What to Do If SBA Denies Your PPP Forgiveness Application

So your probably reeling from the shock of opening that letter from the SBA saying your PPP loan forgiveness application has been denied. After months of careful documentation, submitting what you thought was a complete application, and waiting anxiously for approval, the denial feels like a gut punch. Maybe the SBA says you weren’t eligible for the loan in the first place, or that you used funds improperly, or that your documentation was insufficient, or that you miscalculated the forgivable amount. Whatever there reasoning, your facing the prospect of repaying tens or hundreds of thousands of dollars that you expected to be forgiven. The stress is overwhelming, and your first instinct might be panic or paralysis—what are you supposed to do now?

The good news is that an SBA denial of your PPP forgiveness application is NOT the end of the road. You have legal rights and options for challenging the denial, but you need to act FAST because the deadlines are absolute and unforgiving. The most critical fact you need to understand right now: you have exactly 30 calendar days from the date you received the SBA’s denial letter to file an appeal. Not 30 business days. Not 30 days from when you decide what to do. 30 calendar days from receipt. If you miss this deadline, you permanently lose your right to appeal, and the SBA’s decision becomes final. We’ve seen borrowers lose their appeal rights because they spent weeks trying to figure things out on there own, or because they thought they had more time, or because they didn’t realize how strictly the deadline is enforced. Don’t become another statistic—understanding your options and taking immediate action is critical.

This article explains exactly what you need to do if the SBA denies your PPP forgiveness application. We’ll walk through the immediate steps you should take, your appeal rights and how to exercise them, what to include in your appeal, whether your case is likely to succeed, alternatives to appealing, and what happens if you do nothing. We’ll also address the difference between SBA denials and lender denials, because the procedures are different and borrowers often get confused about who made the decision and how to challenge it. If your holding a denial letter right now, read this entire article carefully—the information could save you tens of thousands of dollars or more, but only if you act quickly enough to preserve your rights.

Who Actually Denied My Forgiveness—My Lender or the SBA?

This is the first question you need to answer because it determines what your options are and where you need to file any appeal. The PPP forgiveness process involves two decision-makers: your lender (the bank or financial institution that issued your PPP loan) and the SBA (the federal agency that guaranteed the loan). Understanding which entity made the decision that’s affecting you is crucial because you can only appeal SBA decisions to the SBA Office of Hearings and Appeals (OHA)—you cannot appeal lender decisions directly to OHA.

Here’s how the process works: When you submit your PPP forgiveness application, it goes to your lender first. Your lender conducts an initial review of your application and supporting documentation. The lender then makes a decision about whether to approve, partially approve, or deny forgiveness, and submits that recommendation to the SBA along with your application and documentation. 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 that controls what happens with your loan.

So if your lender denied your forgiveness application or recommended only partial forgiveness, that’s not immediately appealable to OHA because it’s not a final SBA decision yet. In that situation, you have two options: (1) you can work directly with your lender to try to resolve the issues they identified and get them to change there recommendation, or (2) you can request that the SBA review your lender’s decision. If you request SBA review of a lender’s denial, you have 30 days from the date you received the lender’s decision to submit that request through your lender. The SBA will then conduct its review and issue its own decision. If the SBA’s decision is also adverse to you, THEN you can appeal to OHA.

On the other hand, if the SBA issued the denial (meaning the SBA conducted its own review and determined that forgiveness should be denied or reduced), that decision is directly appealable to OHA without any intermediate steps. You’ll know it’s an SBA decision because the letter will come from the SBA, usually from the Office of Capital Access or a similar SBA office, and it will be titled something like “SBA Loan Review Decision” or “Final SBA Decision on PPP Forgiveness.”

Check your denial letter carefully to determine who issued it. If it’s from your lender, you can’t go straight to OHA—you need to either work with the lender or request SBA review first. If it’s from the SBA, you can appeal directly to OHA, but you must do so within 30 days. This procedural distinction is confusing, and borrowers sometimes file appeals with OHA only to have them dismissed for lack of jurisdiction because the SBA itself hadn’t issued a reviewable decision yet. Getting this right from the start is critical.

What Are My Rights to Appeal an SBA Forgiveness Denial?

If the SBA has issued a final decision denying or reducing your PPP loan forgiveness, you have an absolute right to appeal that decision to the SBA Office of Hearings and Appeals. According to 13 CFR § 134.1202, you can appeal SBA decisions finding that:

• You were not eligible for a PPP loan
• You were not eligible for the loan amount you received
• You used PPP loan proceeds for unauthorized purposes
• You’re not eligible for forgiveness in the amount determined by your lender
• You’re ineligible for loan forgiveness in any amount

This covers essentially all the bases for why forgiveness would be denied. The appeal gives you a chance to present your case to an independent administrative law judge (ALJ) who will review the SBA’s decision and determine whether it was based on clear error of fact or law. The ALJ doesn’t work for the loan review office that denied your application—they’re independent decision-makers within OHA whose job is to fairly evaluate appeals and correct errors when they occur.

However, your appeal rights come with two absolute requirements: (1) you must file your appeal within 30 calendar days of receiving the SBA’s decision, and (2) you have the burden of proving that the SBA’s decision was clearly erroneous. Let’s break down what each of these means in practice.

The 30-day deadline is strictly enforced. OHA does not have discretion to accept late appeals except in extremely narrow circumstances—essentially, you’d have to show that the delay was caused by circumstances completely beyond your control AND that you filed as soon as those circumstances were resolved. “I was busy,” “I didn’t understand the deadline,” or “I was trying to gather more documents” don’t excuse late filing. The date that matters is the date you received the decision, not the date printed on the letter. For mailed decisions, receipt is generally presumed to be a few days after the date on the letter unless you can prove otherwise. Count carefully, and if your anywhere close to the deadline, file immediately even if your appeal isn’t perfect—you can supplement it later, but you can’t restore appeal rights once the deadline passes.

The burden of proof requirement means you have to affirmatively demonstrate that the SBA made a clear error—it’s not enough to show that the evidence could support either conclusion or that you disagree with the SBA’s judgment. You need to point to specific facts the SBA got wrong or specific regulations the SBA misapplied. For example, if the SBA says you didn’t submit your Form 941 payroll tax filings but you can prove you did submit them, that’s a clear factual error. If the SBA applied the wrong formula for calculating owner compensation limits, that’s a clear legal error. But if the evidence is ambiguous and the SBA made a reasonable interpretation you disagree with, that’s much harder to overturn on appeal because you haven’t shown clear error—you’ve just shown that you prefer a different interpretation.

How Do I File an Appeal With the Office of Hearings and Appeals?

Once you’ve determined that you have an SBA decision that’s appealable and your within the 30-day deadline, here’s exactly what you need to do to file your appeal:

Use the official SBA appeals portal. All PPP appeals must be filed electronically at appeals.sba.gov. This is the ONLY acceptable method—you cannot mail a paper appeal, email it, or file it with your local SBA office. Appeals filed in any other manner will be rejected and not docketed for processing. If you haven’t used the system before, you’ll need to create an account with basic information about yourself and your business. The system is generally user-friendly, but if you’re not comfortable with technology or run into issues, that’s another reason to work with an attorney who files these appeals routinely.

Prepare your appeal petition with all required components. Your appeal must include:

• A copy of the SBA loan review decision your appealing
• A full and specific statement explaining why the SBA’s decision is erroneous, with all factual information and legal arguments supporting your allegations
• A clear description of the relief your seeking (typically, approval of forgiveness in full or in a specific amount)
• All supporting documentation that proves your case—payroll tax filings, bank statements, payroll registers, receipts, invoices, lease agreements, utility bills, and any other evidence showing you met the PPP requirements

Your statement explaining why the SBA’s decision is erroneous is the heart of your appeal. This needs to be specific and detailed—not just “I disagree” or “I did everything right,” but a point-by-point explanation of exactly what the SBA got wrong. For example: “The SBA determined that I failed to submit Form 941 for Q2 2020, but this determination is clearly erroneous because Form 941 for Q2 2020 was submitted to the lender on August 15, 2020, as evidenced by the attached email confirmation and the copy of the form included with this appeal.” Or: “The SBA calculated my owner compensation limit using the wrong covered period, applying the 8-week limit of $15,385 when I actually used a 24-week covered period, which allows up to $20,833 in owner compensation under the regulations.”

Notify your lender that you’ve filed an appeal. This is a critical step that borrowers often forget. Under PPP rules, your loan repayment obligation is deferred while your forgiveness application is pending. Once the SBA denies forgiveness, that deferment period would normally end and you’d have to start making payments. However, if you file a timely appeal, the deferment extends until OHA issues its final decision. To ensure your lender knows about the appeal and extends your deferment, you must provide the lender with a copy of your appeal petition. Send this via email with a read receipt or via certified mail with return receipt so you have proof of delivery. If your lender tries to demand payments during the appeal period after you’ve notified them of the appeal, that violates the PPP terms and you should contact your attorney immediately.

Be prepared for the SBA’s response. After you file your appeal, OHA will assign your case to an administrative law judge and send a copy of your appeal to the SBA. The SBA will then file a response—basically there argument for why there decision was correct and your appeal should be denied. You’ll typically have an opportunity to file a reply to the SBA’s response, addressing there arguments and reinforcing your position. This back-and-forth is similar to litigation—it’s an adversarial process where both sides present there case and the judge decides who’s right.

What Are the Most Common Reasons the SBA Denies Forgiveness?

Understanding why forgiveness gets denied helps you evaluate whether you have a strong case for appeal. Some denial reasons involve legitimate problems that are hard to overcome, while others involve SBA errors or overly aggressive interpretations of the rules where appeals often succeed. Here are the most common scenarios:

Insufficient documentation. The number one reason for denials is missing or inadequate documentation. The SBA requires extensive proof of your payroll costs and other expenses—quarterly payroll tax filings (Form 941), state wage reports, payment receipts or cancelled checks, bank statements, and documentation for nonpayroll costs like rent and utilities. If your documentation package is incomplete, has discrepancies between what you claimed and what you can prove, or doesn’t clearly tie the expenses to the covered period, the SBA will deny forgiveness for the unsupported amounts. The appeal question becomes: do you have the missing documentation and just failed to submit it initially? If yes, you have a strong appeal case because you can now provide the proof. If you don’t have documentation and never did, the appeal is much weaker because you can’t meet your burden of proof.

Owner compensation limits exceeded. The PPP rules capped owner compensation at specific amounts—$20,833 for an 8-week covered period or $46,154 for a 24-week period (equivalent to $100,000 annually) for owner-employees. For self-employed individuals with no employees, limits were calculated differently based on 2019 net profit. Many borrowers, particularly self-employed sole proprietors, claimed more than these limits in there forgiveness applications, and the SBA denied the excess. These denials are usually correct applications of the rules, making appeals difficult unless you can show the SBA miscalculated your specific limit or that you have employees whose payroll should be counted separately from your owner compensation.

Ineligible expenses included. Borrowers sometimes include expenses that don’t qualify for forgiveness—payments to independent contractors (only employee payroll counts), expenses paid outside the covered period, personal expenses charged to business accounts, or owner distributions beyond the compensation limits. If the SBA finds ineligible expenses, they reduce forgiveness by those amounts. Appeals can succeed if you can demonstrate that the expenses were actually eligible under the rules and the SBA misunderstood your documentation, but if you genuinely included things that don’t qualify, there’s no winning argument.

FTE reduction penalties. The original PPP rules required borrowers to maintain there full-time equivalent employee headcount during the covered period compared to a baseline period in 2019 or early 2020. If you reduced your FTE count and didn’t qualify for a safe harbor exception, your forgiveness was supposed to be reduced proportionally. Disputes over FTE calculations are common because the rules are complex and involve judgment calls about whether certain employees should count and whether exceptions apply (like if you offered to rehire employees who declined, or if you couldn’t operate at the same level due to COVID restrictions). These cases often hinge on documentation—if you can prove you qualified for an exception the SBA didn’t recognize, you have a viable appeal.

Expenses not paid or incurred during covered period. Forgiveness only covers expenses that were paid or incurred during your specific covered period (the 8 or 24 weeks after loan disbursement). “Incurred” means the work was performed or the expense obligation arose, even if payment came slightly later. The SBA sometimes denies forgiveness for expenses on the edges of the covered period, particularly if your payroll dates don’t align perfectly with your covered period dates. If you have documentation showing when the work was actually performed or when the expense was incurred, you might have a strong appeal even if the payment date was technically outside the covered period.

How Long Does the Appeals Process Take?

PPP appeals to the Office of Hearings and Appeals typically take anywhere from three months to over a year to reach a final decision, depending on the complexity of your case and OHA’s current caseload. The process was particularly backlogged in 2021 and 2022 when thousands of borrowers appealed denials, but things have improved somewhat as the initial wave worked through the system.

The timeline generally looks like this: After you file your appeal, OHA assigns the case to an administrative law judge within a few weeks. The SBA then has a deadline (usually 30-45 days) to file there response. You’ll have an opportunity to file a reply (usually another 15-30 days). After all the briefs are submitted, the judge reviews the entire record—all the documents, the arguments from both sides, and applicable regulations and guidance. Some cases are decided relatively quickly based on the written submissions if the legal issues are straightforward. Other cases require more time, particularly if the judge orders supplemental briefing, holds a hearing, or deals with complex factual disputes.

During the entire appeal period, your loan remains in deferment—you don’t have to make payments, though interest continues accruing at 1% annually. This means if you ultimately lose the appeal, you’ll owe slightly more than you would have if you’d started repaying immediately after the denial. However, for most borrowers, the chance of getting the loan forgiven through a successful appeal is worth the modest additional interest cost. And practically speaking, the extended deferment period can provide crucial financial breathing room while you wait for the outcome.

One thing to understand: there’s no way to significantly speed up the process. You can’t pay extra to get priority treatment, and the judge won’t issue a decision until they’ve thoroughly reviewed everything. Patience is required, but this is also why filing your appeal promptly is so important—the sooner you get into the system, the sooner you’ll get a resolution.

What Happens If I Win My Appeal?

If the administrative law judge rules in your favor, the SBA must grant the forgiveness you’re entitled to. The judge’s decision is binding on the SBA—they can’t just ignore it or refuse to implement it. Practically, this means the SBA will process the forgiveness, notify your lender, and discharge the forgiven amount. Your loan balance gets reduced to zero (if you received full forgiveness) or reduced to whatever amount wasn’t forgiven (if you received partial forgiveness). You don’t owe any payments on the forgiven portion, and the debt is completely eliminated.

If you won partial forgiveness on appeal—meaning the judge agreed that you’re entitled to more forgiveness than the SBA initially granted but didn’t approve your entire request—you’ll have to repay the remaining unforgiven balance. That amount converts to a regular loan with a 2-year term at 1% interest (or 5-year term for loans made after June 5, 2020). Your lender will send you a repayment schedule showing your monthly payment amount.

One important note: winning your appeal doesn’t necessarily mean you’re completely out of the woods. The SBA could still conduct a separate review or audit of your loan for fraud or eligibility issues even after forgiveness is granted. However, successful completion of the appeals process demonstrates that you met the forgiveness requirements under the program rules, which provides significant protection. If the SBA approved your forgiveness after you successfully defended it on appeal, they’d have a very difficult time later claiming you weren’t entitled to it unless they discovered evidence of actual fraud that wasn’t before the ALJ.

What Happens If I Lose My Appeal?

If the administrative law judge rules against you and upholds the SBA’s denial, the SBA’s decision becomes final. At that point, you have very limited options for further review. You can request reconsideration by the OHA Director, but this is rarely granted unless there was a significant legal error or the ALJ overlooked critical evidence. After the OHA administrative process is exhausted, your only remaining option would be to file a lawsuit in federal court seeking judicial review of the agency decision, but courts generally defer to agency expertise on these matters and will only overturn decisions that are arbitrary, capricious, or contrary to law—a difficult standard to meet.

Once your appeal is finally denied, you have to repay the unforgiven loan amount. The loan converts to a regular term loan—typically 2 years at 1% interest for loans made before June 5, 2020, or 5 years at 1% interest for loans made after that date. Your lender will send you a repayment schedule showing your monthly payment amount based on the principal balance plus accrued interest. If you can afford the payments, you simply make them according to the schedule until the loan is paid off.

If you can’t afford to repay the loan, you have several options to explore:

• Request a hardship accommodation plan. The SBA offers hardship accommodation plans for borrowers experiencing financial difficulties. This might include extending the repayment term, temporarily reducing payments, or deferring payments for a period. These don’t reduce what you owe, but they make repayment more manageable.
• Propose an offer in compromise. If you genuinely can’t repay the full amount, you can offer to settle the debt for less. The SBA considers offers in compromise based on your ability to pay—what you could realistically pay over time given your income and assets. This requires detailed financial disclosures.
• Consider bankruptcy. SBA disaster loans (including PPP and EIDL loans) can be discharged in bankruptcy, but only if you meet the “undue hardship” standard, which is very difficult to satisfy. Most borrowers can’t meet this standard, so bankruptcy usually won’t eliminate the debt, though it might help with your overall financial situation by discharging other debts.

Whatever you do, don’t just ignore the debt. The SBA has extensive collection powers—they can garnish wages, seize tax refunds, place liens on property, and refer the debt to the Department of Justice for litigation. Federal debts don’t expire, so ignoring the problem doesn’t make it go away. Proactive engagement with the SBA about repayment options will get you much better results than sticking your head in the sand.

Should I Hire an Attorney for My PPP Forgiveness Appeal?

You’re not required to have legal representation for a PPP forgiveness appeal—you can handle it yourself if you choose. However, the reality is that these appeals involve complex federal regulations, administrative procedures, and legal standards that most business owners aren’t familiar with. Your going up against SBA attorneys who handle these cases every day and know the rules inside and out. Representing yourself puts you at a significant disadvantage unless you have legal training or extensive experience with administrative appeals.

An experienced SBA attorney brings several critical advantages to your appeal. First, we know exactly what OHA judges look for in successful appeals—what evidence matters, how to present it most effectively, and what legal arguments work. We’ve handled many of these cases and understand what separates winners from losers. Second, we can identify errors or violations you might miss—procedural problems, regulatory misinterpretations, or applicable guidance that supports your position. Third, we handle all the procedural requirements—the electronic filing system, briefing schedules, responding to SBA arguments, requesting hearings when appropriate—without you having to figure out the rules yourself. Fourth, we can sometimes negotiate with SBA attorneys even during the appeal process to reach settlements that avoid the time and uncertainty of a full hearing.

Attorney fees for PPP forgiveness appeals typically range from $5,000 to $20,000 or more depending on case complexity and the amount at stake. For a borrower facing denial of $150,000 in forgiveness, paying $10,000 in legal fees for a strong chance at getting that money forgiven makes economic sense. For a borrower facing denial of $15,000, the cost-benefit analysis is tougher. Many attorneys (including us) offer free consultations where we’ll review your denial letter, assess your chances, and explain what representation would cost—so you can make an informed decision about whether hiring counsel makes sense for your specific situation.

One option: limited scope representation where an attorney handles the most critical parts (like drafting the initial appeal brief) but you handle other parts yourself. This “unbundled” approach costs less than full representation while still giving you professional expertise on the key components.

Are There Alternatives to Appealing My Forgiveness Denial?

Appealing to OHA is one option, but depending on your situation, these alternatives might make more sense:

Work with your lender to correct issues. If the denial was based on correctable problems—missing documentation, calculation errors, or clarification issues—ask your lender if you can submit additional information or a corrected application before the SBA’s decision becomes final. Not all lenders are willing to do this, and it depends on what stage of the process you’re at, but it’s worth exploring if you have the documents or corrections readily available. Some lenders will work with borrowers to address SBA concerns and resubmit to the SBA rather than forcing the borrower through a formal appeal.

Just repay the loan. If the unforgiven amount is manageable and you can afford the payments, you might decide it’s not worth the expense, time, and stress of appealing. Calculate what your monthly payment would be on the unforgiven balance over the loan term at 1% interest. If you can handle it without financial hardship, paying it back might be the simplest solution, particularly if your appeal prospects aren’t strong. There’s no shame in accepting the decision and moving on—sometimes that’s the most pragmatic choice.

Request informal reconsideration from the SBA. Even without filing a formal appeal, you can sometimes request that the SBA reconsider its decision if you can present new evidence or show that there was an obvious error. This is an informal process without strict procedural rules, and the SBA has no obligation to grant reconsideration, but it costs nothing to try. Send a letter to the SBA office that issued the denial, explain specifically why you believe the decision was erroneous, and provide any supporting documentation. Sometimes the SBA will take another look, particularly if you’re pointing out a clear mistake.

Focus on settlement or hardship relief. If you can’t afford to repay the full amount regardless of whether the denial was correct, your energy might be better spent negotiating a settlement or requesting hardship accommodations rather than fighting the denial itself. Even if you lose the appeal, you’ll still face the same affordability problem, so dealing with it proactively through an offer in compromise or hardship accommodation plan might be more productive.

What Should I Do Right Now?

If you’ve just received an SBA denial of your PPP forgiveness application, time is critical. Here’s your immediate action plan:

Calculate your exact deadline. Count 30 calendar days from the date you received the SBA’s decision. Mark this date on your calendar with multiple reminders. This is the most important date in your case—miss it and you lose all appeal rights permanently.

Gather every document related to your PPP loan. Collect your original loan application, promissory note, forgiveness application, all supporting documentation you submitted, correspondence with your lender, bank statements, payroll records, tax filings, and anything else related to the loan. You need this documentation to evaluate your case and prepare your appeal.

Get legal advice immediately. Contact an attorney experienced in SBA matters and PPP appeals. Most firms offer free consultations where you can show your denial letter, explain what happened, and get an assessment of your chances on appeal and what it would cost to hire representation. Don’t wait until day 25—if you decide you need an attorney, they’ll need time to review your case and prepare the appeal.

Don’t make statements to the SBA without guidance. Once you’ve received a denial, be very careful about any communications with the SBA. Statements you make could be used against you in the appeal or in any future collection or fraud investigation. If the SBA contacts you, say that your consulting with an attorney and will respond through counsel. This protects your rights without being uncooperative.

Determine whether you have lender issues to address first. Make sure you understand whether your dealing with a lender denial or an SBA denial, because the procedures are different. If your lender denied forgiveness and the SBA hasn’t issued its own decision yet, you may need to request SBA review of the lender’s decision rather than appealing directly to OHA. An attorney can help you figure out exactly what procedural steps are required for your specific situation.

The worst possible response is to do nothing. Paralysis and avoidance guarantee that you’ll lose your appeal rights and be stuck with the debt. Even if your overwhelmed or unsure what to do, at minimum make a phone call to an attorney for a consultation so you understand your options. The 30-day deadline doesn’t care about your stress level or confusion—it’s absolute, and once it passes, your options become dramatically more limited.

Contact a PPP Loan Defense Attorney Today

An SBA denial of your PPP forgiveness application is a serious problem, but it doesn’t have to be the final word. With prompt action, proper legal guidance, and strong supporting evidence, many borrowers successfully appeal wrongful denials and get the forgiveness there entitled to. However, the process is technical, the deadlines are strict, and the stakes are high—potentially tens or hundreds of thousands of dollars.

Our firm has extensive experience handling PPP forgiveness appeals at the SBA Office of Hearings and Appeals. We understand the regulations, we know what arguments work with OHA judges, and we’ve helped numerous borrowers overturn erroneous denials and protect there rights. We also know when appeals aren’t the strategy and can advise you on alternatives like settlement negotiations or hardship relief.

If your facing a forgiveness denial, don’t wait—contact us today for a free consultation. We’ll review your denial letter, assess your situation, explain your options, and give you an honest evaluation of your chances and what representation would involve. The consultation is completely free with no obligation, but it could be the difference between successfully challenging a wrongful denial and being stuck repaying a loan that should have been forgiven.

The 30-day clock is ticking. Call us now before your appeal rights expire.