My PPP Lender Denied my Forgiveness Application – Now What?

As was discussed in a separate article, a Paycheck Protection Program (“PPP”) lender’s decision denying loan forgiveness cannot be appealed to the United States Small Business Administration’s (“SBA”) Office of Hearings and Appeals (“OHA”). However, that does not mean a borrower cannot contest the lender’s decision to deny the forgiveness application. First, a borrower can potentially turn a non-appealable lender decision into an appealable SBA decision by requesting that the SBA review the lender’s decision. Second, the borrower may be able to commence a lawsuit against the lender that requests a declaratory judgment that the borrower was eligible for forgiveness and/or seeks damages for improperly denying loan forgiveness.

Request Review by the SBA

Suppose a Lender issues a decision to the SBA that denies the borrower’s loan forgiveness application. In that case, the lender must provide the borrower with written notice of that decision within five business days. This notice to the borrower must also include the basis for the lender’s decision to deny the borrower’s loan forgiveness application.

Within thirty days from receipt of this notice, the borrower may request that the SBA review the lender’s decision.  This is the only way borrowers can get the SBA to review the lender’s decision, and the request must be made within this period. This request for review must be made through the lender, and the lender must then submit those requests to the SBA within five business days of receiving the borrower’s request. 

While requesting an SBA review creates the possibility of getting a final forgiveness decision from the SBA, the SBA has also made clear that it is within its sole discretion whether it will accept or decline a borrower’s request for review. If the SBA agrees to review the lender’s decision, it will issue a final determination that the borrower can appeal to the OHA.

Suing Your Lender

Suppose the borrower either does not request an SBA review or the SBA declines to review the lender’s loan forgiveness decision. In that case, the borrower is left without any “administrative” remedies and will not be able to appeal the decision to the OHA

Although there is no guidance on the topic, a borrower may be able to contest a lender’s decision to deny forgiveness by commencing a lawsuit in state or federal court against the lender and seeking a declaratory judgment from the court that the borrower is entitled to loan forgiveness and/or damages for breach of contract or a different claim. 

While some lenders will undoubtedly argue that the PPP rules preclude such a lawsuit, the PPP does not specifically deprive borrowers of other rights under state or federal law. Boiling it down, a PPP loan is just an ordinary contract between a borrower and lender, albeit one that is supplemented by certain PPP rules and regulations.  Parties to contracts routinely rely on courts’ powers to issue declaratory relief to resolve disputes arising from the parties’ contractual relationship. Additionally, to the extent the borrower is wrongfully precluded from receiving forgiveness from the SBA because the lender decides to deny forgiveness, the borrower might be able to seek damages from the lender under a breach of contract or other cause of action. 

Contact Us

If you have questions or concerns regarding a lender’s decision to deny a PPP loan forgiveness application or other problems with PPP loan forgiveness, please contact Matthew M. Zapala, Esq., by e-mail ( or phone (518.432.3133) for a no-cost consultation to see how Nolan Heller Kauffman LLP may be able to assist you.

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