Lender vs. SBA Denial: Understanding PPP Forgiveness Process

So you just received a letter denying or reducing your PPP loan forgiveness, and your trying to figure out what to do next. But there’s a critical question you need to answer first, and many borrowers don’t realize how important it is: who actually denied your forgiveness—your lender or the SBA? The letter might not make this distinction crystal clear, but understanding who made the decision is absolutely critical because it determines what your options are for challenging the denial, where you need to file any appeal, and what deadlines apply. We’ve seen countless borrowers waste precious time filing appeals in the wrong place or using the wrong procedure because they didn’t understand the difference between a lender denial and an SBA denial.

The PPP forgiveness process involves two decision-makers: your lender (the bank or financial institution that issued your loan) and the SBA (the federal agency that guaranteed the loan). Your lender conducts the initial review of your forgiveness application and makes a preliminary determination. The SBA then conducts its own independent review and issues the final decision. Depending on where you are in this process, your denial might be coming from your lender (which requires one set of procedures to challenge) or from the SBA (which requires different procedures). The procedural rules about jurisdiction, appeals, and deadlines are strict and unforgiving—file an appeal with the wrong entity or use the wrong procedure, and your appeal will be dismissed without even being considered on the merits.

This article explains everything you need to know about the difference between lender denials and SBA denials in the PPP forgiveness process. We’ll walk through how the two-stage review process works, how to identify whether your denial came from your lender or the SBA, what your options are if your lender denied your application, what your options are if the SBA denied your application, why you can’t appeal a lender decision directly to the Office of Hearings and Appeals, what the 30-day deadlines mean at each stage, and common mistakes borrowers make by confusing the two processes. If you’ve received a denial letter and your trying to figure out your next steps, read this entire article carefully before taking action—filing the wrong type of appeal or missing critical deadlines could cost you tens or hundreds of thousands of dollars.

How Does the PPP Forgiveness Review Process Work?

Understanding the two-stage review process is essential to making sense of lender vs. SBA denials. Here’s how the process is structured:

Stage 1: Lender review. When you submit your PPP forgiveness application, it goes to your lender first—the bank or financial institution that originated your loan. Your lender’s PPP servicing department reviews your application and supporting documentation to determine whether you meet the PPP forgiveness requirements. The lender evaluates whether you calculated your forgivable amount correctly, whether your documentation supports your claims, whether you maintained employee headcount, and whether you used funds for eligible purposes. Based on this review, the lender makes a determination: approve full forgiveness, approve partial forgiveness (reducing the forgivable amount for various reasons), or deny forgiveness entirely.

The lender then submits this determination to the SBA, along with your application and supporting documents. At this stage, the lender’s determination is a recommendation to the SBA, not a final decision. However, many borrowers receive letters from there lenders stating that forgiveness has been denied or reduced, and they understandably believe this is the final word. It’s not—it’s the lender’s preliminary determination that now goes to the SBA for the second stage of review.

Stage 2: SBA review. After receiving your lender’s submission and recommendation, the SBA conducts its own independent review. The SBA is not bound by your lender’s determination—they can agree with it, or they can reach a different conclusion. The SBA might approve forgiveness that your lender denied. More commonly (but still relatively rarely), the SBA might deny or reduce forgiveness that your lender approved, if the SBA’s review identifies problems the lender missed. The SBA issues a final loan review decision, which is the legally binding determination of how much forgiveness you’re entitled to.

The SBA’s decision is communicated to your lender, who then notifies you. This can create confusion because the notification you receive might come from your lender, but it’s reporting the SBA’s decision. The key is to look at the letter carefully: does it say “the SBA has determined” or “pursuant to SBA’s loan review decision,” or does it say “the lender has determined” or “we have reviewed your application”? This language tells you who made the decision.

Once the SBA has issued its final loan review decision, that decision is appealable to the SBA Office of Hearings and Appeals (OHA) within 30 days. But—and this is critical—you can ONLY appeal SBA decisions to OHA, not lender decisions. If your lender denied your application and the SBA hasn’t issued its decision yet, you can’t go straight to OHA. You have to use a different procedure first.

How Do I Tell Whether My Denial Came From My Lender or the SBA?

Look at your denial letter carefully. Here are the indicators that tell you who made the decision:

Lender denial indicators:

• The letter comes from your lender (on lender letterhead, from a lender email address, signed by lender personnel)
• The letter says things like “we have reviewed your application,” “the lender has determined,” “based on our review,” or “we are unable to approve”
• The letter might mention that the lender’s decision will be submitted to the SBA for review
• There’s no reference to an “SBA loan review decision” or “final SBA determination”
• The letter might inform you that you can request SBA review of the lender’s decision within 30 days

SBA denial indicators:

• The letter says “the SBA has determined,” “pursuant to SBA’s loan review,” “the SBA’s decision,” or “final SBA loan review decision”
• The letter might come from the SBA directly, or it might come from your lender but clearly state that it’s communicating the SBA’s decision
• The letter informs you that you can appeal the SBA’s decision to the Office of Hearings and Appeals within 30 days
• The letter references 13 CFR Part 134, Subpart L (the regulations governing PPP appeals to OHA)

If your letter doesn’t make it clear who made the decision, contact your lender immediately and ask: “Is this letter communicating the lender’s determination that will be submitted to the SBA, or is this letter communicating the SBA’s final decision after the SBA conducted its review?” You need clarity on this point before you know what procedures to follow.

In some cases, you might receive two letters—one from your lender explaining there determination, and then later a second letter explaining the SBA’s decision. If the lender denied or reduced your forgiveness, and you requested SBA review of that decision, you’ll eventually receive the SBA’s decision on your review request. That SBA decision is what’s appealable to OHA.

What Are My Options If My Lender Denied My Forgiveness Application?

If your lender has denied or reduced your forgiveness, and the SBA hasn’t yet conducted its review and issued a final decision, you have several options:

Option 1: Work directly with your lender. Before the lender submits there determination to the SBA, you might be able to resolve issues directly with them. Contact your lender’s PPP servicing department immediately and ask if you can provide additional documentation, correct errors, or address whatever problems led to the denial. Some lenders are willing to reconsider there initial determination if you can quickly provide what’s missing. Ask specifically: “Can I submit corrected or additional information for you to reconsider your decision before submitting it to the SBA?” If the lender says yes and gives you a deadline, take full advantage of that opportunity—it’s the fastest and easiest way to fix the problem.

Option 2: Request SBA review of your lender’s decision. This is a formal process established by the SBA specifically for situations where borrowers disagree with there lender’s determination. If your lender has denied or reduced your forgiveness, you can request that the SBA conduct an independent review of your lender’s decision. You must submit this request through your lender within 30 calendar days of receiving the lender’s denial or partial approval letter. Your lender should provide instructions on how to submit an SBA review request—typically, you’ll need to provide a written statement explaining why you believe the lender’s decision was incorrect, along with any supporting documentation.

When the SBA receives your review request, they’ll conduct their own evaluation of your forgiveness application, considering both the documentation you originally submitted and any additional information you provided with your review request. The SBA will then issue its own decision, which might agree with your lender, or might approve more forgiveness than the lender recommended. This SBA decision becomes the final loan review decision that you can then appeal to OHA if it’s adverse to you.

The 30-day deadline for requesting SBA review is critical. If you miss it, the lender’s determination gets submitted to the SBA without your input, and while the SBA still conducts its own review, you’ve lost your opportunity to provide additional information or explanations during the SBA review stage.

Option 3: Wait for the SBA’s decision and appeal if necessary. Even if you don’t request SBA review of your lender’s denial, the lender will submit there determination to the SBA, and the SBA will conduct its review and issue a final decision. You can wait to see what the SBA decides, and if the SBA’s decision is also adverse, you can then appeal to OHA. However, by not requesting SBA review, you’re missing an opportunity to provide additional context or documentation before the SBA makes its decision, which might reduce your chances of getting a favorable outcome.

Important: You Cannot Appeal a Lender Denial Directly to OHA

This is one of the most common mistakes borrowers make. If your lender denied your forgiveness, you might think you can file an appeal directly with the SBA Office of Hearings and Appeals. You can’t. OHA does NOT have jurisdiction over lender decisions—it only has jurisdiction over final SBA loan review decisions. If you try to file an OHA appeal of a lender’s decision, your appeal will be dismissed for lack of jurisdiction, and you’ll have wasted time that should have been used for requesting SBA review.

The proper sequence when your lender denies forgiveness is: Lender denial → Request SBA review (within 30 days) → SBA issues decision → Appeal to OHA (within 30 days if SBA decision is adverse). You can’t skip the middle steps and go straight to OHA.

What Are My Options If the SBA Denied My Forgiveness Application?

If the SBA has issued a final loan review decision denying or reducing your forgiveness, you have different options:

Option 1: File an appeal with the Office of Hearings and Appeals. This is your primary remedy for challenging an SBA denial. You have 30 calendar days from receiving the SBA’s final loan review decision to file an appeal at appeals.sba.gov. Your appeal must include: (1) a copy of the SBA’s decision, (2) the date you received it, (3) a detailed statement explaining why the SBA’s decision was based on clear error of fact or law, (4) all supporting documentation, and (5) a clear statement of the relief your seeking.

The appeal goes to an independent administrative law judge at OHA who will review the SBA’s decision, consider your arguments and evidence, review the SBA’s response defending there decision, and issue a ruling on whether the SBA’s determination should be upheld or reversed. This is an adversarial process similar to litigation—both sides present there case, and the judge decides who’s right.

Option 2: Request informal reconsideration from the SBA. Even without filing a formal appeal, you can ask the SBA to reconsider its decision if you believe there was a clear error. This is an informal process without strict procedural rules, and the SBA has no obligation to grant reconsideration. However, if you can point to an obvious mistake—like the SBA saying you didn’t submit a document that you clearly did submit—a reconsideration request might get the error corrected without the time and expense of a formal appeal. But don’t rely on this approach as your primary strategy, especially if your within the 30-day appeal deadline, because reconsideration is discretionary and not guaranteed.

Option 3: Accept the decision and focus on repayment. If the SBA’s determination is factually correct and you don’t have strong grounds for appeal, you might decide to accept the decision and work on making the repayment obligation manageable. You’d focus on negotiating favorable repayment terms, requesting hardship accommodations if needed, or exploring an offer in compromise if you can’t repay the full amount. Not every denial is worth appealing, and sometimes pragmatic acceptance and moving forward is the better strategy.

Why Is the 30-Day Deadline So Important at Each Stage?

The PPP forgiveness review and appeal process is governed by strict 30-day deadlines at multiple stages, and understanding these deadlines is critical:

30 days to request SBA review of a lender’s decision. If your lender denies or reduces your forgiveness, you have 30 calendar days from receiving the lender’s determination to request SBA review. This deadline is calculated from when you received the lender’s letter (not from the date on the letter, but when it was actually delivered to you). Miss this deadline, and your opportunity to request SBA review is lost. The lender’s determination goes to the SBA without your input, and you’ll have to wait for the SBA’s decision and then appeal if that decision is adverse.

30 days to appeal an SBA decision to OHA. If the SBA issues a final loan review decision that’s adverse to you, you have 30 calendar days from receiving the SBA’s decision to file an appeal with OHA. This deadline is strictly enforced—OHA has very limited discretion to accept late appeals except in extraordinary circumstances (like you were in a coma during the entire appeal period). Miss this deadline, and the SBA’s decision becomes final and unappealable. You lose all formal rights to challenge the denial.

Both deadlines are calendar days, not business days. Weekends and holidays count. If the 30th day falls on a weekend or federal holiday, the deadline extends to the next business day, but don’t count on this—always calculate conservatively and file early rather than risk miscalculating.

The reason these deadlines are so strict is that the system needs finality. The SBA can’t have forgiveness applications and appeals dragging on indefinitely with no time limits. The regulations establish that once a decision is made, you have a reasonable but limited time to challenge it, and if you don’t act within that time, the decision stands. This might seem harsh, but it’s consistent with how administrative appeals work throughout federal agencies—strict deadlines are the norm.

What Happens If I File an Appeal in the Wrong Place?

If you misunderstand who made the decision and file an appeal using the wrong procedure, here’s what happens:

If you try to appeal a lender decision to OHA: OHA will dismiss your appeal for lack of jurisdiction. OHA only has authority to review final SBA loan review decisions, not lender determinations. Your appeal will be rejected, and you’ll receive a dismissal order explaining that you need to use the proper procedure—requesting SBA review through your lender. The problem: by the time you receive the dismissal and realize your mistake, you might have already missed the 30-day deadline to request SBA review of the lender’s decision. At that point, you’ve lost your opportunity to challenge the lender’s determination through the formal review process.

If you request SBA review when the SBA has already issued a final decision: If the SBA has already conducted its review and issued a final loan review decision, requesting “SBA review” doesn’t make sense because the SBA already reviewed it and made its decision. The proper procedure at that stage is appealing to OHA, not requesting SBA review. Your request for SBA review will likely be treated as a misguided communication and ignored, and meanwhile the 30-day deadline to appeal to OHA is ticking. Once that deadline passes, you’ve lost your appeal rights.

This is why understanding the distinction between lender denials and SBA denials is so critical. Using the wrong procedure can result in procedural dismissal and missed deadlines that permanently bar you from challenging the denial, even if you have a strong substantive case.

Can the SBA Overturn My Lender’s Denial?

Yes. The SBA conducts an independent review and is not bound by your lender’s determination. If your lender denied or reduced your forgiveness, the SBA might review the same application and documentation and reach a different conclusion. This happens when:

• The lender misapplied PPP rules or regulations, and the SBA corrects the error
• The lender overlooked documentation you submitted, and the SBA recognizes it
• The lender made calculation errors that the SBA corrects
• The lender took an overly conservative approach, and the SBA applies the rules more favorably to you
• You requested SBA review and provided additional documentation or explanation that persuades the SBA

However, the reality is that the SBA often agrees with lender determinations, particularly when the lender’s decision is based on clear documentation deficiencies or obvious violations of PPP rules. The SBA isn’t looking to overturn lender decisions unless there’s a reason to do so—they’re conducting quality control review, not advocating for borrowers. So while it’s possible for the SBA to approve forgiveness that your lender denied, you shouldn’t count on it unless you can point to specific errors the lender made.

Should I Hire an Attorney to Navigate This Process?

Whether you need legal representation depends on where you are in the process and how complex your situation is:

You might handle it yourself if: Your dealing with a straightforward lender denial based on missing documentation that you have and can submit, your working directly with a cooperative lender who’s willing to reconsider, and the amount at stake is relatively small. Some borrowers successfully resolve lender-level issues without legal help.

You should seriously consider an attorney if: Your dealing with an SBA denial that requires an OHA appeal (these are formal legal proceedings), large amounts are at stake, the issues are complex (disputes about eligibility, interpretation of regulations, or challenging factual questions), you’ve already made procedural mistakes and need help salvaging your rights, or your concerned about jurisdiction and deadlines and want to make sure you use the correct procedures. Attorneys experienced in PPP cases understand the lender vs. SBA distinction, the procedural requirements at each stage, and how to present your case most effectively.

Many attorneys (including our firm) offer free consultations where you can show your denial letter, explain your situation, and get advice about what procedures apply and whether representation makes sense. Even if you decide to handle it yourself, a consultation can prevent costly procedural mistakes.

Talk to a PPP Loan Defense Attorney Today

Understanding the difference between lender denials and SBA denials, and knowing what procedures apply at each stage, is critical to protecting your rights in the PPP forgiveness process. The procedural rules are strict, the deadlines are unforgiving, and using the wrong procedure or filing in the wrong place can result in dismissal of your challenge without any consideration of the merits.

Our firm has extensive experience navigating both stages of the PPP forgiveness review process. We’ve helped borrowers request SBA review of lender denials, filed successful appeals with OHA challenging SBA decisions, and guided clients through the sometimes-confusing procedural maze. We understand the jurisdiction rules, the deadlines, and the substantive requirements for challenging forgiveness denials at each stage.

If you’ve received a denial of your PPP forgiveness and your not sure whether it came from your lender or the SBA, or if you know who denied it but you’re not sure what procedures to follow, don’t guess—contact us today for a free consultation. We’ll review your denial letter, explain exactly what stage of the process your at, tell you what options you have and what deadlines apply, and advise whether legal representation makes sense for your situation. The consultation is free and confidential, but it could save you from making procedural mistakes that cost you tens or hundreds of thousands of dollars.

The 30-day deadlines are critical at every stage. Call us now before your opportunity to challenge the denial expires.