What Does It Mean When My PPP Loan Is Flagged for Review?
You got a letter from the SBA. Your PPP loan—the one they already approved, the one they already forgave months ago—is now “flagged for review” or marked with something called “hold code 70.” You’re terrified this means criminal charges are coming. You’re not alone. As of May 2024, 37,938 forgiven PPP loans totaling $4.6 billion are sitting in this exact same limbo, flagged for potential ineligibility after SBA already said they were eligible.
Thanks for visiting Spodek Law Group. We are a second-generation law firm managed by Todd Spodek, with over 40 years of combined experience defending clients in federal cases—including PPP loan reviews, SBA audits, and DOJ criminal investigations. We’ve represented clients in situations like yours, many, many, times. Unlike other law firms who focus on their relationship with prosecutors and judges, our loyalty is to you. We’re available 24/7, and we understand what you’re facing right now. Here’s what “flagged for review” actually means in 2025, what happens during the review process, what outcomes you’re facing based on your loan size, and what you need to do right now to protect yourself.
What “Flagged” Means—And What It Doesn’t
Hold code 70 is SBA’s internal identifier placed on a forgiven PPP loan when they subsequently suspect the borrower is potentially ineligible for the loan or forgiveness. This is critical: it happens after SBA already approved your forgiveness. They’re trying to claw it back. According to SBA’s Office of Inspector General Report 25-12, SBA did not complete the review process for these 37,938 loans—they’re in limbo, and so are you.
Here’s what you need to understand immediately: “flagged for review” does not automatically mean criminal investigation. There’s a massive difference between civil review and criminal investigation, and you need to know which one you’re facing. If you got a letter on SBA Office of Capital Access letterhead asking for documentation, that’s civil review—administrative process, handled by SBA bureaucrats, outcome is either approve forgiveness or demand repayment. If you got a letter from SBA Office of Inspector General, or worse—a target letter from the Department of Justice—that’s criminal investigation territory. If FBI agents show up at your business, invoke your Fifth Amendment right to remain silent immediately and call us at 212-300-5196. Don’t answer questions. Don’t try to explain. The constitutional right to remain silent exists because anything you say can and will be used against you.
Many loans are flagged not because SBA thinks you committed fraud, but because of data anomalies detected by automated screening tools. All loans over $2 million are being systematically audited—not because you did something wrong, but because of loan size. It’s automatic. According to SBA OIG Report 25-07, non-bank lenders flagged loans at five times the rate of traditional banks, meaning if you got your loan through an online lender, you’re statistically more likely to be flagged regardless of legitimacy.
The Timeline You’re Facing
SBA has a 90-day statutory review period from your forgiveness application to review the loan and documentation. That’s the law. The reality? Reviews extend six months, twelve months, sometimes longer. Here’s what actually happens at each stage—and what deadlines you absolutely cannot miss.
During the initial 90-day period, SBA sends you a questionnaire requesting additional documentation: payroll records, tax returns, bank statements, utility bills, proof your business was operating February 15, 2020. You typically have 10 to 15 days to respond. This deadline is extendable if you request it in writing—don’t just ignore it hoping it goes away. Provide complete documentation the first time. Piecemeal responses trigger more questions, more delays, more scrutiny.
If your loan has hold code 70—meaning they already forgave it and now they’re questioning it—the clawback process is different. SBA issues a formal notice of potential ineligibility. You have 30 days to respond with evidence of eligibility. This is not a suggestion. This is a strict deadline. Miss this 30-day window and you forfeit your appeal rights forever. Under the Administrative Procedure Act, you have due process rights—the right to respond to SBA allegations before final determination, the right to present evidence, the right to administrative hearing. But only if you respond within 30 days.
If SBA determines you’re ineligible and denies forgiveness or demands repayment, you have 30 days to appeal to the SBA Office of Hearings and Appeals. An administrative law judge will hear your case. You can present evidence, cross-examine SBA witnesses, challenge their determination. If you lose at OHA, you can appeal to federal court under the Administrative Procedure Act. But again—miss that initial 30-day deadline and none of this matters. The government gets ten years to investigate PPP fraud under the extended statute of limitations Congress passed. You get 30 days to appeal. That’s not due process. That’s a trap.
Why You Got Flagged—And What Happens Next
Loan size determines everything. Loans over $2 million are being systematically audited—automatic, not accusatory. DOJ calls these “high priority” cases. If they find discrepancies, criminal prosecution is much more likely. False Claims Act penalties can triple damages—$2 million loan becomes $6 million liability. Federal bank fraud under 18 U.S.C. § 1344 carries 30-year maximum. We’ve defended clients facing these exact stakes—many, many, times in federal court where prosecutors have unlimited resources and you need attorneys who’ve actually won against DOJ.
Loans $150K-$2M face audit if flagged, six-year document retention, potential False Claims Act exposure. Criminal prosecution is possible if evidence shows intentional fraud—but prosecutors evaluate whether charges are worth resources. Payroll calculation errors? Civil review. Fabricated employees? Criminal fraud. This is where the line gets drawn. Loans $25K-$150K: review if flagged, three-year retention, repayment required if ineligible. Criminal prosecution unlikely unless fraud indicators are egregious. Loans under $25K hit de minimis threshold—SBA guidance says recovery “may not be prioritized,” though they can still pursue if fraud is clear.
What triggers flags? Payroll doesn’t match IRS 941 filings. Business not operating February 15, 2020. Multiple loans under different names. Self-employed borrowers with inconsistent Schedule C documentation. According to GAO Report GAO-25-107267, SBA’s fraud referral process has significant weaknesses—legitimate loans get flagged while some fraudulent loans slip through. Once you’re flagged, four outcomes are possible. Full approval: SBA reviews documentation, concludes loan was proper, removes hold code. If you have complete documentation—payroll matching tax returns, business operating February 2020, funds used properly—probability is 60-70%. outcome.
Partial denial: SBA approves some expenses, disallows others. Claimed $100K, approved $80K? Repay $20K plus interest. You can appeal within 30 days or negotiate Offer in Compromise—settle for 30-60% in many cases if you demonstrate financial hardship. We’ve negotiated these settlements before. Full denial: SBA determines complete ineligibility, demands full repayment. Loan converts to term loan with 1% interest. If you don’t repay, Treasury collections can garnish wages, intercept tax refunds, seize Social Security. SBA can lien business and personal assets. Civil collections—not criminal—but financially devastating.
Criminal investigation: SBA-OIG referral for suspected fraud. OIG investigates, may refer to DOJ. You may receive criminal target letter. Potential charges: bank fraud (30-year maximum), wire fraud (30-year maximum), false statements (five years). Invoke Fifth Amendment immediately. Do not talk to investigators. Call 212-300-5196.
Read the letter carefully. Letterhead from SBA Office of Capital Access? Civil review. SBA Office of Inspector General? Criminal investigation potential. DOJ or FBI? Invoke Fifth Amendment immediately, hire criminal defense attorney, call 212-300-5196. Don’t answer questions—the constitutional right to remain silent exists because anything you say will be used against you.
Gather documentation now: PPP loan application, forgiveness application, IRS Form 941 for 2019-2020, bank statements, payroll records, tax returns. If self-employed, you need 2019 Schedule C and proof business operated February 15, 2020. Do not alter documents—that’s obstruction of justice under 18 U.S.C. § 1519, 20-year federal offense. Recalculate your actual eligibility before SBA does. Identify discrepancies between your application and documentation—you’re better off addressing errors proactively.
Respond within deadlines. SBA questionnaire? Ten to fifteen days. Formal denial? Thirty days to appeal—strict, no extensions. Miss this and you forfeit appeal rights forever. Provide complete documentation the first time. Piecemeal responses trigger more scrutiny.
Hire attorney immediately if: SBA-OIG letter received, DOJ target letter, FBI contact, loan over $2 million, SBA alleges intentional fraud, or you don’t have documentation. We’ve defended clients facing SBA audits, OIG investigations, DOJ prosecutions, False Claims Act suits. We’ve negotiated Offers in Compromise. We’ve handled Anna Delvey—Netflix series, Shonda Rhimes. We’ve handled Ghislaine Maxwell juror misconduct. We’re available 24/7.
The government extended the statute of limitations for PPP fraud to ten years. They have a decade to investigate. You have 30-day deadlines. The playing field isn’t level—but constitutional rights still apply. Call 212-300-5196.