Partial PPP Forgiveness: Do I Have Legal Options?
So your PPP forgiveness application finally got processed, but instead of the full forgiveness you expected, you received only partial approval. Maybe you applied for $100,000 in forgiveness but only got $60,000 approved, leaving you responsible for repaying the remaining $40,000 plus interest. Or perhaps you requested forgiveness for the entire loan amount but the SBA or your lender reduced the forgivable amount based on documentation issues, owner compensation limits, or FTE reductions. Either way, your facing an unexpected debt that you thought would be completely eliminated, and your wondering: do I just have to accept this partial forgiveness decision, or do I have legal options to challenge it?
The answer is YES—you absolutely have legal options if you received partial PPP forgiveness and believe you were entitled to more. Depending on who made the decision (your lender or the SBA) and why the forgiveness was reduced, you might be able to appeal the decision, request an SBA review, submit corrected documentation, or file a request for adjustment. However, most of these options come with strict 30-day deadlines, so acting quickly is critical. We’ve seen borrowers who could have successfully challenged partial denials but missed there opportunity because they didn’t realize how fast the clock was ticking, or because they spent weeks trying to figure things out on there own before seeking legal help. Don’t make that mistake—understanding your rights and exercising them promptly can mean the difference between repaying tens of thousands of dollars or getting the additional forgiveness your entitled to.
This article explains everything you need to know about challenging a partial PPP forgiveness decision. We’ll cover why forgiveness gets partially approved rather than fully approved, whether the decision came from your lender or the SBA (which determines what your options are), how to appeal an SBA partial denial to the Office of Hearings and Appeals, how to request SBA review of a lender’s partial approval, when you can submit a request for adjustment to correct errors in your original application, and what happens if you decide not to challenge the decision. We’ll also discuss the practical considerations—is it worth fighting over the unforgiven amount, what’s your realistic chance of success, and when does it make sense to just repay the remaining balance rather than spend time and money appealing? If your staring at a partial forgiveness letter right now, read this entire article carefully before making any decisions.
Why Did I Only Get Partial Forgiveness Instead of Full Forgiveness?
Understanding why your forgiveness was reduced is the first step in evaluating whether you have a viable challenge. Partial forgiveness happens for various reasons, some of which involve legitimate application of the PPP rules and some of which involve errors by your lender or the SBA. Here are the most common scenarios:
Documentation deficiencies. The most common reason for partial forgiveness is insufficient documentation to support the full amount you requested. Maybe you claimed $80,000 in payroll costs but only provided documentation supporting $50,000, so the unsupported $30,000 was denied. Or perhaps you included utility expenses but didn’t provide invoices and proof of payment, so those expenses were excluded. If the partial denial is based on missing documentation, the key question is: do you have the documentation and just failed to submit it initially? If yes, you might have a strong case for getting the additional forgiveness approved. If you don’t have documentation and never did, challenging the decision is much harder because you can’t prove you spent the money on eligible expenses.
Owner compensation limits exceeded. PPP rules capped how much owner compensation could count toward forgivable payroll costs—$20,833 for an 8-week covered period or $46,154 for a 24-week period (equivalent to $100,000 annually) for owner-employees. Self-employed individuals had different limits based on 2019 net profit. If you claimed more than these limits, the excess was denied. For example, if you’re self-employed and claimed $60,000 in owner compensation but the limit for your situation was $46,154, you’d get partial forgiveness with the excess $13,846 denied. These denials are usually correct applications of the rules, though sometimes lenders or the SBA miscalculate the applicable limit, which could be grounds for challenge.
FTE reduction penalties. The PPP rules required borrowers to maintain there full-time equivalent employee headcount during the covered period compared to a baseline period. If you reduced your FTE count and didn’t qualify for a safe harbor exception, your forgiveness amount was reduced proportionally. For example, if you had 10 FTE during the baseline period but only 7 FTE during the covered period (a 30% reduction), your forgivable amount would be reduced by 30%. These calculations are complex and involve judgment calls, so there’s often room to dispute them—maybe you actually did maintain FTE count but the lender miscalculated, or maybe you qualified for an exception (like offering to rehire employees who refused to return, or being unable to operate at the same level due to COVID restrictions) that wasn’t properly considered.
Payroll costs not paid or incurred during covered period. Forgiveness only covers expenses that were paid or incurred during your covered period. If the lender or SBA determined that some of the expenses you claimed fell outside your covered period dates, those expenses were denied. This often happens when payroll dates don’t align perfectly with covered period dates, creating disputes about whether certain payroll should count. If you have documentation showing that the work was incurred (performed) during the covered period even if payment came slightly later, you might be able to challenge the exclusion.
Ineligible expenses included. If you included expenses that don’t qualify under PPP rules—payments to independent contractors, personal expenses, prepaid expenses beyond the covered period, or owner distributions beyond compensation limits—those amounts were excluded, resulting in partial forgiveness. Whether you can challenge this depends on whether the expenses actually were ineligible (in which case the denial is correct) or whether the lender/SBA misunderstood what you submitted (in which case you might have grounds to appeal).
Math errors or miscalculations. Sometimes partial forgiveness results from calculation errors—the lender or SBA added up your expenses incorrectly, applied the wrong formula, or used wrong numbers from your documentation. These are clear errors that can usually be corrected on appeal if you can demonstrate what the correct calculation should be.
Did My Lender or the SBA Make the Partial Forgiveness Decision?
This is the critical question that determines what your options are. The PPP forgiveness process involves two decision-makers—your lender and the SBA—and the procedures for challenging there decisions are different.
Here’s how it works: When you submit your forgiveness application, your lender conducts an initial review and makes a decision about how much forgiveness to approve. The lender then submits that decision to the SBA as a recommendation. If your lender approved only partial forgiveness, that’s the lender’s decision, not yet an SBA decision. The SBA then conducts its own independent review. The SBA can agree with the lender’s recommendation, or the SBA can disagree and make a different determination. The SBA’s decision is the final decision.
So if you received a partial approval letter from your lender, and the SBA hasn’t yet issued its own decision, you’re dealing with a lender decision. If you received a partial approval from the SBA after they conducted their review, you’re dealing with an SBA decision. Check your letter carefully to determine who issued it.
Why does this matter? Because you can only appeal SBA decisions to the Office of Hearings and Appeals (OHA). You cannot directly appeal your lender’s decision to OHA. If you disagree with your lender’s partial approval, you have two options: (1) work directly with your lender to resolve the issues and get them to approve more forgiveness, or (2) request that the SBA review your lender’s decision. Let’s discuss each of these paths.
How Can I Challenge a Partial Approval From My Lender?
If your lender issued a partial approval and the SBA hasn’t made its final decision yet, here’s what you can do:
Option 1: Work directly with your lender. Contact your lender’s PPP servicing department and explain why you believe you’re entitled to more forgiveness. Maybe you have additional documentation that you didn’t submit initially. Maybe there was a misunderstanding about your covered period or your calculation method. Maybe the lender made a math error. Some lenders are willing to work with borrowers to correct issues and revise there forgiveness recommendation before submitting it to the SBA. This is the fastest and simplest path if your lender is cooperative and the issue is straightforward. However, not all lenders are willing to reconsider—many take the position that once they’ve made a decision and submitted it to the SBA, it’s out of there hands.
Option 2: Request an SBA review of your lender’s decision. The SBA has established a process that allows borrowers to request SBA review of a lender’s partial approval decision. This is not an appeal to OHA—it’s a request for the SBA’s Office of Capital Access to review your lender’s determination before issuing the SBA’s final decision. To request this review, you must submit your request through your lender or servicer within 30 calendar days of receiving the lender’s partial approval letter. Your lender should provide you with instructions on how to submit the request, and there should have included information about this option in there partial approval letter. In your request, explain specifically why you believe your lender’s decision was wrong—what documentation was overlooked, what calculation was incorrect, what PPP rule was misapplied. The SBA will then conduct its own review and issue a final decision. If the SBA’s decision is also adverse (meaning the SBA agrees with the lender’s partial approval or reduces it even further), then you can appeal that SBA decision to OHA.
The 30-day deadline for requesting SBA review of a lender’s decision is critical. If you miss it, the lender’s recommendation becomes the basis for the SBA’s final decision, and you’ll have lost your opportunity to get the SBA to take a fresh look before the decision becomes final. Count carefully from the date you received your lender’s partial approval letter, mark your deadline on your calendar, and act promptly.
How Can I Appeal a Partial Approval From the SBA?
If the SBA has issued a final decision partially approving your forgiveness—meaning the SBA conducted its own review and determined that you’re entitled to forgiveness of only part of what you requested—you have the right to appeal that decision to the SBA Office of Hearings and Appeals. According to 13 CFR Part 134, Subpart L, borrowers can appeal SBA decisions finding that they’re not eligible for the full forgiveness amount they applied for.
The appeal process requires:
Filing within 30 calendar days. You have 30 calendar days from the date you received the SBA’s final loan review decision to file your appeal. This deadline is strictly enforced—miss it and you lose your appeal rights permanently. Count from the date you received the decision letter (not the date printed on the letter, but when you actually received it), mark the deadline on your calendar, and don’t wait until the last minute.
Filing electronically at appeals.sba.gov. All PPP appeals must be filed through the SBA’s electronic appeals portal at appeals.sba.gov. This is the only acceptable filing method—paper appeals mailed or emailed will be rejected. If you haven’t used the system before, you’ll need to create an account, which takes just a few minutes.
Including required components in your appeal petition. Your appeal must include: (1) a copy of the SBA’s final loan review decision, (2) the date you received it, (3) a detailed statement explaining why the SBA’s decision is erroneous—what specific factual or legal errors the SBA made, (4) all supporting documentation proving your case, and (5) a clear statement of the relief your seeking (typically, approval of forgiveness in the full amount you originally requested). Be specific—don’t just say “I disagree” but rather “The SBA determined I exceeded owner compensation limits by calculating my limit at $15,385, but this is erroneous because I used a 24-week covered period, which allows up to $20,833 in owner compensation under the applicable regulations.”
Notifying your lender of the appeal. After filing your appeal, send a copy of your appeal petition to your lender immediately. This ensures that your lender extends the deferment period on your loan (you don’t have to make payments while the appeal is pending) and doesn’t start demanding payments on the unforgiven balance while your appeal is being decided.
The appeal goes to an administrative law judge at OHA who will review the SBA’s decision and all the evidence. The SBA will file a response defending there decision, you’ll have a chance to reply, and eventually the judge will issue a written decision either upholding the partial approval (meaning you lose and have to repay the unforgiven balance) or granting you additional forgiveness (meaning you win and the unforgiven amount gets reduced or eliminated). The process typically takes several months to a year.
What’s a Request for Adjustment and When Can I Use It?
There’s another option that applies in specific situations: a request for adjustment. This is different from an appeal or SBA review—it’s a mechanism for correcting certain types of errors in your original forgiveness application after the fact. The SBA established this process in Procedural Notice 5000-20089 to address situations where borrowers made mistakes in there forgiveness applications that resulted in them requesting less forgiveness than they were actually entitled to.
You can submit a request for adjustment if:
- You made a clerical error in calculating your forgivable amount—for example, you accidentally transposed numbers, used wrong totals from your payroll registers, or made math mistakes that caused you to request less than you should have.
- You reduced your forgiveness request by the amount of an EIDL advance that you received, not realizing that the rules changed and EIDL advances no longer reduce PPP forgiveness.
- You used a shorter covered period than you were entitled to use—for example, you used an 8-week period when you could have used 24 weeks and would have had more forgivable expenses if you’d used the longer period.
- You made other similar errors that resulted in you requesting less forgiveness than the PPP rules actually allowed.
Importantly, a request for adjustment is NOT used to challenge your lender’s or the SBA’s determination that you weren’t entitled to the full amount you requested. It’s only for situations where you yourself requested too little forgiveness due to an error in completing the application. If you applied for $80,000 in forgiveness and got $80,000 approved, but you now realize you should have applied for $100,000, a request for adjustment might be appropriate. But if you applied for $100,000 and only got $60,000 approved, that’s not a request for adjustment situation—that’s an appeal or SBA review situation.
The good news about requests for adjustment: there’s currently no deadline for submitting them. Unlike appeals (30 days) or SBA review requests (30 days), you can submit a request for adjustment even years after your forgiveness was processed, as long as you meet the eligibility criteria. To submit a request for adjustment, contact your lender or loan servicer and ask them to submit the request to the SBA on your behalf. You’ll need to provide documentation showing what the error was and how much additional forgiveness you should have received.
Is It Worth Fighting Over the Unforgiven Amount?
This is a practical question you need to carefully consider before deciding whether to appeal or request SBA review. Just because you have the legal right to challenge a partial forgiveness decision doesn’t necessarily mean it makes sense to do so. Here are the factors to weigh:
How much is at stake? If you received partial forgiveness leaving $5,000 unforgiven, that converts to a loan with very manageable payments—probably around $90 per month over 5 years at 1% interest. Spending $10,000 on attorney fees to fight over $5,000 doesn’t make economic sense. On the other hand, if you received partial forgiveness leaving $80,000 unforgiven, that’s substantial—around $1,400 per month in payments, and spending $10,000-$15,000 on legal representation to potentially get that additional $80,000 forgiven is a very reasonable investment.
How strong is your case? If the partial denial was based on a clear error—the lender miscalculated your FTE ratio, or the SBA overlooked documentation you submitted, or they applied the wrong owner compensation limit—you probably have a strong case and appealing makes sense. If the partial denial was based on legitimate problems—you genuinely didn’t have documentation, or you clearly exceeded the owner compensation limits, or you included expenses that don’t qualify—appealing is unlikely to change the outcome and might not be worth the time and expense. An experienced attorney can review your situation and give you an honest assessment of your chances.
Can you afford the unforgiven balance? If repaying the unforgiven amount is manageable for your business, you might decide it’s not worth the hassle and uncertainty of an appeal. You’d start making payments, pay off the loan over the 5-year term, and move on. If the unforgiven amount creates serious financial hardship, fighting for additional forgiveness becomes more critical, particularly if you have a strong case.
Do you have the time and energy? Appeals take months, require gathering extensive documentation, involve back-and-forth with attorneys and OHA, and create ongoing stress. Some business owners decide they’d rather just repay the debt and focus their energy on running there business rather than spending months fighting with the SBA. That’s a legitimate choice, particularly if the amount isn’t huge and the case isn’t particularly strong.
There’s no universal right answer—it depends on your specific circumstances. But thinking through these factors helps you make an informed decision rather than acting impulsively.
What Happens to the Unforgiven Balance If I Don’t Challenge It?
If you receive partial forgiveness and decide not to appeal, request SBA review, or submit a request for adjustment, the unforgiven portion of your loan becomes a debt you have to repay. Here’s what that looks like:
The unforgiven balance converts to a term loan with a 5-year repayment period at 1% interest (for most PPP loans made after June 5, 2020; loans made before that date have a 2-year term). Your lender will calculate your monthly payment based on the unforgiven principal plus accrued interest. For example, if you have $30,000 unforgiven, your monthly payment would be approximately $513 over 60 months. The lender will send you a repayment schedule showing your payment amount and due dates.
The first payment is typically due shortly after the deferment period ends. The deferment period lasts until the SBA makes its final forgiveness decision (or until you receive the lender’s decision if the SBA hasn’t issued its own decision yet). Once the decision is final and there’s no pending appeal, the deferment ends and payments begin, usually within 30-60 days.
If you can afford the payments, you simply make them according to the schedule until the loan is paid off. The lender will report your payment history to credit bureaus, so making payments on time helps your credit score while missing payments damages it. If you can’t afford the scheduled payments, contact the SBA about hardship accommodation options—extended repayment terms, reduced payment amounts, or temporary deferment. If you can’t repay the full amount at all, you might be able to negotiate an offer in compromise to settle the debt for less.
One important point: just because you accepted the partial forgiveness doesn’t mean you can never dispute it. If you later discover that you made an error in your application (like the situations eligible for a request for adjustment), you can potentially get additional forgiveness even after you’ve started making payments on the unforgiven balance. But time-limited options like appeals and SBA review requests must be pursued within there 30-day deadlines or those options disappear forever.
Common Mistakes Borrowers Make With Partial Forgiveness
We’ve seen borrowers make these mistakes when dealing with partial forgiveness decisions, and avoiding them can save you significant money and stress:
Mistake #1: Missing the 30-day deadlines. This is the most common and most costly mistake. Borrowers receive the partial approval letter, put it aside intending to deal with it later, and then realize six weeks later that they’ve missed the deadline to appeal or request SBA review. At that point, those options are gone. The moment you receive a partial forgiveness decision, mark your calendar with the 30-day deadline and set multiple reminders. Don’t procrastinate.
Mistake #2: Assuming there’s nothing you can do. Many borrowers receive partial approval and just assume that’s the final word—they don’t realize they have appeal rights or that they can request SBA review of a lender’s decision. Don’t assume—investigate your options. At minimum, schedule a consultation with an attorney to understand whether challenging the decision makes sense for your situation.
Mistake #3: Trying to appeal a lender’s decision directly to OHA. As discussed, you can’t appeal a lender’s decision directly to OHA—you have to request SBA review first, and only after the SBA issues its decision can you appeal to OHA. Borrowers who don’t understand this procedural requirement waste time filing appeals that get dismissed for lack of jurisdiction.
Mistake #4: Not notifying the lender of an appeal. If you file an OHA appeal but don’t notify your lender, the lender might start demanding payments on the unforgiven balance because they don’t know the deferment period has been extended by your appeal. Always send your lender proof of your appeal filing immediately after filing.
Mistake #5: Fighting over small amounts. Some borrowers spend thousands on legal fees to fight over a few thousand dollars in unforgiven balance, which doesn’t make economic sense unless there’s a principle at stake beyond the money. Be pragmatic about whether the cost of challenging the decision is justified by the potential benefit.
Mistake #6: Not correcting errors via request for adjustment. Borrowers who made errors in there original forgiveness calculation sometimes don’t realize they can correct those errors and get additional forgiveness through a request for adjustment. If you suspect you requested less forgiveness than you should have, investigate whether a request for adjustment is appropriate.
Should I Hire an Attorney for a Partial Forgiveness Challenge?
Whether you need legal representation depends on the amount at stake, the complexity of your case, and your own comfort level with legal procedures. Here’s how to think about it:
You probably need an attorney if: The unforgiven amount is substantial (tens of thousands of dollars or more), the issues are complex (disputes over FTE calculations, interpretation of PPP regulations, or competing legal arguments), you’re going up against an SBA decision (as opposed to just working with your lender informally), or you’re uncomfortable with legal writing and administrative procedures. Attorneys who handle PPP appeals know what arguments work, what evidence OHA finds persuasive, and how to navigate the procedural requirements without making costly mistakes.
You might be okay without an attorney if: The unforgiven amount is relatively small, the issue is straightforward (like a clear math error or obvious miscalculation), your working directly with a cooperative lender to resolve the issue informally, or you’re just submitting a request for adjustment based on a simple error in your original application. Some situations don’t require sophisticated legal expertise, and hiring an attorney might not be cost-justified.
Most attorneys (including our firm) offer free initial consultations where you can explain your situation, show your partial forgiveness letter, and get advice about whether challenging the decision makes sense and what legal representation would cost. This consultation lets you make an informed decision about whether to hire counsel without committing any money upfront.
Talk to a PPP Forgiveness Attorney Today
Partial PPP forgiveness isn’t necessarily the final word—you have legal options to challenge partial approvals if you believe you’re entitled to more forgiveness. However, the deadlines are strict, the procedures are technical, and the stakes can be substantial. Making informed decisions quickly is critical.
Our firm has extensive experience helping borrowers challenge partial forgiveness decisions through OHA appeals, SBA review requests, and requests for adjustment. We understand the PPP regulations inside and out, we know what arguments succeed with OHA judges and SBA reviewers, and we’ve helped numerous clients get additional forgiveness that lenders or the SBA initially denied.
If you received partial forgiveness and believe you were entitled to more, don’t wait—contact us today for a free consultation. We’ll review your partial approval letter, assess why forgiveness was reduced, explain your options, evaluate your chances of success, and give you an honest recommendation about the path forward. There’s no obligation and no cost for the consultation, but it could save you thousands or tens of thousands of dollars in debt you shouldn’t have to repay.
The 30-day deadlines are absolute. Call us now before your options expire.