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Home-Based Care Providers with PPP Loans Can’t Bank on Forgiveness

Paycheck Protection Program (PPP) loans from the Small Business Administration (SBA) were a godsend for a lot of home care agencies in 2020, allowing them to keep their heads above water during financial downturns and reward employees for conducting hazardous work.

But now agencies must prepare for the aftermath of PPP in the form of loan-forgiveness applications, financial audits and billing reviews.

“Really, the question that you’re going to have to ask yourself is: Are you prepared?” Jamie Whatley, a partner at Dorsey & Whitney LLP, said on a recent webinar. “Are you ready if there’s an SBA review, or any adverse decisions of bills or SBA audits, [for example]?”

Minneapolis-based Dorsey & Whitney LLP is a law firm that works with clients in health care, as well as clients in five other industries.

The vast majority of PPP loans were sent out in two rounds: one included in the Coronavirus Aid, Relief and Economic Security (CARES) Act in late March of 2020, with another in December under the Consolidated Appropriations Act of 2021.

Home-based care agencies were major benefactors of those funds, receiving loans ranging from amounts in the tens of thousands to ones in the multi-million dollar range. One of the biggest stipulations of the loan program was that no less than 60% of received funds had to be put toward payroll costs, which is why many agencies used the money to reward their employees with hazard pay.

As of last week, PPP funds had been exhausted, according to the SBA.

Debt forgiveness was supposed to be a part of the program, but it is not automatic, Ken Logsdon, a partner at Dorsey & Whitney, said on the webinar. Loans over $2 million were also subjected to much higher benchmarks of scrutiny in the forgiveness process, including an automatic audit.

An agency that received a loan needs to apply for debt forgiveness via an application. The lender then has 60 days to review it and send it to the SBA. Once that happens, the SBA has an additional 90 days to review the application and make a forgiveness decision.

But that 90-day limit for the SBA is not being satisfied right now in a lot of cases, which is worrying providers. Additionally, the bar for how much material lenders need to review has not been firmly set, which is causing confusion.

“There’s many, many applications out there that are beyond the 90-day period,” Logsdon said. “That raises a lot of question marks as to what’s [going on]. And frankly, we don’t really know. Because due to the sheer volume of the applications coming in and the size of the program, the SBA is overwhelmed. And so it’s very difficult for it to adhere to that standard.”

The SBA foresaw these types of bandwidth issues. It’s part of the reason why it decided to reduce oversight on loans under $2 million and rely on “good faith.”

But just because the SBA has opted to gloss over certain issues with sub-$2 million loans doesn’t mean that other governmental agencies will do the same, Logsdon said.

“The SBA — more or less — is giving loans under $2 million in round one a free pass,” Logsdon said. “They did not say that other governmental agencies wouldn’t take a closer look. That’s still a [possibility].”

Potential forgiveness issues

When a final decision on loan forgiveness is made, it will come from either the SBA directly or, in some cases, the lender. If the result of the review is not a good one for the agency, it will be because the SBA found that the business was ineligible for the loan from the outset; it was ineligible for the amount of money it was provided; or that the received funds were not dispersed properly.

At that point, an agency can comply with the decision and work out the payback details with the SBA or appeal the decision to the SBA’s Office of Hearings and Appeals (OHA).

No matter what, every agency should be prepared for this possibility, Douglas Lang, of counsel at Dorsey & Whitney LLP, said on the webinar.

“It’s critical that anybody that believes there’s a ghost of a chance that they’re not going to be forgiven any part of the debt — or all of it — gets ready,” Lang said. “They really need to have everything [in a line] to pursue that appeal.”

In these cases, the appellant — the agency, in this case — has the burden of proof. The final decision on the appeal would be determined on whether “the SBA loan review decision was based on clear error or face of law.”

The required contents for an appeal include a copy of the SBA loan review and a full, specific statement that is thorough enough to explain exactly why the appeal is being filed. In addition, it must include the relief being sought from the appellant and the contact information for the agency or its attorney along with signatures.

An agency will have to file a petition, then wait 45 days for the SBA to consider its appeal, and then wait another 45 days — at least — for the official findings from the second review.

If an agency from the first tranche of PPP borrowers admits wrongdoing right off the bat, whether accidental or purposeful, and pays back the amount owed, the SBA will offer a safe harbor. For the second tranche, as long as a business can prove a 25% reduction in gross revenues, that also acts as a safe harbor for them.


This article was written by Andrew Donlan on May 17th, 2021 and can be found here. Please be sure to visit for more articles written by Andrew and other quality contributors.