Financial Management

Keep Good Records on PPP Loan Forgiveness. Lookback on SBA Challenge is Up to 10 Years


Many companies that have submitted documentation to the Small Business Association and that have had Paycheck Protection Program loans forgiven may think they are home free. Think again. The SBA has the right for up to 10 years from the time of forgiveness to audit the documentation and challenge some, if not all, of the forgiveness if it finds the documentation lacking.

The SBA is in the midst of auditing the documentation submitted by many companies and, in many cases, challenging the accuracy and completeness of their documentation. In these situations, the SBA will send a letter, via the intermediary bank, to the company requesting additional documentation, challenging the accuracy of the calculations submitted, or otherwise challenging the forgiveness.

Companies must respond to these letters in a timely fashion. Failure to do so, or failure to satisfactorily address the questions raised by the SBA, will result in partial or full denial of the forgiveness. And depending upon the nature of the forgiveness denial, the company may be required to repay the full amount of the loan immediately.

In addition to having to repay the loan, denial of forgiveness can result in other headaches for the company. The loan forgiveness may have been used by the company’s owners as a basis to deduct losses or to receive tax-free distributions.

In the event there were any ownership/equity transactions prior to the denial of forgiveness, the basis may have been included in the calculation of gain on the sale. As a result, the denial of forgiveness may have significant adverse tax ramifications.

Denial of forgiveness will also reduce the company’s equity on its financial statements and may necessitate a restatement of previously issued financial statements.

If your company receives one of these letters from the SBA, you should contact your financial consultant.

About the author: Phillip Ross, CPA, CGMA is an Accounting and Audit Partner and Chair of the Construction Industry Group at Anchin, Block & Anchin, LLP. For more construction industry thought leadership and content, log on to

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