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The last time we blogged about the Payroll Protection Plan loan program, the SBA Inspector General was reporting that the levels of fraud in the program were truly mind-blowing. Since that’s the case, it’s probably not surprising that according to this McDermott Will memo, many PPP borrowers find themselves ensnared by red tape when it comes to trying to get their loans forgiven, and many of those whose loans have previously been forgiven are now facing audits. This excerpt addresses the predicament of borrowers who have won appeals of SBA denials of forgiveness:

Some businesses are facing an increasingly common predicament: They appealed an unfavorable Final Decision to the [SBA’s Office of Hearings & Appeals]. The OHA granted their appeal, agreeing with the borrower that the SBA’s decision was based on clear error. The OHA then remanded the loan back to the SBA to conduct a new review, and the business is forced to wait for months for the SBA to act on the loan.

Other borrowers are in a similar situation after filing an appeal with the OHA only to have the SBA withdraw the challenged Final Decision and place the loan back under review with no further communication from the SBA regarding the status of the loan. These businesses have been waiting and waiting for months—and in some cases more than a year—for the SBA to issue a new decision.

The memo says that once a Final Decision has been withdrawn, the borrower faces what feels like a “black hole” of SBA review. It suggests that the problem stems from both a lack of resources & a lack of a sense of urgency on the part of the the SBA to resolve outstanding loans in a timely manner. On another happy note, the memo says that there’s been an uptick in audits of borrowers who have had their loans forgiven years ago. The most significant issues in these audits are whether the borrower correctly calculated its initial PPP loan amount and whether the borrower was “small” enough to qualify for the loan.

– John Jenkins