Will a Personal or Business Credit Check Be Required for EIDL or PPP Loans?

On December 22, 2020 Congress passed the stimulus bill which includes new EIDL grants, new Paycheck Protection Program loans and other small business relief. Read more about that legislation and apply for a new PPP loan here . For small business owners hoping to get a COVID relief loan through the Economic Injury Disaster Loan (EIDL program) or Paycheck Protection Program (PPP), a credit check is both dreaded and anticipated. Some worry that a credit check will reveal credit problems that may prevent them from getting approved for the small business funding they desperately need. Others are excited when they see a credit check from the SBA appear on their credit reports as they take it as a sign their application is moving forward.

EIDL Credit Checks

As we explained in our article, FAQs about EIDLs , acceptable credit is a requirement for these disaster loans. There will be a personal credit check for all applicants, plus a business credit check for all applicants except sole proprietors for loan amounts above $200,000. If you are applying for one of these loans it’s a good idea to review your credit reports so that you can prepare an explanation for any past credit problems to provide to your SBA case manager. Personal credit checks for these loans go through Experian, so it’s a good idea to review your Experian credit report. The inquiry appears as “US SM BUS ADMIN ODA” on the credit report. Business credit checks go through Dun & Bradstreet.

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One source of confusion seems to be why credit is checked for these loans, especially in a nationwide disaster like that caused by coronavirus. The answer is fairly straightforward: if an SBA loan isn’t repaid, taxpayers are ultimately on the hook. Credit checks are traditionally a way to spot borrowers who are more likely to default, and that’s true of disaster loans as well. Note that even if you are turned down for an EIDL due to credit concerns, you can still keep any advance/grant of up to $10,000 you received.

PPP Credit Checks

There does not appear to be any credit check required for PPP loans. That’s somewhat surprising because these loans technically fall under the SBA 7(a) loan program, which typically does require acceptable credit. In fact, 7(a) loans for $350,000 or less normally require the application to be prescreened using the FICO SBSS credit score , which can take into account both personal and business credit. However, when you think about the fact that PPP is designed primarily to be a loan that will be completely forgiven, it makes sense that good credit isn’t required. It does not appear most lenders are checking credit for these loans. However, several people in the Nav CARES Act Facebook Hub have reported their credit has been checked for PPP loans, or that they were denied for PPP based on credit. Generally lenders are allowed to add their own requirements to SBA loans as long as they don’t discriminate on a prohibited basis. It’s also possible they could check credit to verify an applicant’s identity. An increasing number of lenders are providing these loans to non-customers and will need to try to prevent fraud. But in that case, the lender could use a “soft” credit check which we discuss below. Keep in mind that if the credit check appears on your credit reports from the SBA, it will be for an EIDL as those loans come directly from the SBA. If a lender checks credit for a PPP loan application, the lender’s name will be associated with the inquiry, not the SBA.

Inquiries And Your Credit Scores

1. An inquiry simply indicates that someone has checked your credit. It does not state whether you were approved or denied for credit.
2. An inquiry may be a “soft” inquiry which doesn’t impact your credit scores, or a “hard” inquiry which may. You see all inquiries on your reports, but lenders won’t see soft inquiries. Applications for loans fall under the hard inquiry category, though some creditors do use soft credit pulls in the context of business credit applications.
3. An inquiry will appear only on the credit report accessed for the transaction and usually that’s one credit report from either Equifax, Experian or TransUnion. In the case of EIDL inquiries, it appears the SBA is accessing personal credit reports from Experian.
4. A single inquiry usually drops the credit score by roughly 3-7 points. The impact often levels off over the course of the following months as long as new inquiries don’t continue to wrack up.
5. Inquiries generally impact credit scores for six months to a year. After two years they are removed from the credit report.
6. Certain types of inquiries in a short period of time may be grouped and counted as one, including mortgage, auto and student loan-related inquiries. The exact time period varies depending on which credit scoring model is used.

In general, inquiries should not be a major concern or issue for individuals applying for COVID relief loans. However, if you have past credit problems and apply for these loans, you will want to review your credit reports in advance.

This article was originally written on April 20, 2020 and updated on January 11, 2021.

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Ty Kiisel is a Main Street business advocate, author, and marketing veteran with over 30 years in the trenches writing about small business and small business financing. His mission at Nav is to make the maze of small business financing accessible by weaving personal experiences and other relevant anecdotes into a regular discussion of one of the biggest challenges facing small business owners today.

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89 responses to “ Will a Personal or Business Credit Check Be Required for EIDL or PPP Loans? ”

I understand that a loan requires repayment and, as such, will rightfully require a credit check due to certain credit history and file requirements to qualify for the same. What I don’t understand is the fact that an applicant’s credit scores and history are being used to determine ones eligibility to receive COVID-19 financial disaster relief grants, specifically the “Targeted & Supplemental Advance” grants. I challenge anyone to offer (1) single solitary correlation between an applicant’s credit history and their qualification to be afforded an equal opportunity to survive a disaster that is 100% out of the applicant’s control. Under certain circumstances, this financial relief is the difference between life and death. Those with an undesirable letter of explanation as to why their credit score is low: sorry, you do not get to survive this one… shouldn’t have filed that bankruptcy 3 years ago, based upon our interpretation of your LOE. Better save what ya got left for funeral costs… NEXT! Even the name afforded the grant, “Targeted”, meaning those in “low-income” areas, of which, in fact, generally include a higher % of folks having less than desirable credit history due to poverty levels reducing one’s ability to pay consistently, amongst hundreds of other factors not imposed or impose much less in non-povershed communities, yet for seemingly no viable reason whatsoever, the personal credit history of every low-income applicant is currently being scrutinized as a factor in determining an applicants qualification of receiving COVID-19 financial relief in the form of the Targeted and Supplemental Advances that never have to be repaid. Forcing every applicant to first apply for the “loan” that some KNOW they do not qualify for and therefore DO NOT WANT TO APPLY for said loan in the first place, but if said applicant wishes to be GRANTED those funds of which have been designated specifically for that applicant, regardless of credit history, they will be forced to endure scrutiny of their credit history. Why? can someone please offer a viable response to this dynamic, yet thoroughly fundamental inquiry? Any argument that is solely based on ease of processing applications is pure bullshit and everyone knows it… next Isn’t there specific verbiage in the CARES Act & ARP that strictly prohibits this nonsense? Could have sworn I read it briefly several months back

Gerri Detweiler says:

Unfortunately you’d have to find those who drafted the legislation to find out more about the reasoning for various requirements. (I personally don’t see why credit would be relevant for the grant either.)

I received $500K EIDL loan first time and want to apply for additional Funds. When Log into the SBA portal, it asks me if I want additional funds. If I process the funds in this manner, will there be another hard pull on my credit?

Gerri Detweiler says:

I believe some business owners in the Facebook group Business Loan Insight Financing Hub – PPP, EIDL and More on Facebook have reported a second inquiry for a loan increase.

Thank you!! The info was most helpful as I got a hard check..My credit is Good.. I just got approved to buy a car for myself and co-sign for my daughter. The new credit I have is paid all on time! I’m a sole owner and operator and have watched folks scam the government and the first time after 18 years in business I need help.. I’m jumping through hoops for a loan, I’m willing to repay. I’m thinking positive fir the 10K because it will help me in my low income rural area to bring my retail dress store back alive..

As a sole proprietor, if I get both the EIDL and PPP loans in 2021, do they show up on your credit report as debt? For example would a mortgage lender count them towards my debt to income ratio?

Gerri Detweiler says:

I have not seen either show up on personal credit reports. (For EIDL loans of more than $25,000 the SBA files a UCC-1 filing but that doesn’t show up on personal credit.)

I am getting mixed answers. Perhaps someone can help? I received EILD loan in spring, I also got 1k each per my 2 employees. Is this saying I should have gotten 10k? or was it 1k up to 10k per employee . Also, can I talk out another loan or add to this one? I need to do a relaunch and get people excited about the new merch. Losing 3/4 my vendors due to covid hit us hard.

Gerri Detweiler says:

Rachelle – I wrote about the new EIDL grants in the stimulus bill here. It’s not law until the President signs the bill. If it happens, you may be eligible for more $. Also if it passes there will be a second round of PPP loans.

Is the current EIDL( as of November 25, 2020 ) a Grant or an actual Loan?
Understanding that when these EIDL Loans Initially became available to apply for back when Covid-19 was first discovered and declared a ‘disaster’ they were actually ‘Grants’ and people were given an ‘Advance’ on them and they were not required to be paid back.
Now, as of November 25, 2020 the sba. gov website says they are ‘Accepting’ EIDL applications for ‘processing’ but they also say that NO ‘advances’/’grants’ are being given at this time.
I’m hearing many people out there say that they applied either in the very beginning or are doing so now for the EIDL loans and they are getting approved EVEN THOUGH THEY DON’T EVEN HAVE AN ACTUAL BUSINESS. NO BUSINESS REGISTERED, NO FILING WITH THEIR SECRETARY OF STATE OFFICE, NO EIN, NO TAX ID, NO TAX/ACCOUNTING RECORDS, NOT ACTUALLY OPERATING A BUSINESS.
?- HOW IS THIS POSSIBLE?
I’M EVEN SEEING THAT ACTUAL CONVICTS; PEOPLE SERVING TIME IN PRISONS ARE RECEIVING THESE LOANS. FOR REAL.
* CAPITAL LETTERS NOW MEANT TO YELL AT ANYONE, ONLY MEANT FOR EMPHASIS AND DUE TO PERSONAL ISSUES WITH VISION IMPAIRMENT*
Also-
One thing I am not seeing on ANY website is DO YOU HAVE TO HAVE AN ACTUAL BUSINESS BANK ACCOUNT, CREDIT LINES in order to have the SBA pull Credit and for you to Get approved for the EIDL?
How about those people who DO have actual Businesses Registered thru their Secretary of States office, have an EIN or Tax ID, but they have no made any money at all due to COvid-19 related disaster/ economic disaster, therefore, have NO records of income for their business, NO Business Bank Account of lines of credit.
Can these people apply for an EIDL and what is the likelihood of them receiving an EIDL loan or should they be applying ofr other types of Loans or grants?
Looking for some Clarification on these questions.
Thank you

Gerri Detweiler says:

As of December 26, 2020 the only EIDL available is the loan not the grant. You can apply through the end of 2020 at SBA.gov. If the stimulus bill Congress passed becomes law there is more funding for EIDL grants as I wrote about here. In addition there will be funding for more PPP loans which are forgivable. That story is here. All of this is contingent upon the President signing the stimulus bill.

Hi. Can a one person sole proprietor (educator/tutor) apply for a PPP loan? Can I apply for both the PPP and the EIDL loan?

Gerri Detweiler says:

I applied for the SBA money but my credit report is currently on freeze, will that affect the inquiry and would I still be able to get approved for the SBA money and funding ?

Gerri Detweiler says:

You will likely need to lift the freeze with Experian. If you haven’t already heard from the SBA, you should reach out to the SBA Disaster Assistance hotline.

Please, if you could advise me in regard to ppp program. It seems as though I fell through the cracks. I have all the criteria and I was a small business owner until Corona hit. Now I am heading into bankruptcy. I have been diligent in paying my bills and on top of my credit score.
I need help because the contradictions I have been hearing are confusing and nonsensical to me. Thank you,
Robyn Chandler

Gerri Detweiler says:

Robyn, I’d encourage you to reach out to your local SBDC or SCORE office for assistance. They offer free mentoring to small businesses in the US and also have information about PPP.

The SBA is pulling hard credit reports on the employees identified as the contact person on EIDL loan applications for their employers. The SBA has informally told me that they would similarly report defaults by the borrowing entity against the contact person. Why? The contact person is usually just an employee who filled out the application, especially if the applicant is a non-profit. The employee clearly is not liable for repayment of the EIDL, directly or as a guarantor. So why should the SBA impair the credit of an employee (usually by 3-7 points) when the employee is merely a representative of the entity borrower? Basic agency law teaches that the employee is only an agent and thus not responsible for the acts of their principal. Given that the EIDL has a 30-year term, any defaults would likely come long after most of the employees have left the borrower’s employment. Maybe checking the credit of the employee filling out an application for their employer makes sense for small businesses applying for an SBA 7(a) loan (other than a PPP) where the person applying for the loan on behalf of the entity is also a material owner of the borrower, but I see absolutely no reason that a comptroller of a small business or an executive director of a non-profit should have to accept the credit score impact of a hard credit pull so their employer can get an EIDL as the employee’s credit does not support the loan. Further, penalizing the employee becomes really surreal if the SBA actually follows through on its threat to report a default by the employer against the credit score of the employee –who, in most cases, has no control over the borrower’s finances and will usually be long gone by the time of the default. What am I missing? Are there going to be thousands of employees with ruined credit because their employers borrow EIDLs and then default? Will the employee then sue their (probably bankrupt) (former) employers?

Gerri Detweiler says:

These are all valid questions. You are right – there is a hard credit check. The SBA states that it has waived the personal guarantee for loans below $200,000 though the loan agreement appears to say otherwise. The owner should fill it out. The employee can go all the way to the submit button to make sure they have all the needed info and simply not submit it. Then the business owner can complete it.

I had an inquiry alert from Experian that SBA looked at my credit, problem is I am just an employee of the company that applied for the PPP Loan. My father owns the company and I am just the registered agent, I own none of the business and have none of the financial responsibility. Why do you think they would associate me with the loan? Could it be fraudulent activity? I tried to call the number from the inquiry to ask the SBA about it and the number was not in service. Any thoughts would be appreciated..

Gerri Detweiler says:

It’s a valid question and I don’t know the answer. I just tried the hotline and it worked: For help with applying for an Economic Injury Disaster Loan, call 800-659-2955 or email disastercustomerservice@sba.gov.

Since the EIDL funds will show up on my credit report as mentioned above …. should I assume that the amount will be part of my credit usage score & affect my percentage of debt to income if I should want to obtain future credit for a new car or possible other large purchases?

Gerri Detweiler says:

Christina – I would encourage you to contact the SBA Disaster Assistance hotline at 800-659-2955 asap. Let us know what you find out.

I applied for PPP on 6/20. 6/25 Credit was pulled and creditwise shows “US SM BUS ADMIN ODA” with Experian. I got approved for the PPP a few hours later from the lender and signed my docs. SBA does pull your credit. I also had to verify my identity with the lender and the 8 questions were very specific and had one question specific because of my line of work.

Should a ppp loan for my husiness which is s corp should up on personel credit report i did show.om my equifax loan from bank that gave me ppp loan is this correct

Gerri Detweiler says:

I’m not sure I understand your question Jason. A few lenders are checking personal credit for PPP loans.

I just got my Experian score up to a 787. My credit weakness is that my credit shows 24 months of history. I would like to know if after approval of the EIDL Loan, will it show up on my credit report as a new loan. For me, this will decrease my credit history down to 20 months and drop my score by 20 points. Not sure if a $10K loan is worth the drop. Your thoughts?

Gerri Detweiler says:

It is our understanding that the SBA does not have a mechanism for reporting EIDL loans to personal credit. However, I can’t speak for the SBA. You can always call the SBA Disaster Assistance hotline to confirm.

if approved for the EIDL loan for my business, will that debt show in my personal credit report until it maturity?

Gerri Detweiler says:

It’s our understanding that the SBA does not have reporting EIDL loans to personal credit. However, I can’t speak for the SBA. You can always call the SBA Disaster Assistance hotline to confirm.

I received a ppp loan from Bank of America about May 10th. It is very strange that the SBA not bank of A checked my credit on May 28, long after I got the money..
why would this be?
I also got money from the disaster loan- the one that you get 1000 an employee up to 10,000. Since I am a solePractitioner I received 1000, but it was in April.

Gerri Detweiler says:

We don’t know why Bank of America checked your credit later. Are you sure it wasn’t a promotional (soft) inquiry? They may be checking to offer you other products.

Sounds like another well intentioned concept with extremely poor execution. Folks with mediocre credit get denied AND an additional zing on their credit. Folks with good credit risk lowering it due to the same. Once inquiry is done, it should be either removed or “exempted” from other considerations as these inquiries were done for extenuating circumstances, not because people wanted 0% financing on a car purchase. What happens to people who wish to purchase a home and the point drop from this inquiry now pushes them down into a different category where they can’t get cheaper rates due to their score? What a shame.

Gerri Detweiler says:

There will be a hard inquiry but my understanding is that the SBA has no mechanism to report to personal credit.

If accepted, will the EIDL show up on your credit report? I know the inquiry did, but wonder about the loan itself.

Gerri Detweiler says:

No it should not appear on personal credit. They will file a UCC-1 filing which appears on business credit for loans of $25,000+.

Hits a load of crap ya my credit report is way down because I missed a lot of different cards I have their payments because the country is locked down and I’m not physically allowed to run my business against the threat of being arrested and put into jail but apply for the loan and get denied because through no fault of my own I dropped almost 140 points in past two months thanks to our govt for also giving me false hope on for once getting a helping hand To all the big corps and business who got gathers loans that didn’t need them F. U. I think I will just buy everything that’s not made in America from now on because goes to show they don’t give a shit about it’s people and before someone says something about the small 1200! They sent look up how much they also gave themselves in this bills they passed

SBA run my credit twice. I don;t know why. I applied for both EIDL and PPP loan. No idea why they have to run it twice. Recently they email me my account number and asked me to create a portal account, no idea what that means in getting an approval.

On may 1st I was paid $3000 from what I believe is the EIDL but also applied for PPP (never submitted paperwork because I haven’t done 2019 taxes yet)…today my credit was pulled by the sba and I’m wondering why. I also haven’t heard from the sba, I woke up may 1st and had a deposit into my account. What should I expect

I applied for the EIDL and about a month ago, $1000 was deposited into my bank account.
It said “SBA EIDL”.
However, last night I was notified that there was a hard inquiry from the SBA dated May 15th. What does this mean?

Gerri Detweiler says:

I applied for the PPP Loan through PayPal and got approved with a score of 620/630 They did a hard inquiry through Transunion and Equifax witch im not too happy about since im in the process of repairing my credit. And didnt need a 10 point drop right now.

The SBA took almost a month to deny my EIDL application based on credit history, and never saw a dime of the advance. 11 employee LLC.
Requested reconsideration for the advance two weeks ago.

Gerri Detweiler says:

J Rod – I am so sorry to hear that. It doesn’t seem to be the way the program was designed. Have you contacted your Senators or Representative in Washington? If I were you I would definitely do so. This is a federal program and they should have staff to help.

Gerri Detweiler says:

Interesting – who did you apply through and which credit bureau showed the inquiry? I’m sure other readers would be interested!

Why the credit check for the EIDL Advance ? It says right on SBA’s website that this will not have to be paid back. This doesnt make sense to me.

Gerri Detweiler says:

I hear you. Disaster loans require “acceptable credit” and EIDLs are the same. You apply for the EIDL and request a grant so it’s not a separate process. Based on my reading of the CARES Act, though, I did not expect business owners to be declined the grant based on credit. As you point out, it does not have to be repaid. But at least one business owner has shared his rejection letter for both based on credit.

Ive been denied The EIDL because of credit, ive been trying to reach out to find out where or how to complete the PPP, can anyone give me the right direction

Gerri Detweiler says:

Bruce – Hopefully PPP will open again when the President signs the stimulus legislation Congress passed. We’ve written about that here.

My question would be this. Now that it has been checked, does this bring it any closer to getting it funded. Eidl grant. If so, the timeframe of when could should look to see funds in my account from there. Thanks for your helpful article regarding it.

Gerri Detweiler says:

I wish I knew the timeframe Bruce! They are processing on a first-come, first-served basis. You may want to visit the
SBA CARES Act Insights Hub on Facebook as there is a lot of discussion going on there where people are sharing their application numbers and results.

I am an independent contractor, and receive a 1099 for ALL of my income. I was denied a PPP loan yesterday and the reason given in the email was “Insufficient credit history for authorized representative or applicant”. Loan was being processed by PayPal. I don’t have “bad” credit, just a lack of history because I’m averse to debt and just pay cash for things. My income has ground down to $0 since 3/10/20, there isn’t much work on the horizon, and savings is dwindling rapidly. Am I just out of luck?

Gerri Detweiler says:

Apply elsewhere Craig. We’re happy to try to help match you to a lender at Nav (Nav.com). You can also try local banks or credit unions. Act quickly as funds will go quickly this time around.

Sorry to hear this! What do they consider as “insufficient credit history…” ? Only 1 year? 2 years? Was your credit score sufficiently above the minimum of 570?

this is a situation thousands of people in this country are in now Craig. I’ve heard SO many stories of how even people with NO actual registered businesses, convicted felons in prison currently, and so many more got the 1st round of EIDL ‘advances’ of the $10k which they technically don’t ever have to pay back.
I don’t see how this is possible and am wondering the same thing you asked here.
Also, what about people who lost their jobs and are now looking to ‘Start’ a business, any business; full or part time so they can do something smarter not depend on a company who will let them go or when that company itself goes under when times get tough?
People who live on SSDI and may want to try even starting a tiny business part time, gig work, etc ?
How do these people apply for a Small Business Grant or Loan and Where do they do it?
These people under age 62 who can’t ‘keep’ other earnings AND keep their Social Security like when you are OVER age 62 and receiving SSDI, SSI, other types of Social Security Payments need to be able to keep that minimal monthly SSI SSDI payment while they try to make more money; start their own business, do gig work, etc.

Yes , don’t even ask pay pal! My business account is with them and I was denied a ppp for a credit score of 648 and it dropped thanks to them…..

To whom it may concern, my name is Randall Knowles, I have Equifax monitor my all my financle matters. And they told me you recently run a credit check on me. I’m not sure why this has happened . But we need to talk .I havnt applied for anything ,lately,full name.Randall. Wade. Knowles. We sure need to talk ,so we can stop this theft or whatever is going on.i would appreciate your assistance in this matter ,thank you,. R. Knowles

Gerri Detweiler says:

It is ridiculous that the government will only give disaster funds to people with good credit! So people that is already in financial hardship and have bad credit now are left to suffer even more. What a great country the USA is…… NOT.

I was not approved for a PPP loan through PayPal/Webbank who I have received working capital loans through them before. Their reason for denial was “insufficient credit history of authorized representative of applicant” So they will deny approval for a PPP loan based on credit check.

I Would like to know if I can apply for PPP if am self employed? And can or do I claim one employee as my self? I was as my side business? Project finished near the end February. But the client couldn’t pay.

Gerri Detweiler says: