SBA Failed the American Small Business owner during the COVID in the way it implemented the EIDL program guidelines as set forth in the CARES Act.
Under the CARES Act provisions for the Economic Injury Disaster Loan (EIDL), SBA was to provide a totally-forgivable Grant of $10,000 PER BUSINESS paid within 3 days of filing application for EIDL program online. There was never any requirement or provision of anything different from that simple language in the Legislation.
SBA subsequently and arbitrarily changed the Grant to a distribution of $1000 per employee, along with capping EIDL loans at $150k when they’re supposed to go up to $2M as per Congressional Legislation.
The $1000 per employee nonsense was exactly that, complete nonsense and a violation of The CARES Act and a capricious and arbitrary decision by SBA without direction or permission from Congress.
CONGRESS DECIDES HOW U.S. TAX DOLLARS ARE SPENT, NOT FEDERAL AGENCIES.
When taken to task in a Senate hearing, SBA Administrator Jovita Carranza and US Treasury Secretary Steven Mnuchin both replied like Ralph Kramden, “Hummina…hummina…hummina…” and meekly stated that they made these arbitrary decisions to change the program (and ignore Congressional mandate) because SBA was worried they would “run out of money”.
Imagine if the US Navy was in danger of running out of money? Would they stop sailing ships and flying fighters? NO. They would ask Congress for more money.
THAT is the most massive #FAIL on the part of SBA Administration (and Treasury, for their part) in not returning to Congress to request additional funding.
In making these decisions, SBA failed in its fiduciary duties to the American Small Business owner. FYI: In the currently proposed Second Stimulus Legislation, Congress made sure to hold SBA accountable by requiring definitive reporting deadlines that SBA must return to Congress to report on progress of the funding of the various programs.
We strongly urge EVERYONE to stop watching all the alleged YouTube experts expounding on the exact rules of the new Stimulus. When this is actually signed into LAW, SBA still has to create the RULES. Until SBA creates the RULES, NO ONE can say with any certainty what they are. Not me, not anyone. We can only interpret what we read. I read the Legislation several times. To Trevor’s practiced eye (30 years lending with Government programs), some language remains unclear and confusing.
Our interpretation—and that’s all it is—doesn’t mean a hill of beans until SBA MAKES THE RULES. Instead of watching YouTube “experts” watch kitten videos. It could prove to be a better use of your time.
How to Apply for an EIDL Loan
An updated sample of the EIDL application with Trevor's commentary on what changes the SBA has implemented when underwriting your EIDL loan.
If you’re submitting documents to the SBA, you’ll need to do it the RIGHT way to ensure a smooth process! Here’s our advice (based on Trevor processing loans for over 30 years) on the best way to submit documents:
1. PDF ONLY. No photos, no other file types. With the volume of documents and applications they’re working on, SBA Loan Officers simply do not have the time to convert your documents to PDF. They’ll probably set it aside until they have time.
2. Separate PDFs for separate documents. A PDF of a voided check should be separate from a PDF of a photo ID and etc. When SBA has to separate your documents from a single PDF it slows down your entire process.
3. Label the PDF on your end. For example of a labelled PDF: “COMPANY NAME YTD Income Statement JAN 1 to SEP 30 2020” or “COMPANY NAME Voided Check”
4. List the documents you’re submitting in the body of the email. For example, SUBJECT LINE: “Company Name: Documents submitted DATE”. Then, in the body of the email: “Attached to this email: YTD Income Statement JAN 1 to SEP 30 2020, Voided Check, Photo ID”
5. We recommend using the NOTES App on your iPhone to scan documents. Ridiculously easy.
6. BEST Scanning app of all: “ADOBE Scan” which you can download to your smartphone from your respective app store.
7. When scanning with your smartphone, keep the document within the scanning borders. Most often the scanning app will give you a highlighted “border” for the document.
8. Always scan documents on a flat surface and scan straight, not slightly tilted.
7 Tips to Submit Documents for Your EIDL Application
Grab these 7 tips to better prepare you on how to submit you documents to the SBA. You have to guide SBA to an approval. We've seen that they don't try to make it work if something is confusing or sloppy; they easily decline.
Lenders don’t actually like lending, and SBA can be useless thus leaving many business owners vulnerable to bad actors aka SHARKS circling the waters with expensive loans that will only cripple business owners with high interest rates and stringent terms!
Trevor grabbed his iPhone and recorded an almost psychotic rant after Linda Rey spoke with a Commercial Banker we’re hoping to add to our Lender Matrix. The Banker talked about how the underwriters have removed the passion from the process, which I understand.
We’re okay with that. We don’t really need an underwriter to be passionate. Business owners need financial professionals to havecommon sense, which has been removed from the process. There’s no common sense underwriting anymore, especially during the COVID-19 pandemic. Mind you, the banks are sitting on trillions in deposits!
Bottom line: If banks were actually lending money right now to small businesses to help support our economy, if banks were making smart decisions about how to interact with the ongoing COVID pandemic, then the MCA SHARKS would not be circling in the waters seeking to eat small businesses alive with high interest rate loans with horrible repayment terms.
There’s blood in the waters. The MCA loans, a loan that is based upon the credit card activity in your business for the last 3 to 6 months or 12 months, depending on the lender, and the interest rate is, uh, mind-blowingly high. And they take their money every time you swipe the Customer’s credit card. So it is the worst possible financing for a small business owner.
The problem is, it’s the only type of financing that’s out there. Those are the sharks. They’re swimming in the water. HEY BANKS! You need to step up. It comes from the top down. TOP DOWN! Banks: $2 trillion. WAKE UP! Smell the coffee. Figure out how you can make small business loans during the pandemic.
Use some COMMON SENSE and figure it out!
Assess your risk using a different model instead of sitting on all that cash while the SHARKS eat Small Businesses alive.
Business Financing Documents Checklist
Stop worrying about what's required when pursuing a business loan for your small business. This list will indicate what a lender, bank, SBA, etc. will want to know about you and your small business if you're looking for a business loan.
These are prudent documents that help tell your small business story. Without them, it's difficult for lenders to assess you as a risk when it comes to lending your small business money.
This is NOT SPECIFIC to the SBA EIDL loan.
We know how frustrating it is to spend time and energy following up with the SBA on the status of Your EIDL loan or Reconsideration request!
We’re sharing our experiences from having worked on dozens of EIDL loans and our interactions with SBA Agents. We want to you to know you’re not alone in your frustration, but also to help you to understand how the system works.
1. WE LOVE SBA AGENTS! Every call we experience an SBA Agent who is very professional and eager to help business owners obtain the EIDL financing they need to survive this pandemic.
2. SBA Loan Officers are, to quote an SBA Agent, “Working 15 hour days” on loan requests and reconsideration requests.
3. Okay, once you understand the value of the intrepid SBA Agents and how enthusiastic and hard-working they are, let’s discuss the frustrations of follow up.
4. We did a video on “How To Speak With An SBA Agent” we recommend you watch that for tips on how to make your follow up call.
5. Next, know that SBA Agents don’t always have a complete picture on your loan status. Their system has notes about your file’s progress with “Codes.” We don’t know what those codes are, but let’s hypothesize that a typical code could be something like this: “9837: IRS Form received” or “9822: Email sent to Applicant”.
Trevor has seen coding like this in his previous career as a Mortgage Banker. It’s an efficient way for a system to track the progress of a file.We’ve spoken to a couple of Agents who told us they don’t know what some of the Codes mean when a file is in the Reconsideration system.
6. Apparently, the Reconsideration Team works like a “Black-Ops” enterprise. SBA Agents can’t speak with them and their Codes can’t be deciphered by the SBA Agent you call for a status.
7. Beware of general statements made by an SBA Agent such as “Reconsideration processing times are 5-6 weeks.” Another Agent told us that is not true; she’s seen Reconsiderations take substantially longer. She said the other Agent should never have made that statement. Moral of the story: Take anything an SBA Agent says on general matters with a grain of salt.
8. Don’t think you’re going to call and get very clear guidance. The SBA is STILL overwhelmed with the number of new and Reconsideration requests. There’s a lot of moving parts, a lot of confusion, and long waiting times.
9. Remain consistently vigilant, and always polite. Check in regularly on your file. You won’t always get a definitive answer, but once in a while you might discover the SBA sent you an email that you didn’t know they sent! We’ve seen that happen…the email was sitting in the client’s spam folder. Other times, no such email was received. Moving parts. Confusion. Not quite controlled chaos.
10. Patience is a virtue. We know you need this money to help you survive this pandemic. We know the SBA is working diligently. We also know that sometimes some folks in an organization (Bank, SBA, etc.) get a file and it sits there waiting its turn because that person in the organization is overwhelmed, confused, slow, or, maybe, just maybe, even lazy. Think of the real world and how folks work in your business; the SBA is no different.
This comment in an online forum about SBA EIDL loans says it all about two key concepts:
“…who knows what this winter is gonna be like here so I’m afraid to give it back yet.”
The business owner has EIDL monies left over and had considered (oh so briefly) prepaying the loan with the remainder of the monies. And then the new surge hit.
Concept #1: Utilization of EIDL monies as a way to replace lost revenue for working capital due to the COVID-19 pandemic. There is no finish line; no concrete timeline; complete uncertainty.
If you have not used all your EIDL monies, we recommend holding on to the funds through the coming months. You want to have a better understanding of a “diminishment” of the COVID-19 pandemic to such a level that there’s no fear of upcoming possible lockdowns where you have to close your business. Likewise, to know there’s no upcoming lockdowns to gauge if you will have customers coming through the door.
Concept #2: “who knows what this winter is gonna be like…” speaks to the SBA’s continuing failure to recognize the drastic difference of this disaster from all “traditional” natural disasters. The EIDL processing guidelines and the Loan Agreement and the lack of clear, unambiguous guidance on how to use the monies from and EIDL all need to be addressed by the Administrators of SBA.
We’re eight months into this pandemic; that’s more than enough time for this Federal Agency to have created at the very least some better guidance on how to use the monies beyond stating, “Working capital” in the Loan Agreement.
Business owners are terrified to use the funds incorrectly, many of them saying, “I don’t want to go to jail!” This is absurd.
SBA! Please, please, please, we are begging your Administration, recognize the unique features of the COVID-19 pandemic disaster and modify your guidance for EIDL funds so that business owners can use the money without fear of contravening the terms of their Loan Agreements!
We’re all holding on out here for this disaster to end. We’re all holding on out here, trying to survive and keep our business’ doors open. We’re all holding on for more detail from SBA and a resiliency to the fact this disaster is like no other disaster in American history.
We read an online article recently about credit and credit scores. The writer was complaining about how they couldn’t get approved for credit for a major purchase. He was denied due to a credit score of 575. In the article, he complained how this credit score is wrong, how the creditor who denied him must be committing fraud, and on and on.
This article writer referenced a consumer-credit app that all too many people use, some “karmic” thing that purports to guide people on improving their credit histories.
Based on 30 years’ experience in mortgage banking and having read thousands of credit reports, my response to the author of the article and a commenter is below. We promise you, as you will see, credit ain’t a rocket science.
People in the world spend too much time focused on their credit scores, only to lead to the kind of frustrations experienced by the article writer referenced above. I’ve been giving this kind of credit advice for decades because we know it WORKS.
Our opinion is that consumers have been trained to spend entirely too much time focusing on credit scores. If you want a good credit report and good scores there are several basics to follow.
Longevity counts. The longer your credit history (assuming on-time payments, no derogatory accounts, good utilization), the better your scores.
You have 3-5 accounts open and ACTIVE at all times. Active means using that account every month: a car loan you’re paying, a credit card you use for groceries, a student loan (or more), a mortgage. Even if it’s only credit cards, 3-5 accounts is the standard for good scores in my experience.
STOP paying off your balances to zero permanently and STOP paying off your credit card balances at the end of the month. Credit scoring relies on you actually USING credit. If your complaint is that you don’t want to pay the interest, fine, but don’t complain that your credit scores aren’t higher. It’s a scoring system based on USING credit over time. FYI: “time” does not mean monthly, rather over long periods of time, consistently. (See #1 above)
Utilization. I know all the online “experts” say “Don’t use more than 30% of your available revolving balance.” What a bunch of scaredy-cats! We’ve seen thousands of credit reports thanks to Trevor’s financing career. He’s seen folks with up to 50% utilization of their available revolving balances with excellent credit scores. When you go above 50%, then it can get interesting. Depends on your overall credit history. Is it one account above 50%? Is it several? Did you just get a new house and mortgage? Did you trade in your leased-car last month? Yeah…interesting. (See #5 below)
Credit is a “living breathing thing.” Not like as in a “monster” but certainly there’s an organic aspect to your credit history. There’s a lot going on there. That’s why it’s nearly impossible to control your credit scores no matter what all those “karma” websites will tell you. I have had many people I’ve worked with (including one right now) who are tweaking their credit based on what “karma” tells them to do with the flick of a finger on the screen of their smartphones. I just shake my head as I watch their frustration as to why in the longer term they’re not hitting the desired scores. There are no short cuts. A credit history determines your credit score. And a credit “history” is exactly that: a long-term project. (See #1 above)
Yes, pay your bills on time. Duh. Note, a “late” payment reported to a credit report is for a payment 30 days late or more. If you pay two days after the due date, but within 30 days, you’ll incur a late charge, but not a derogatory “30 day late” mark on your credit report.
If you’re planning on big purchases in the next few months, don’t close any accounts and don’t pay them down to zero. (See #3 above). If you’re not planning on big purchases, close those accounts you’ll never use again. But remember to keep open 3 to 5 accounts current and active, keep your utilization of revolving credit below 50% of available balance. Don’t zero out your accounts. Pay your bills on time.
You now have your open source access to how your credit scores are calculated. Now, with all that extra time on your hands from NOT monitoring your credit scores, order a pizza, pay for it with a credit card, give the delivery person a generous tip, and kick back and watch “The Queen’s Gambit” on Netflix (it’s AWESOME).
If you want to rebuild your credit, we’ve written an EBOOK with tactics and strategies to begin rebuilding your credit.
Here is my response to the author of this article:
I’ve [Trevor] been in finance for over three decades and I’ve read thousands of credit reports.
Here are my observations and advice:
STOP wasting your time with that karma nonsense. It’s a rabbit hole that, in my professional experience, does very little to assist consumers with valid credit guidance.
Credit scoring and credit reports are “organic” to a certain extent: many moving parts shifting each month. That’s why the “karma” advice and others like it can’t work correctly all the time, or in the long term.
Credit scores update once a month. Period. Not daily, not weekly, not based on activity. Creditors choose to provide reporting information to the THREE credit bureaus (Trans-Union, Equifax and Experian). The accuracy of that information can often be questionable.
No consumer anywhere can obtain the same credit scores that we use in the financial services field. We use “CLASSIC” FICO scores. Even should you obtain your score from the FICO website, it’s not a CLASSIC score.
I’ve seen differences of as much as 100 points in either direction between the consumer-access credit scores and CLASSIC scores.
Financing decisions are made using CLASSIC FICO scores by pretty much every credit-decision maker everywhere.
Creditors of all sorts (mortgages, car loans, credit cards, etc.) have varying criteria from one creditor to the next to determine creditworthiness.
Visit www.consumer-action.org for great, legitimate, free advice on all things credit related.
NEVER ever, ever, ever, ever, ever, ever, EVER pay anyone to repair/restore/add trades to your credit report. I’ve met too many people over my career who have done that only for me to tell them months later how terrible their credit is and, no, I cannot approve them for a mortgage to buy a house.
They respond with the kind of outrage you express in the article. Those credit “repair” people are scams, IMHO. I don’t care if they now appear as “legitimate” on the FTC website: I haven’t seen a single case where those types of services assisted a consumer in the long term.
And credit is LONG TERM.
As for people offering to add trades to your report: dunno, but that sounds incredibly fraudulent to me.
Linda Rey manages the marketing for our business financing practice. She recently posted relevant information on Reddit about our recent experiences with EIDL loans, both new applications and the Reconsideration process. A troll responded with, “Old news.”
COVID-19 is ongoing with no definitive end point in sight.
“Old news” doesn’t describe the continuing inquiries we receive from anxious business owners. A quick scan of any relevant online forum about EIDL programs reveals the simple truth: business owners still struggle with EIDL loans they’ve obtained (utilization) and fighting for monies they need to survive.
The U.S. Congress and the Small Business Administration (The SBA) responded with amazing alacrity in the early days of this crisis to provide vital support to Americans and American businesses. Yes, there’s been tremendous chaos around those initiatives.
In our opinion, that chaos, specifically about EIDL program loans, arises from two sources.
First is the overwhelming number of requests. According to an SBA Press Release on October 28th, 2020, SBA has funded nearly 9 million loans worth $7 billion. Chaos or not, the SBA did an incredible job of helping American businesses with the two COVID-related loan programs, EIDL and Paycheck Protection Program (PPP).
Our second opinion about the chaotic state of SBA EIDL response focuses on the SBA’s internal operations mindset. We mentioned in our introduction the drastic difference between a natural disaster such as a tornado, flood or wildfire, and the COVID-19 disaster. This pandemic is like no other disaster ever experienced in American history. And yet, with all their heroics on the frontlines performed primarily by the amazing SBA agents, loan officers, and processing staff, the upper level SBA Administration applied standards more relevant to the traditional natural disaster phenomenon.
To this day, we are dumbfounded by the SBA’s Administration’s failure to radically adjust the thinking and ultimately guidelines and processes for the EIDL program.
As amazing as our Government’s response has been to the financial uncertainties of this pandemic, there is surely more assistance to come in the future. As of this writing there is no second stimulus package negotiated or finalized in Congress. It is our opinion this will change as the pandemic moves into the second year of human distress. With any future stimulus package there are sure to be improvements and revisions to existing SBA programs.
Presenting this information at this time, in our professional opinion, will help business owners understand the basics of the EIDL program in anticipation of just such changes. When you install a fire extinguisher in your house, you probably took a moment to read the directions, didn’t you? Hopefully, you’ll never need it, but a basic understanding of when and how to use the extinguisher will surely come in handy in the event of catastrophe.
SBA now has a way to upload required documents for your Reconsideration request directly to the SBA website. Previously (as recently as the morning of October 21, 2020!), the SBA Reconsideration Team sent you an email with the list of documents. You would then email the documents and SBA could take up to ten days to upload your documents to your file.
With this new method, YOU upload the documents!
Remember: You can still apply for an SBA Economic Injury Disaster Loan (EIDL) through December 31st.
IF your loan was declined or you did not receive sufficient funds to help you through this crisis you can request a Reconsideration from SBA.
Our client received the email and within an hour we had uploaded the requested documents. Notice in the email: the STATUS of your….has been UPDATED.
In this case, the loan had previously been declined by SBA.
We requested a Reconsideration on October 17th; SBA responded with LIGHT SPEED on October 21st.
In the screen shot of the SBA portal website, you can see the new TAB “UPLOAD DOCUMENTS.”
If we haven’t viewed dozens of these SBA portals we wouldn’t realize what this meant as there is no other guidance on the SBA website or by email. Unfortunately, we all have to figure it out on our own.
Here at Aurora Consulting, we are committed to providing accurate and timely information about the SBA Disaster Loan programs. Stay safe! Stay well!
7 Tips to Submit Documents for Your EIDL Application
Grab these 7 tips to better prepare you on how to submit you documents to the SBA. You have to guide SBA to an approval. We’ve seen that they don’t try to make it work if something is confusing or sloppy; they easily decline.
We’ve had many interactions and exchanges with the SBA about clients whose EIDL loan was declined due to a low credit score.
What can you do if that happens? Our EIDL Blueprint is a guide for you to work through this process.
1. Ask for a Reconsideration. Often EIDL loans are automatically rejected by the computerized underwriting system. What you want is a human being to review your loan request. You get to a human by requesting a Reconsideration.
2. Prepare a Reconsideration letter. At the top of the letter include your name, company name, address, EIN (or SSN if you’re Self-Employed), and EIDL Loan number. REMEMBER: all your information must exactly match the information you inputted on the SBA website when you applied for the EIDL loan. If your name was not included as an owner or Authorized Preparer, then you cannot write the letter; only names that were inputted on the original EIDL application.
3. In the body of the letter, keep it short and concise. Request a reconsideration due to your credit explanation. Write a brief credit explanation in the next paragraph. For example, something like this, “The late payments on my credit report and the resulting lower credit score were directly a result of the COVID-19 pandemic. My income/revenue dropped dramatically and I could not pay my bills on time.”
4. Keep your credit explanation short. If you have any documentation that supports the explanation, be sure to include PDFs of that documentation with your request.
The History of the Economic Injury Disaster Loan (EIDL) PROGRAM was that it was established back in 1953. It was created for individual disasters declared in any one of the United States causing homeowners and business owners an economic injury .
For example, this month it may be a tornado in Ohio county. Two weeks from now it could be a flood in the state of Mississippi.
COVID-19 created its own unique disaster. The Small Business Administration (SBA) responded by offering an EIDL loan for the pandemic. We make this distinction because we want to answer this question accurately.
The fact is, you can apply for multiple EIDL loans, according to the SBA as long as they are for different disasters that have affected you.
In other words, if you received a COVID-19 EIDL loan in April, but your county was affected by a tornado in September (and it’s declared a disaster area), then you can apply for another EIDL for the tornado disaster. We confirmed this with the Small Business Administration (SBA).
You cannot apply for more than one EIDL LOAN for the same disaster. However, the SBA has a provision for up to 24 months (or two years after the disaster), for you to request additional funding above the amount of your original EIDL loan.
Let us know if this is helpful and what other disaster financing questions you may have.
How to Apply for an EIDL Loan
An updated sample of the EIDL application with Trevor’s commentary on what changes the SBA has implemented when underwriting your EIDL loan.
