PPP Loan Forgiveness Denied? 5 Reasons Why and How To Appeal

PPP Loan Denied Reasons and Appeal

Was your loan forgiveness request denied under the Paycheck Protection Program? It’s not just you. Many people have experienced this problem, and these rejections can be caused by several factors, such as an inverted set or a missing signature.

In this article, you’ll learn the five most common reasons you might have been denied and how to appeal the decision to the SBA.

About the Paycheck Protection Program

The Paycheck Protection Program was created by Congress as part of the Coronavirus Aid, Relief, and Economic Security Act. It helps small businesses stay in business, and employees get paid. Depending on the circumstances, these loans might be forgiven.

Small businesses could use PPP funds to purchase:

  • Payroll for up to eight weeks
  • Other benefits and healthcare for employees
  • Utilities, mortgages, and rent
  • Mortgage interest payments
  • Protective worker expenditures
  • Cloud services and business software directly related to business operations
  • Additional expenses may also be incurred

The SBA will fully forgive any loan that was used for such purposes and at least 60% of the loan used for payroll expenses. For unforgiven loans, the SBA may grant an additional six-month delay to allow you to start repayment.

Qualifying Payroll Expenses to the PPP

Most business owners believe that payroll is simply the money employees receive. However, payroll expenses qualify as payroll expenses beyond the normal daily payroll. Here’s a list:

  • Compensation such as wages, tips, and commissions can reach up to $100,000 per employee per year (or $8333 per month).
  • Paid time off such as vacation, parental or family leave, sick leave, or medical leave
  • Separation and dismissal allowances
  • Retirement benefits payments
  • Group vision, life, and dental insurance
  • Taxes such as the payment of local or state taxes on the compensation of employees

If you have been denied PPP loan forgiveness due to not using 60% of the loan’s payroll, you might want to look again at this list and see if it can help you reach that 60% mark.

You cannot use qualified wages to get loan forgiveness if you claim the Employee Retention Credit (ERC). This means that you cannot use the same wages for loan forgiveness under both the ERC and PPP programs.

5 Reasons PPP Loan Forgiveness Requests are Denied

Almost $700 billion worth of PPP loans has been forgiven as of February 2022. The SBA has forgiven most loans, but there are still some that remain unpaid. The following are the top five reasons your PPP loan forgiveness application may have been denied.

  • Your documents were not complete
  • The loan was not available to you
  • Your calculations were incorrect
  • You have forgotten to sign your documents
  • You haven’t used the money for its intended purposes (60% on payroll)

Appeal your PPP Loan Denial within 30 Days

From the date you receive your letter of forgiveness denial, you have 30 days to appeal. The date that you were notified, not the time when your lender was notified. This could delay the process.

Get your SBA notification time-stamped with the date if your lender informs you that you have been denied so that you can appeal within the grace period.

Here are some ways to appeal your PPP loan denial

The following documentation is required to file an appeal to extend your PPP loan deferment.

  • A dated copy, with the date and signature of the SBA letter
  • A written explanation and supporting documents to support your application for loan forgiveness approval.
  • Quarterly wage reporting copies for employees of the Signed State
  • Signed unemployment tax filings
  • Signed copies of Federal tax returns showing self-employment/partner income
  • Another document to show your proper use of funds
  • Information about you, including:
  • Name, Address, and Phone Number
  • Email address
  • Sign your signature or the signature of your attorney/power of attorney holder on all necessary documents

Once you have your documents, verify their accuracy, dates, and signatures and then submit them electronically to the SBA Office of Hearings and Appeals.

What happens after your Appeal?

Your case will be reviewed by a judge from the Office of Hearings and Appeals. This judge has 45 days to respond and issue a Notice and Order decision in response to your Appeal. Hence, this is a legal notice.

If you disagree with the SBA’s decision, you have an additional 10 days to respond. You still have two options if you do not respond to the OHA’s decision within 30 days.

  • Request reconsideration of OHA
  • Appeal the OHA decision to the relevant federal district at this address:

Small Business Administration

Associate General Counsel for Litigation

409 Third Street SW

Washington, DC 20416

The OHA will review your Appeal. Let your lender know how you are doing with your Appeal.

Further Reading

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