Tax Refund vs. Eligible Income

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With Tax Time soon approaching, we feel obligated to remind you of our continued advice about the best methods to prepare your tax returns if you plan on applying for Business Financing in the future.

With Trevor’s 30 years as a Mortgage Loan Officer, he saw this time and time again. While the tax professionals and CPAs might do a marvelous job of getting a Self-Employed Business Owner a GIANT REFUND (or simply lowering the tax bill) these folks never seem to have a discussion with their clients about the long term ramifications of such deductions/lowered income.

The “look back” period to qualify for a mortgage is 2 years; for a business loan of any type, it’s 3 years. That means the Lender will take those “Bottom line” numbers and average them for the time period in question (2 or 3 years) and create a qualifying income. When Schedule C shows a loss or minimal income over the time period, well, do the math. It ain’t pretty.

For a Self-Employed Borrower with a Schedule C (including many LLCs), lowering the net income on Line 31 by deducting oodles of expenses lowers the potential loan. IRS does not “require” anyone to deduct expenses; this is an “option” which helps to lower tax liability. BUT it also reduces a Borrower loan qualification by lowering income.

Whenever you complete a tax return you don’t have to deduct expenses! This feature of a tax return allows you to lower your tax liability.

BUT IT ALSO LOWERS YOUR INCOME.

And for any Loan you may request in future (up to three years later) the Lender will use that bottom line income to calculate your qualifications.
Take extreme care and think long term strategically before making a final decision on a tax return.

Be sure to watch our YouTube video about the “LOOK BACK” period!

We are scheduling FREE 15 Minute Phone Consultations to review disaster financing eligibility and qualifications.

Small Business Must Roll the Dice

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.

Contact us with some good news if you are in a position to know what is going on in the background of this nonsense.

Old News on EIDL LOANS

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.

We welcome any questions, comments or concerns you may have if it means some insight or assistance to help sustain your business.

Summarize your Finance Package

Summarizing your finance package can help to prioritize how your banker reviews your financing request.

We recently submitted a client’s financing request to one of the Lenders on our lending matrix.  Our Lender Rep. said, “Holy cow, you guys are on top of it with your summary. Not many brokers make it this easy to review the package.”

We made it easy because the client provided us with their financials. The financials were comprehensive. It’s a multi-million dollar corporation and we’re at the early stage of presenting to the lender. We want to show something that’s easily digestible. We want to ease  the process for the lender to give us a prompt review and tell us their interest in offering the financing.

Summarizing your financials is easy to do.  When you have a lot of line items that lead up to one type of deduction or one type of income source, simply summarize it. Drop it down to as few lines as possible so the lender can do a quick review and say,  “Okay, I see the picture here.”

The Lender doesn’t need to know the granular line-by-line details at this early stage; you want the Lender to give a fast review to gauge their interest. If the Lender expresses interest and offers a Letter of Intent for the financing, you can present the more detailed financials with your full loan application package.

For each client financing request, we write a summary statement. We present a one or two page statement describing some background on the business, the reason for their financing request, and, in bold, large font, the amount of our financing request.

Our presentation package for the initial Lender review is compact, yet complete.  The “first glimpse” by a Lender is sufficient to tell us if that particular Lender is the right fit for our client’s request, or if we need to locate a different Lender.

If you’d like a copy of our Documents Checklist, click HERE.

If you have questions on the best way to present your financing request to a Lender, email us at Curious@AuroraConsulting.biz and we’ll be happy to provide advice.

Four Metrics to Monitor for Profit

To monitor your bottom line profit you need to put some fundamentals in place.  Once those foundational elements are implemented, you next need to create a monitoring schedule to check in on your profits.

Again, we’re not suggesting anything that is revolutionary in the world of running a business.  But we’re presenting these suggestions based on our real world conversations with business owners as we interview them to begin searching for credit financing solutions for their businesses.

In other words, as obvious as this advice might seem, we’ve encountered many business owners who don’t have these fundamentals in place for their business. If they do have these building blocks established, we discover their systems for implementing and monitoring are only one step removed from “back of the envelope” calculations.

We want you to do incredibly well with your business!  We’re presenting this obvious advice to help you organize these basics in a way that you can almost say to yourself, “Set it and forget it!” This leaves the system in place and removes so much anxiety and impatience from the day to day operations of your business so you can dig in to the two things that count most: loving what you do and building your business to even bigger scale!

The 4 fundamentals to measure profitability.

Timeline.  What is the sales/production cycle for your business?  Create a realistic expectation of when the cash hits your bottom line by reviewing your past three years performance.  Look at your previous cycles.  Calculate the turn times on when you delivered your product/service, and when you realized the cash injection to your bottom line.

Production Costs. While your production timeline might be, for example, three weeks, you must ask yourself if any production costs linger after the production cycle.  Are there delayed payroll expenses?  Are there residual expenses for cost of deliveries (freight costs, internet marketing costs, re-tooling expenses for next production run, Accounts payables to outside vendors necessary for the production cycle)?

Receivables.  Review your Accounts Receivables aging reports for the past three years. What is the true timeline when you receive better than 90% of the cash income from your receivables after you’ve sold your product or service?

Delays.  With each of the above three fundamental criteria, add a percentage variable to account for delays. What happens if there’s a slowdown in your ability to deliver your product/service? Add that into your calculation. Same for cost overruns that could lead to extended time periods of production costs

(What if your current freight delivery provider can’t manage the extra volume of a large order and you need to bring in another provider? What if you needed to add three more freelancers to complete video/content/production or implement design elements?) 

Same with your receivables. Assume the worst for your slower paying receivables and add delayed payments to your calculations.

Time To Check Your Profits.

Once you implement the above four fundamental monitoring elements, now create a schedule to check in on your profits.  Get it in your calendar!  Lock the door!  Give yourself (and your management team) time to focus solely on this aspect of your business.  No interruptions, and answer the question: where do we stand with profit?  If you’re profitable, what’s your bottom line number and does that match your expectations from your Business Plan?

Throw in the additional calculation: margin. Compare profit to expense. On a per product/service delivery price, what is the exact percentage in your profit column?

In the final analysis, literally, you’ll have a clear understanding of your profit.  When you comprehend in clear terms how you derive profit for your business you can then think about how to improve profit.  You may find yourself discovering new opportunities for profit centers and thus new products/services.

You may be pleasantly surprised that you’re more profitable than you thought you were.  Then you can decide what to do with that extra income, to plow it back into the business, to create cash reserves, maybe make bonus payouts to ownership, make charitable contributions, or take a vacation!

Again, what we’ve found is that many business owners lack a clear picture of their profitability in terms of hard numbers, metrics that you can see on your computer screen.

These fundamental systems may seem daunting in terms of the investment of time and money to implement, but, like any other feature of your business, once you’ve put them in place, not only will they help you with clarity of your profitability, but you’ll only need to tweak these existing systems in years to come as you grow your business by leaps and bounds!

Email us with any feedback, especially any solid “fly by the seat of your pants” stories.

3 Metrics to Watch

We find business credit financing solutions for business owners.  We also find that many business owners hold anxious trepidations about the concept of borrowing money.

Yet, the need does arise for working capital to continue to grow your business success story.

Whether the working capital need is unexpected–due to an unusually large order from a customer, a seasonal downturn in revenues, or a sudden opportunity for growth such as purchasing a competitor–or a planned requirement such as equipment purchase or investing in a new marketing plan, your business will need capital to grow.  Unless your profit margins or cashflow planning have created a massive pile of cash for just such a capital expenditure, you’ll need to go outside your company to find that money.

The alternate choice to credit financing is to bring in capital from other equity sources.

Refinance your personal home or leverage your retirement accounts and bring in the required capital.  Sell off valuable equipment, ideas, collectibles.  Bring in an equity partner.   We’ve pontificated at length about the last option…do you really want a partner who may wind up telling you “how to make the pizza?

There are many reasons why choosing equity sources for capital infusions are bad for you personally and professionally.

Yet, too often this is the path chosen: equity sources.   Business owners go down this path for several reasons: time-constraints to obtain the capital; anxiety around the idea of borrowing.

Credit financing to obtain working capital doesn’t have to frighten the heck out of you.  At Aurora Consulting, we understand the worries that come along with borrowing money: “What if there’s a downturn in my business and I cannot repay this loan?”

Especially after the global meltdown and subsequent recession of a dozen years ago, lingering fears and doubts remain laced through our economy and our economic thinking like clogged drainpipes during a sudden torrential downpour.  The water has to move, and move quickly, but the remnants of various and miscellaneous flotsam and jetsam are jamming up the pipes and the rainwater backs up causing all kinds of other problems.

The same is true of these lingering doubts about borrowing money.  Credit can be a good thing and nothing to be fearful of when approached sensibly and when the credit terms are incorporated into your business planning.

Still, these worries hang on.

We’ve come up with the concept of 3 important business metrics you can keep an eye on after you’ve borrowed that needed working capital.

Remaining vigilant on these metrics can help you avoid a sudden negative revenue issue which could lead to default on credit obligations.  While it may seem obvious to you that these are the metrics ANY business should constantly monitor for maintaining profitability and continuing growth, as with all advice and observations we provide from Aurora Consulting, our real-world experiences demonstrate these ideas are not so obvious to every business owner.

What is obvious is worry and anxiety.  Thus, our presentation of these not-so-revolutionary-ideas.

  1. Profit margins: pricing and expenses
  2. ROI: products/marketing plans/infrastructure/product development
  3. Customer Retention/Construction

Monitor these important metrics by maintaining your financial reporting to the most current and efficient methods.   We often see businesses with financial statements such as P&Ls and cashflow statements that are not up to date.

A balance sheet isn’t just for your CPA to use when you’re filing your tax return!

And the ever important marketing and business plans?  Wow, we are constantly shocked when we request these vital documents from our clients to include in a financing request package only to be told they don’t have one!

Creating and maintaining these financial reporting documents is incredibly easy with the sophisticated computer applications available, even for your smartphone!

Making the time to check  in with them is another thing altogether.  We sometimes feel as if our clients present us with financial statements and they haven’t reviewed them, recently, or ever.

That’s why we suggest you at the very least monitor these three important metrics on a constant and vigilant basis. WHY?

First, it’s good for the overall health of your business.
Second, you will find you can anticipate challenges and successes before they arise.
Third, you can plan for those challenges and successes well in advance and avoid nasty surprises and cashflow chokeholds.

Finally, and best of all, you can lower or maybe even eliminate altogether your anxiety and fears of credit financing capital to grow your business.

REACH OUT to us and ask us anything whether you agree or disagree. We would love to hear of the “fly by the seat of your pants” stories too!

Small Business Surviving COVID

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Some Lenders are beginning to open their doors, and their coffers, to businesses in need of working capital. However, the COVID-19 impact on lending guidelines has been brutal.

Lenders’ guidelines for these types of loans are typically tighter than pre-COVID, and every Lender requires a business applicant to provide a COVID Impact Statement.

Underwriters are taking a close look at how businesses plan to survive the continuing pandemic, especially diligent on management experience, cash reserves, equity, and business planning for pandemic-response.

Today, let’s look at some industries and businesses we expect to thrive and survive the COVID-19 crisis.

Logistics.  The pandemic panic in March and April exposed the weaknesses in supply chains, especially for groceries.  But the resiliency of the industry became quickly apparent with the exponential growth in demand for home delivery of goods from online shopping excursions as so many people found themselves locked-down at home.

Warehouses, sorting equipment, storage accessories, forklifts, robots, long haul trucks and delivery vehicles all have multiple sources of financing available to maintain and grow during the pandemic.

Professional Writers. Yes, writing for business, whether it’s email newsletters, website content, or White Papers, writers can thrive during COVID-19, especially with the trend towards remote working.

The downside to being a professional writer during this time is the influx of amateurs hustling for a work-at-home gig overwhelming the ranks of people you’re competing against.  If you’re a professional writer with Accounts Receivable from reputable business clients, there’s financing available to you to help you grow your business.  And, if you haven’t already applied, the SBA Economic Injury Disaster Loan (EIDL) is still available, even if you’re Self-Employed and you file a Schedule C as a Sole Proprietor.

Manufacturing.  Manufacturers can thrive during COVID-19 with three fundamentals in place:

  • Pivot-Planning
  • COVID safety protocols for employees
  • Supply surety

We know of one manufacturer who promptly converted his business to a COVID pandemic perspective by manufacturing components of PPE for health care frontline workers, notably plastic face shields.  He later enhanced his planning to create the decals for grocery stores that direct customers with one-way arrows and six foot social distancing location markers.

A manufacturing firm that can demonstrate its resiliency during the crisis, its ability to protect workers, and the confidence in obtaining necessary supplies for manufacturing processes is sure to find Lenders willing to provide financing, including for Accounts Receivable, Business Lines Of Credit, and Equipment financing.

Online-Motion.  We created this category at Aurora Consulting to define any kind of business demonstrating incredible pandemic-related-resiliency by either moving its business online where it didn’t exist before, or bolstering an existing online presence.  70% of Small Businesses have NO or minimal online presence.

The COVID-19 pandemic clearly demonstrates the need for your business to move online, to create product/service opportunities for consumers to engage with you remotely, and to integrate product deliveries with successful delivery systems.  The Small Business demonstrating sincere “Online-Motion” will find Lenders willing to provide financing providing a recently revised business plan demonstrates the strategies for success to survive.  Our firm Bridge Street Business Plans assists Small Businesses with this vital aspect.

Key Points of Financing Your “COVID-SURVIVING” Small Business:

  1. Management experience: substantial heft with more than three years’ experience.
  2. Equity: Whether it’s cash liquidity, real estate collateral, or other convertible equity, expect a Lender to want at least 30% equity.
  3. Credit. High credit scores, in excess of 700 for principals of the business.
  4. Cash Flow. Demonstrate how your business is cashflow positive during and through the pandemic.
  5. ROCK SOLID Pandemic Business Plan.  State the case for how your business is surviving now, how you will succeed through the crisis with a focus on strategies, profit centers, and an expanded vista that takes into account the new paradigm of limited customers in-store, remote work, online shopping, employee protections, supply-chain strength, and utilization of delivery options.

At Aurora Consulting we’re doing our part to help your Small Business survive COVID-19 with the following services:

  • Flat Fee Financing Consultation.  $750 gets your business a thorough review of your existing business plan, financial statements, and credit report.  We’ll then advise on the viability of finding Lender financing, whether that’s today, or in the future with our suggested strategies.
  • Bridge Street Business Plans.  We created Bridge Street Business Plans to assist our financing clients with a necessary component of a successful business credit application. We understand how to update your business plan to respond to the COVID-19 pandemic “pivot.”
  • Innovative Financing Products.  We know the Lenders who will lend and we know how they will lend.
  • SBA Economic Injury Disaster Loans. These loans are still available and we’ve become experts in this loan process.

Email us anytime to find out more about what financing products can help you become resilient to thrive beyond COVID.

 

You Want to Repair Your Credit

We want you to have peace of mind that, should you need to apply for business financing, you’ll be prepared to keep your business going through this or any unexpected crisis.

If you are considering business financing in the future, or simply want to know what to do and how to go about applying for business financing, Aurora Consulting offers a flat fee consultation to help navigate the bumpy road, the treacherous waters of financing.

We review all aspects of what’s required in a loan application including your credit report, financial statements, business plan and marketing plan. We review with you items in your credit report and what happens when you try to repair your credit.

Our consultation includes a credit report with real credit scores from Equifax and Experian.  These are the “Classic FICO” scores only available to financial services institutions.  These scores can be radically different from the scores available to consumers.

When we run the credit report, we assess any challenges that could affect your loan application in the future.  More importantly, we’ll give you the correct advice, based on decades of experience in lending and based on current experience working successfully with Lenders on business loan applications, to address any challenges on your credit report.

What makes us crazy is when a new prospective client says, “I’m holding off for now because I want to take care of my credit report.”

There is no way a business owner can know what is acceptable and what is unacceptable to a Bank for business financing.
We can, and we do know.

Worse, in our experience, more often than not, people take actions to “take care” of their credit that actually does not help them in the business loan process. Sometimes, what they think they’re doing to help, makes their credit worse!

4 things NOT to do with your credit report:

  1. Don’t pay off Collection or Charge Offs or Judgments. Many times these accounts don’t affect a loan approval depending on type of account and amount.  Plus paying these accounts off can lower your credit score dramatically.
  2. Don’t pay down credit card balances.  You may pay down the balance to a level that seems worthy, but actually could have a negative effect on your score.
  3. Don’t pay credit card balances to zero.  If an account has a zero balance, the credit scoring system has nothing to score!
  4. NEVER pay anyone to “repair” or “restore” your credit. According to the Federal Trade Commission, you’re paying for something you can do yourself. And the “guarantees” these companies offer often fail to materialize. Read this article for credit repair scams.

EMAIL NOW if you want to explore how your credit could impact your financing.

Download our EBOOK on how to rebuild your credit after bankruptcy. This information was curated after 30 years of reading thousands of credit reports.

We Anticipate Problems to Create Solutions

Our Process Anticipates Problems, Creates Solutions

The good news is that Banks are lending again on a limited basis for non-disaster loan requests.  The bad news is that the loan products are limited and the underwriting guidelines are very, very restrictive.

Many industries/businesses are excluded from loan programs.  Banks simply cannot determine yet the viability of the businesses to survive the pandemic. Risk is too high and thus doors to the lending vault are tightly shut.

Today we spoke to a Bank on four different loan scenarios. Each of these businesses has challenges on their loan applications of different sorts, whether it’s credit, cashflow, type of business, COVID-19 impact on the ability of the business to earn income.

In the hour-long conference call with the Bank, thanks to our qualification process here at Aurora Consulting, we easily addressed the Bank’s concerns and answered their (often) difficult questions as they assessed the risk on each loan scenario. In three out of the four scenarios, we received positive feedback of interest from the Bank. While this interest does not guarantee a loan approval, this, in our experience is a giant hurdle we overcame. 

The rest of it is the loan process.

We also spoke today with a prospective new client in a follow up to our initial call last week.  This client seeks over $4Million in funding for a unique business, a business for which many Banks and Lenders do not provide funding due to their lack of understanding of how this business operates.

We had already identified a Lender for this financing request.

In our follow up call today, the prospective client indicated they would soon make a final decision on moving forward with Aurora Consulting to secure the financing. They also indicated they were working on their credit.

STOP. RIGHT. THERE….BEFORE we go any further. (Meatloaf medley playing).

A client should not “work on their credit” without proper guidance. Luckily, we provide that kind of guidance here at Aurora Consulting. While we don’t believe in credit repair/restoration, we do have decades of expertise with credit and we also know the appetite of commercial lenders when it comes to credit. Note: We have not yet seen this person’s credit.

Our process at Aurora Consulting includes running a credit report as soon as we sign a consulting agreement with a new client. We do this so that we can anticipate any issues that could slow down or prohibit the lending process. We do this upfront so that we can provide advice that leads to a positive result for our clients.

The same holds true for our entire process. We review all financial statements, business plans, marketing plans and any other pertinent items in the early days of working with a new client.  

We do this to anticipate and resolve problems a Bank or Lender may have in the future.

When you apply directly to a Bank/Lender for commercial financing, these items, credit reports, financial statements and the like, are not seriously reviewed until the very late stages of the loan application process. By then the applicant has spent time collecting and submitting documents and spent money on application fees, appraisal fees and other associated costs.

Literally most Banks/Lenders do not run a credit report until the very final stage of the application process, weeks or months after the initial application. At that point, if a credit issue arises on the credit report, all those weeks and months of work are quite literally flushed down the toilet and the loan is declined.

Our role as your financing Broker is to review all relevant documents, including a credit report, in the early stages of your request, before the application, before we’ve even considered conversing, in depth, with a Bank/Lender.

That’s why today, we hit the mark with 3 out 4 of our loan scenarios getting the green light from a Bank to move forward to the application process.  

We were prepared for every question and concern the Bank had because we’d reviewed credit and documents. We anticipated problems in advance and could converse honestly with the Bank on possible workarounds for those problems.

It’s what we do, because we are the business-owner’s advocate. We work for the business-owner. We would be remiss if we didn’t share with you that banks call us when they can’t underwrite the loan. So we understand their process.

Ask us any questions when it comes to business loans. If you want your business to survive, and THRIVE despite the worst crisis we’ve seen in our lifetime, please call us with your questions.

Email Curious@AuroraConsulting.biz

Proposed vs Passed Legislation

We’re often very blunt about things, especially Trevor as he is Scottish.  “Right between the eyes” is a favorite expression of his.  We don’t like to dance around the truth and we certainly despise getting someone’s hopes up about something that’s not reality.

These principles served both Linda Rey and Trevor very well during their respective careers in Insurance and Banking.

At Aurora Consulting, we embrace and continue to follow those principles to assist our business financing clients.

 

We’re going to give it to you now right between the eyes: We refuse to discuss proposed legislation about COVID-related stimulus and disaster financing until and at such time as, that legislation has passed the House of Representatives, the US Senate, and has been signed into law by the President. Period.

Passed gets our attention; proposed stays on our “pay no mind” list.

We relied on this attitude in the early days of the pandemic lockdowns when so much was complete chaos, speculation, despair and distress.  We fielded calls, texts, and emails from our friends, colleagues and clients, each of them despairing for any kind of positive news about Government assistance to help them survive the pandemic lockdown, whether about the EIDL program or the proposed CARES Act and the Paycheck Protection Program.

In every instance, we patiently listened to and carefully counselled folks.  We emphasized the word “patience” time and again and coined our phrase for the pandemic, “Ever-Evolving.”

Based on our guiding principles, we waited for concrete information.  The SBA website provided skimpy information at best for the Economic Injury Disaster Loan (EIDL) program.  We charged forward and submitted applications, spoke to several trusted and experienced colleagues, and submitted our clients’ applications, utilizing our decades’ of experience completing successful applications for loans and insurance.

We pivoted with each new challenge that came up, apprised our clients of the situation, and continued hammering at the wall until we achieved positive results.

We used the same methods for the Paycheck Protection Program (PPP). We opted to wait to submit applications until there was more cogent guidance from Lenders and SBA on the functionality of the program.  When we finally submitted our clients’ applications we achieved positive results again.

There’s a lot of talk on the internet, especially on YouTube with glamourous videos, purporting to provide definitive knowledge of what’s in store for extended stimulus and disaster financing legislation.  We call that “static.” PLEASE subscribe to our channel for updates especially for our WTF Wednesday videos.

At Aurora Consulting, we seek results based on reality.  We don’t search for self-inflation of our professional egos by providing incomplete or inaccurate information to the general public at large or our clients in particular.

We know you’re impatient and desperate to hear there is more assistance on the way.  We know that we will wait until that proposed legislation becomes passed legislation.  Only then will we dive into the details to find results-based financing solutions for our clients.

Email us anytime at Curious@AuroraConsulting.biz with questions or comments on what you’ve been experiencing with business financing and disaster relief financing.

Tough Questions from Lenders

The good news is that Banks and Lenders are opening up their coffers to provide business credit financing. The other news, that’s more anticipated than “bad,” is these Banks want business owners to answer some tough questions about preparedness for further pandemic-related challenges.

If you are applying for business financing—a loan or line of credit—that’s not Disaster Relief-related, here’s a sample from one of our Bankers on what to expect:

  • How has your business been impacted throughout the crisis?
  • How have you and your employees been affected? Your suppliers? Your customers?
  • What are your key priorities over the next 30/60/90 days?
  • How do you anticipate accomplishing these goals? What hurdles do you anticipate?

To achieve a successful response to your application, you should answer these questions with all appropriate gravitas and extreme detail.

  • The Bank wants to know that, should the pandemic-related lockdowns get tighter:
  • How have you planned to get through that?
  • Do you have cash reserves?
  • An employee-furlough action plan?
  • Do you have the ability to provide your services or products with a serious downturn in customer traffic (think early days of lockdown)?

Banks make loan decisions by assessing the risk on the credit profile of the Borrower. As with any aspect of a loan application, the COVID-19 pandemic has created another layer of risk for Banks. Your successful loan application will take that risk assessment into account as you prepare your application for submission by anticipating how to make a Bank/Lender get into a “comfort zone” about your ability to make payments on the loan as other challenges from the pandemic arise.

Reach out to discuss if your answers to these aforementioned questions would suffice. We are your advocate in the process.

Email us at Curious@AuroraConsulting.biz.

How To Shop Financial Services Products While Black

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We have worked in Insurance and Banking for three decades.  We have seen how our White colleagues behave when discussing internally, or when working directly with persons of color.

This video is difficult to present because we don’t dare presume that we know what life is like to be Black in America. We can only empathize and attempt to put ourselves in your shoes.

We share some advice on how you should expect a financial services professional to behave if they are treating you with the equal respect they provide to their white clients.  We created this advice based on how we have behaved with clients, knowing that we have standards that are severely Anti-Racist, and how we have observed other professionals with less savory standards behave.

 

  • Language.  An Anti-Racist uses language that is respectful at all times, not only the words used, but the tone of voice used.
  • Education.  The quality professional, treating all customers equally, seeks to educate clints. They bring to the presentation deep reserves of patience and empathy.  They never behave in a way that disrespects the client’s lack of knowledge about the service or product.
  • On Time. Your Professional should be on time and prepared for the meeting/call.  This demonstrates their ability to take you seriously.
  • Respect. The Anti-Racist professional never speaks down to a client.  The Anti-Racist professional asks questions with a patient demeanor, or explains things in plain English with a respectful tone.  Example, “I’m asking for your Identification because I’m required to do so for every client when we will run their credit report.”  That’s respectful, seeks to demonstrate a patient educational tone.   The opposite is, “I need to see your ID.”
  • Polite.  Language and words truly demonstrate how a person thinks.  When a person is polite to a customer, they use the appropriate words such as “Please” “Excuse me” and “Thank You.”

We recommend that you, as a Black American, or a person of ethnicity or different gender, absorb these key points of behavior and, most importantly, act on the points with the best action you as a consumer of financial service products can take: Walk away.

Too often, we’ve seen an African American customer being treated badly by a white professional but that customer stays in the meeting.  Walk away.

The best way to demonstrate your requirement that you be treated equally is to walk away from, or hang up the phone on, any financial services professional who you feel is not sufficiently Anti-Racist. There are plenty of us out here in the world who know how to treat our fellow human being equally and with respect.

Walk away from the racists and find those of us who are Anti-Racist.

We’re here and we’re waiting for you.

The Dreadful Disorganized Document Disaster

Our resident Chief Financing Rock Star, Trevor Curran, was a Mortgage Banker for 30 years. His specialty was helping first time homebuyers with low down payments to achieve the American Dream of Home Ownership.

From the early days, with no computers, no internet, no email nor a beeper on his belt—until the day of his retirement in 2018, a mortgage loan application was all about the paper. Documents to support the application needed to be submitted, reviewed, dissected, parsed, and collated.

Trevor’s clients submitted their documents in many and varied ways, including coffee-stained tax returns, crumpled paystubs pulled out of an old wallet, and badly-scanned PDFs.

Considerable time was spent by Trevor and his loan processing team to put these documents into a manner acceptable for review by an Underwriter.

And of course there was the pushback from clients.
“Why do you need that (document)?”
“I can’t find my tax return.”
“The dog ate my homework.” Oh, wait, wrong story.

Trevor’s response, time and time again, including in the early days when he would literally drive to the clients’ home, workplace, a McDonald’s parking lot, or the real estate office, to pickup their required documents, was, “We need these documents because the bank requires it since you’re asking the bank to lend you several hundred thousand dollars.”

This obvious message was delivered in a kind and patient but firm manner.

Still, it always seemed incredible, time and time again, how people could be so cavalier about their loan application requirements. “Don’t they want the house?” he would often ponder in the moments of extreme frustration.

Now, as the primary processor for Aurora Consulting, Trevor’s manages the document flow and the loan applications for our business clients. When we launched this business we remember discussing how this document issue is going to be so much better because we’re dealing with serious business people.

Unfortunately, we were mistaken.

Especially over the past eight weeks as we have assisted over 30 businesses to apply for and receive Government Disaster Relief financing, the poor quality of document management is mind-blowing. Especially at a time like this, when the desperation of keeping a business alive requires this emergency infusion of cash. You’d think business owners and their representatives (CPA’s, mostly) would be sharper than ever to get documents submitted in an organized and prompt fashion.

Again, mistaken.

Moral of the story for anyone thinking they want to ask a Bank or Lender for money—whether you’re buying a house or financing a business—it’s all about the paper. Organize your documents, submit them in a clean, efficient manner, and submit them promptly.

Rant over.

Send us a message with how you’ve successfully managed your team to understand your high level of standard when it comes to managing your documents.

Quick Access to Working Capital

If you are aware of factor financing, you may know that you can leverage your Accounts Receivables with a Factoring Lender to get quick access to working capital. However, you may be concerned what your Customers will think when they have to send their payments to a different address.

  • Lending aspect aside, it is not unusual for Businesses to create a different location to receive payments on Invoices, whether a physical location or an electronic ACH location.
  • The Factoring Lender works hand in hand with you to ease the transition for payment destination on your Invoices.
  • Many of your Customers are already sending their Invoice payments for other B2B purchases to Factor Lenders whether they know it or not.
  • Factor Lending, while a niche financing solution, has been utilized by businesses in need of quick capital for 30 years.
  • Businesses frequently leverage Assets, Property, Income and other collateral to obtain working capital whether it’s a traditional Bank loan or other financing solution; leveraging your Invoices is no different.
  • The fact your business is borrowing money demonstrates strength, not weakness.  You’re demonstrating your faith in your business by borrowing money to continue to grow your business.

Factor Financing is an affordable, fast, financing solution to help you leverage important aspects of your business–in this case your Accounts Receivable–to obtain the working capital you need.  It’s easier to qualify for Factor Financing than traditional Bank Loans, especially during the pandemic paradigm when Banks are making loans difficult to obtain.

Factor Financing Qualifying Criteria:

  • You must sell your Product/Service B2B
  • Your Customers must pass muster for basic creditworthiness on their ability to pay Invoices
  • Non-Progressive Billing
  • Startups Acceptable
  • Consistent Accounts Receivable practice

Let us ease your worry about what your customers will think. Learn more to see how this could be a solution to keep your business going during this pandemic. Email us at Curious@AuroraConsulting.biz.

Optimize Cashflow During This Pandemic

In this difficult time, normal Bank lending criteria has tightened up.  Banks, always risk-averse, have become even more so during the pandemic. If a Bank is lending at all to businesses, they are only doing so to their existing business customers, and those customers must have demonstrated ridiculously healthy financials before the pandemic and more so now.

In other words: for businesses that are booming during the pandemic paradigm, in need of working capital to keep up with demand, the purse-strings at traditional Banks are pulled super tight.

Let’s discuss the fortunate scenario that your products are flying out the door or your services are in high demand right now due to the new pandemic paradigm. However, you find yourself in need of working capital, here’s a unique solution for your business:

Convert your Accounts Receivables to instant cash.

If your Customers have a good history of on-time payments within 40-60 days of Invoice issuance, and you’re selling B2B products or services, then you’re positioned to take advantage of this quick, affordable, working capital solution.  Lean into your Receivables and get the cash you need today to better service the orders for your Products and Services with Accounts Receivables Factor Financing.

Criteria:

  • You must sell your Product/Service B2B
  • Your Customers must pass muster for basic creditworthiness on their ability to pay Invoices
  • Non-Progressive Billing
  • Startups Acceptable
  • Consistent Accounts Receivable practice

Contact us to learn more about how Factor Financing could be an incredibly efficient and cost-effective way for you to have capital flowing to your business. Email us at Curious@AuroraConsulting.biz.

Short-Term Solutions for Long-Term Goals

There are two scenarios that some business owners take when starting and maintaining their business.

First, no debt.  These businesses were started with savings and/or investments from the business owners.  These businesses fund daily and annual operations costs with money generated from the profits of the business.  These business owners most often do not like the concept of credit debt, or, worse, have a severe anxiety about the idea of borrowing money to run their business.

Second, belief in debt.  Using debt in the form of credit financing is a reliable source of capital for starting and running a business when the concept is applied with smart planning. These business owners understand that obtaining capital to start or grow a business from a bank loan or other financing source can be a great way to preserve existing profits and working capital, and also a viable option to find the money needed on a larger scale.

Pandemic Panic financing such as disaster relief loans, SBA economic injury disaster loans (EIDL) and paycheck protection program (PPP) loans due to the COVID-19 crisis is a type of credit financing that, in most all cases, could be a band-aid on a gaping wound.

Longer term financial considerations, as your business strives to come through the crisis and survive on the other side, it’s important to consider other types of credit financing to help you obtain the working capital you need.  We’re exploring many different options for our clients.  One of those options is Asset-Based Lending, specifically, .

This is an excellent option for a business with valuable and well-performing Accounts Receivable to obtain quick sources of working capital to assist through this crisis.  The Factor Financing Lender works hand in hand with you and your business team to create a system where your customers invoices are assigned to the Lender.

For a very reasonable cost, you can obtain immediate access to the cash value of that invoice practically as soon as you send it out to your customer.  This quick access to capital dramatically improves your Cash Flow situation, helping to make you stronger on a daily basis to survive and thrive through this crisis.

Factor Financing Lenders vary in their criteria for the types of businesses and types of receivables they prefer.  We’ve assembled a healthy matrix of different types of Factor Financing Lenders to provide you with an array of financing options for your business to help you through the COVID-19 pandemic.

Curious? We are here to answer your questions about this type of financing. Email us at Curious@AuroraConsulting.biz.

 

Plan Prepare Prosper with a Business Plan

There are business owners that are still focused on how they can conduct business today based on the old normal. We’re here to say that you might as well flush that notion down the toilet. It’s a sad reality indeed. We’re not saying that a business cannot be prosperous in today’s climate. No! We are merely saying that there are conditions that must be considered on how you can market your business. We need to reconcile in our minds that this is a “new normal” paradigm.

It’s an apocalypse of sorts. The old normal isn’t coming back anytime soon, if at all.

In our experience as financing brokers we discovered that with the more than two dozen businesses we spoke to ranging in revenue from $60,000 a year to $6,000,000 a year, not one of them had a written business plan. And that was during normal times! It’s a bit crazy that people run their business without a written business plan. It is an essential document for your business. It’s a working, living, breathing document of your business.

And here we are now during the pandemic paradigm.

Now more than ever you need a business plan if you plan to go back to business or keep your business alive. A business plan is a written guide book, that not only helps you to survive this crisis, but also prepares you for new, unexpected challenges as they arise. Those challenges are coming! And those challenges are unknown! The consequences of those challenges are uncertain.

Too many business owners have seen how, in this pandemic environment, a sudden challenge can arise in an hour, a day, a week, a month. And they’re not prepared to deal with that challenge. Even if they had a business plan that they created during normal times, that business plan is mostly useless if not completely useless under this new paradigm, under this new normal.

We are promoting the idea that you need to create a written business plan right now that helps you to survive and helps you to face every unknown challenge that could come your way.

Contact us at Curious@AuroraConsulting.biz to discuss how you can plan, prepare and prospect during this pandemic.

Who’s Not Afraid to Say “I Don’t Know”?

Who else is an avid fan of Warren Buffett? The “Oracle of Utah” presided this weekend over the annual—virtual—Shareholders meeting for Berkshire Hathaway. Mr. Buffett was a stout, granite-like, believer in the recovery of the American economy after the crash of 2008. This time, not so much.

Much of his ideas, though overall optimistic, were tempered with uncertainty for the future of the American economy in particular and the Global economy as a whole. “Nothing can basically stop America” and “You can bet on America” are two optimistic quotes in an article about the Berkshire Hathaway meeting and Mr. Buffett in today’s NYTimes.com. But he tempered much of his positivity with more than a few “I don’t knows” when queried by the audience and journalists on the uncertain future of a continuing COVID-19 world.

Not that he was necessarily espousing “doom and gloom” as much as he was following a traditional line of thinking for himself and his company: Cautious optimism. Warren Buffett would rather lose out on an opportunity for an investment than to have acted to quickly, without the due consideration such a decision deserves. You can clearly see this as a bedrock concept of his success as a stock investor. He’s not sure which way the economy is headed, but he’s hoping for the best.

Warren Buffett is a student of economic history, and he presented his analysis at the meeting of the American economy from 1789, up to and past The Great Depression. He pointed out that the stock market took 22 years to recover to its highs between 1929 and 1951. His realistic assessments are important for us at Aurora Consulting as we determine ways to continue our Brokerage and find working capital for businesses.

We’ve spent the past six weeks working feverishly—including more than a few all-nighters—to help our clients obtain SBA Disaster Relief financing, in particular the EIDL program and PPP loans. We’re happy to report we’ve been quite successful with that project. But now we find ourselves casting about to see what our horizon looks like, and how to continue helping our clients.

To take two of Mr. Buffett’s phrases into our context seems appropriate today. “I don’t know” is the first. We have some good ideas and you will see those concepts unfolding in the coming days and weeks. Already this week we’ve scheduled conferences with different types of Lenders as part of our deep-dive into lending availability for our clients. We’ve also created basic strategies for Aurora Consulting on the best ways to move forward and help Small Business during the ongoing pandemic and its attendant economic challenges.

The second of Mr. Buffett’s quotes, and the inspiration for this blog, seems most appropriate to what we do here at Aurora Consulting, we find working capital from Banks and Lenders for our Small Business clients. Warren Buffett, as quoted in today’s NYTimes.com: “This is a very good time to borrow money, which means it may not be such a great time to lend money.” Realistic words, a realistic assessment from The Oracle of Utah.

Here at Aurora Consulting, we’re going to embed the Oracle’s words into our strategic thinking so as to best serve our Small Business Clients. If you want to know more about how we help business owners, please email Curious@AuroraConsulting.biz.