Both Arbroath and the Montrose branch had made successful £10k business support grant applications to Angus Council in July last year for help under the lifeline scheme.
However, they have now been told grants do not go to political parties and been ordered to refund the money.
Arbroath West and Letham SNP councillor Alex King explained: “The rules at the outset did not state that the local branch offices of political parties were not entitled to receive business support grants.
“As the branch treasurer I made an application for the grant to Angus Council, based on the rules as they appeared at the time, which was accepted as valid with a grant of £10,000 being awarded.
“Last week I received a letter from [Angus Council finance director] Ian Lorimer requesting that the branch repay that £10,000 as we were not entitled to receive it.
“Arrangements to repay the £10,000 were immediately set in motion and after some considerable difficulties at the bank, the grant has been repaid by bank transfer as requested by the council.
“It is a pity that these rules regarding political parties were not available when I applied for the grant as this situation could then have easily been avoided.”
An Angus Council spokesman said: “We do not comment on individual grant applications, but should we become aware of any issues, we would seek to remedy the situation as appropriate.”
The Scottish Conservative candidate for Angus North and Mearns, Braden Davy, suggested local businesses would be angry over the mistake.
He said: “These grants were intended for the likes of small businesses who faced major costs because of Covid restrictions and loss of income.
“They had the safety net of putting employees on furlough through the Treasury scheme or accessing business loans from the UK Government.
“But many small business owners in Angus will have seen their dreams go to the wall while they waited for support like this.
“Any anger they felt about missing out while the SNP were given handouts would be justified.”
The SNP have been approached for comment.