We are starting to hear of U.S. Small Business owners who received a denial notice for an Economic Impact Disaster Loan ("EIDL") by the SBA without any additional contact from SBA. The reason for denial is based solely on credit history. Many of these businesses did not receive any emergency grant funds either.
These denials are coming with the ability to apply for reconsideration.
A number of legal issues exist with this. The CARES Act provides SBA an avenue to APPROVE an EIDL based solely on credit report; however, it does not allow for a denial based on the same and suggests other evidence should be reviewed by SBA to determine ability to repay such a loan.
Additionally, the Emergency Grant funds should never have been based on your credit report or the success of the EIDL application. The law expressly states the emergency grant funds do not have to be repaid "even if" later denied for the EIDL.
SBA delayed disbursing these Grant funds well beyond the 3-day disbursement window proscribed by statute, and then is denying loans, so as to not ever have to answer for acting contrary to law.
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