The Economic Injury Disaster Loan is a longstanding loan provided by the Small Business Administration. The SBA has been offering disaster loans long before the COVID-19 pandemic appeared. Lately, many small business owners are taking advantage of this loan because of its recent expansion to include COVID-related disasters.

Many small businesses rely on this loan when an unexpected disaster impacts their business. Unfortunately, many businesses are being denied the loan with a rejected application, putting struggling businesses in an even tougher spot. This leaves business owners with the question, “what is the reason my loan was declined?” We will review common reasons loans have been declined, what to do if your application was declined, and whether or not you can re-apply.

Common Reasons for Application Decline:

  • Unsatisfactory Credit History – Your credit score does not meet the minimum credit score requirements.
  • Unverifiable Information – The SBA will deny an application due to uncertainty in the validity of the information provided by the applicant. This might occur as a result of a failed identity verification, the applicant’s device was associated with fraud, international IP address or a high-risk IP address. Another reason for denial is the company, along with its affiliates, has reached its $2M limit on loan amounts. Another thing to note is the EIDL is only available for small businesses. If your business exceeds 500 employees your application may be denied.
  • Ineligible Non-US Citizen Status – To qualify for the loan owners of 20% or more of the business must be US citizens, non-citizen nationals, or qualified aliens.
  • Business Activity Not Eligible – The business activity associated with the company must meet SBA regulations. Business activities that are not eligible are gambling, pawnshops, adult entertainment, real estate developers, insurance companies, and illegal activity under federal, state, or local law including cannabis businesses.
  • Economic Injury Not Substantiated – If a business received an EIDL advance that was greater than their economic injury, then their application may have been declined. Also, on the application the business did not indicate that it experienced an economic injury then the application would have been declined.
  • Failure to Respond – The SBA may contact the business to request more information such as legal documents. Response to this attempted contact must be done within 7 days or the SBA will consider the application to have been withdrawn.

For many of the reasons listed above, the company may be able to request reconsideration of its application. This may require submitting additional information along with the request to reactivate the application.

If you are considering requesting a review of your Economic Injury Disaster Loan application, please contact our professionals at The Innovative CPA Group who can guide you through the process.

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