020, providing PPP loan application guidelines. Since then, the SBA has posted a number of other interim final rules implementing the PPP and loan review procedures.

Subsequent to the June 5, 2020 enactment of the PPP Flexibility Act, on June 22, 2020, the SBA posted an interim final rule that reconciled the PPP Flexibility Act into the loan forgiveness application process.

The new interim final rule establishes rules for appeals procedures of certain SBA PPP loan review decisions to the SBA Office of Hearing and Appeals (OHA).

These appeals are limited to final written decisions by the SBA (as opposed to lender) regarding any of the following of the 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 or partial approval decision issued to SBA (except for the deduction of any Economic Injury Disaster Loan advance);
  4. Is ineligible for PPP loan forgiveness in any amount when the lender has issued a full denial decision to the SBA.

The new interim final rule details the expected content of the appeals petition and the procedures governing the appeal.

The deadline to appeal is the earlier of a borrower’s receipt of the final SBA loan decision or 30 days after the lender notifies the borrower of the final SBA loan decision.

The appeal does not allow the borrower to avoid or delay repayment.

These rules do not apply to a challenge by a borrower against the PPP lender.

A borrower can request an SBA review of a PPP lender decision to deny the borrower’s loan forgiveness application in full, but that request is for a review by the SBA, and not an OHA appeal.

A borrower may exercise any other rights it has against the PPP lender for the lender’s decision.

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