The Problem with Crowdsourced Knowledge

We believe crowdsourced knowledge can be useful for two reasons ONLY.

    1. Ascertaining general knowledge on a topic with which you’re unfamiliar.  An example is changing a tire on a car.  If you’ve never changed a tire on a car and you either ignore the instruction manual in the glove compartment or don’t have one (you can download it online in most cases), then crowd-sourcing other people’s experiences with changing tires can be useful to the extent that you’ll learn special tips or come to understand the general concepts: jack, bolts, tire pressure, etc.
    2. Obtaining referrals to experts.  After learning of other people’s experiences with changing a tire, you may decide there’s too much at stake—such as the car falling off the jack. For this reason, you may decide to not undertake the job yourself.  You seek out advice from expert providers of tire-changing services.

Both of these concepts are valuable, but should only be used as a starting point if you have absolutely no knowledge or experience of the task or information you’re researching.  Or, if the task is complicated and requires true expert knowledge of the subtleties and nuance of the information.

The starting point of using crowdsourced knowledge can become a “fork in the road” to move forward with the activity you’ve been researching.

You can choose to take the knowledge and seek out an instruction manual for the car you wish to change the tire on.  You can then do the work yourself, guided by the instructions created by an expert—in our example, the vehicle manufacturer.

Or you can choose to conduct additional research on the experts you’ve seen recommended:

    1. You might look up each expert’s online reviews through other platforms.
    2. You might seek out the expert’s professional credentials through government regulatory authorities or check out the professional biography of the expert.
    3. You might ask your trusted circle of friends, family and colleagues if they have used any of the recommended experts to obtain further information and enhance your research.

Using these additional activities, the crowdsourced research can lead you to find a high-quality expert in the area you’re researching.

But there’s a small alleyway off the side of the road where the “fork” in the road lies. We call that “shortcut alley” because too many people don’t want to take on the extra work necessary to find the best results for the information they seek.  Instead, they want the shortest way to solve their problem. 

They’ll take the crowdsourced information they’ve obtained at face value as the be-all and end-all of expertise.

They fail to use the crowdsourced knowledge solely as a starting point, and then do the extra work necessary to gather data and inform the ultimate decision with comprehensive research.

In our opinion, this is a disaster in the making more often than not.  Yes, the crowdsourced information can often be very useful, such as learning to add a dollop of butter to your oatmeal at breakfast.  But when it comes to more complicated topics, the crowdsourced expertise is anything but expert.

We learned this through the pandemic as we sought to provide free expert information to small business owners trying to navigate the United States Small Business Administration’s COVID-19 disaster loan program.  Often, we’d encounter business owners telling us that our information was wrong. They would challenge us with the information they’d crowdsourced.  Our pushback was to say that the experience of one person was unique to that person and that the loan program was too complicated to rely on the one experience of one business owner with their particular scenario.

We continue to encounter these crowdsourced-fake experts as many small businesses fail or continue to face challenges repaying these COVID-19 disaster loans.  The crowdsourced-fake experts would have people believe they can simply walk away from the loan, to either ignore the consequences or, worse, to go about their days thinking, “The government will never come after me.”

Because we rail against this terrible advice, we’re sometimes accused of being fear-mongers so we can sell our products and services.

While it’s true that we’re a small business and we have products to sell and services for hire to earn a living, we also give away volumes of free expert advice through our YouTube videos, free downloadable guides, and responses to video comments. Our expertise is derived from our respective careers in the financial services field, from the work we did during the pandemic, and from the ongoing work we do to assist small business owners with their interactions with the SBA post-pandemic.

Book a call CTA

In today’s New York Times, an article about a basketball player’s dream of owning a home in Canada provides probably the most succinct insight into the reasons why simply “crowdsourcing” your expert knowledge is a failed concept if you don’t do the additional work. This is a tale of the worst aspects of bad crowdsourced experience, and the shortcut mentality that led to a financial disaster.

In the article, the basketball player must vacate the house he purchased because nefarious characters continually show up at the house looking for the previous occupant.  The previous occupant is a person named Aiden Pleterski, a self-styled “crypto king” who declared bankruptcy in 2022, while owing 26.8 million Canadian dollars to more than 150 investment clients.

He’s under investigation for the massive financial fraud involving monies that he is alleged to have stolen from investors.

Pleterski had no professional or educational experience or expertise. In this quote from the article, you can see where Pleterski learned how to become a financial whiz: “Mr. Pleterski said he first became interested in cryptocurrency after using it to make purchases for video games and began trading it when he was still in high school. He started out with money from his family and his earnings as a part-time baseball umpire. His knowledge of trading and financial markets, he said, came from “YouTube videos, Google, quick Google searches.”

“The business, Mr. Pleterski said, operated through his personal bank accounts until December 2021, when he set up his company at the suggestion of a former landlord. His only record-keeping, he said, consisted of his texts and WhatsApp messages with customers. While Mr. Pleterski did create spreadsheets for a handful of customers who demanded them, he acknowledged that the investment return they showed was just “a general ballpark figure” he came up with after looking at his bank accounts.”

We understand that the nuances of some activities, such as interacting with a complicated program such as the SBA’s COVID-19 loan program can make the search for expert knowledge more challenging.  But we’ve too often heard from people—as recently as yesterday, in fact—how they wish they’d found us sooner.

The small business owners we spoke to yesterday are not “shortcut” people by any stretch of the imagination. They had a question during the pandemic about how to properly use the funds their business received from the COVID-19 EIDL program. They sought out expert advice and received a referral to an expert.  But that professional ultimately gave them bad advice, so bad in fact, their business might be in legal jeopardy should the US Government investigate the use of the funds and then discover the improper utilization.

Based on our conversation, we know these business owners were so desperate to get an answer to their question, that they failed to go to the next step of taking their crowdsourced referral to investigate further the background of the expert. They did not read online reviews of that expert’s professional services or acumen.  They did not research the expert’s professional credentials or professional biography.  They simply accepted the crowdsourced recommendation, contacted the expert, and followed his bad advice.

Too often the desperation to resolve a problem quickly can lead to taking shortcuts.

When it comes to your COVID-19 EIDL, there are no shortcuts. The program is complicated and there are substantial real consequences to making bad choices and bad decisions. Whether you need to make a simple change to your business or if you’re facing challenges in repaying the loan, take the time to thoroughly research and locate the expertise you need to make the best decisions possible.

If you don’t invest the time to thoroughly research, if you take a “shortcut” and accept the crowdsourced knowledge as the ultimate expertise, you may discover the car falling on top of you as you try to change the tire with the badly sourced fake expert advice.  

And it’s going to hurt. A lot.

buy our blueprint CTA

10 EIDL UPDATES

Visit our Videos on COVID-19 EIDL Updates

Our opinions are our own. For videos on EIDL Updates, visit our YouTube playlist.

1. SBA is definitely working faster on files. We’re seeing recent Reconsiderations getting a response in thirty days or less. The response typically requests additional documents; the response isn’t necessarily an approval.

2. Once documents are submitted. SBA’s typical dysfunction kicks in and there’s silence on the file, no status updates available, NO approvals, and, too often, DECLINATIONS.

3. DECLINATIONS. We’re seeing that SBA fails time and again to actually read documents submitted for the Reconsideration process, including failure to read SBA’s OWN specialized forms (SBA Form 3501 and 3502). Also a failure to thoroughly review tax returns.

4. DECLINATIONS II. There’s a spate of declines over the past several days. Feels like SBA is “clearing the decks” again and sweeping older files over the starboard bow.

5. OLDER Reconsiderations. It’s an absolute disgrace with the lack of activity on these files. When SBA actually works on the file, there are repetitive requests for the same documents, and failure to read the documents submitted and move the file forward.

6. Once a Loan Officer signs off.  When a file is marked for approval based on the loan officer’s review, there’s a secondary review level (including legal team as far as our understanding). This secondary review seems to take weeks and there’s no response or status update in the meantime.

7. Uploading documents to SBA portal.  This is a constant nightmare: documents do not register in the system or are marked as “incorrect” when they aren’t.

8. $2M Increase requests. So far, it’s easy to request; we’ve submitted several.

9. Funding problems. Once a file is approved and the primary “authorized signor” DocuSigns the Loan Agreement, there have been delays in receiving the funds. We solved the mystery yesterday when we discovered the SBA is emailing the Loan Agreements to ALL other owners with a 20% or greater ownership interest, but the emails often go to SPAM and the primary signor is UNAWARE of this because there’s no mention (or functionality) on the SBA portal.

10. INCREASE BACKLOG. SBA has NOT cleared the backlog. We still have dozens of Client increase requests languishing in the SBA system with NO activity since APRIL.

Grab it NOW

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.

How to Manage Distractions for Your SBA EIDL APPROVAL

Saturday afternoon, Trevor purchased a half gallon of 2% milk for his morning coffee. He then discovered the milk was bad. When he checked the date, he saw the container was already 8 days past its “sell-by” date when he purchased it, thus making today 10 days past due.

He returned to the market, grabbed another 2% half gallon only to discover that the date was also past due. Finally, he found one that’s good for another 8 days.

When Trevor went to the counter to tell the owner, he said, “I knew it. I should always stock the milk myself.  No matter how many times I tell them, they just don’t pay attention.”

He was referring to the two young men, probably teenagers, who work part-time for him. We remembered they were there the Saturday when Trevor went to the counter to pay for the first, bad, half gallon of milk. They sat off to the side and neither one had the sense to get up, come to the counter and ring Trevor out. The owner was busy at the ice cream window scooping out some of his excellent local creamery ice cream.  Trevor had to wait to pay for him to finish with his ice cream customer.

When he told Trevor about the lads not ‘paying attention’ to their work, we were reminded of the teenager we hired to split firewood on our property. We told the owner, “When they’re working here, you have to take their phones away.” Trevor went on to describe his observations of the wood-splitter at our house: “His Mom drove him up to our driveway with the wood splitter on a trailer attached to her car.  Then, later, I saw him split two pieces of wood, then take his phone out of his pocket, spend five minutes messaging, then split two pieces of wood, then the phone would come out of the pocket, and so on.”

Before you think we’re just old curmudgeons who disregard a teenagers’ work ethic, let’s describe some of the same behaviors we’ve discovered in our clients.

Thanks to COVID-19, our little financing practice morphed into assisting small business owners with the Federal Government’s disaster assistance from the U.S. Small Business Administration (SBA) known as Economic Injury Disaster Loans (EIDL). Working on an SBA loan application is, in the best of times, a daunting and complicated process. 

The paperwork is complicated and lengthy, and the bureaucracy is fraught with all kinds of systemic incompetence.  All of these features have been exponentially made worse by the overwhelming need for this program due to the pandemic.

Our clients run the gamut from “gig-worker” self-employed sole proprietors to owners of businesses that generate multi-millions in annual revenue; age ranges from 20-somethings to folks my age (60) and older.

Trevor was a mortgage loan officer for 30 years. He learned early on that the key to getting any loan application approved was paying attention to details, especially those that may appear to be inconsequential. He worked mostly on government mortgage loans in his career; which presented a solid preparation for working on these SBA government loans now. And the most important lesson, about those otherwise minor details, comes to bear every single day.

Most of our clients have applied for the SBA loan and have been declined. So our job is to review their documents and their applications and “fix” whatever was wrong that caused the declination in the first place. You may think these folks were all declined because they simply didn’t qualify; but that’s not how this program works, almost every applicant is eligible and qualified due to the fact the loan program is only about compensating the business for revenue lost due to the disaster—COVID-19.

We’ve discovered a terrifying aspect of our modern life: it seems everyone, of all ages, every generation, is distracted. Their distractions are causing real difficulty, personally and professionally. In almost every client file we work on, we see mistakes that range from their SBA application process to the mistakes made with their fundamental business documents or information.

Those mistakes, many of them fairly simple and functional, are causing these businesses to be delayed in getting an approved for vital this funding that, quite literally, will keep their business alive during the pandemic and beyond. When we discuss these errors with the clients, the responses too often point to that one disturbing word, again and again: distractions.

“I was in a hurry when I did the original application,” as an explanation why there are wild inaccuracies in their application when compared to their financial or other business documents.

Or, from the business owner who’s original business partner, absent from the business for ten years or more, recently walked into the bank and withdrew nearly $100,000 of the business’ money for himself because his name still appears on the business name and the bank account, even though our client doesn’t consider the man to be a partner at all.  Our client never took the time to visit his attorney and change the paperwork, or remove the partner’s name from the bank account. Why? Distracted with his other job, another business, his family, and, you name it.

That same local market owner had his problems with the SBA process too, notably, his inability to locate an important email from the SBA about his loan that we had submitted for him. We called him every few days to ask if he had received an email from SBA with his loan approval (all our other clients were receiving emails and I couldn’t figure out why he wasn’t). “No, nothing yet,” he’d say, to which we responded, “Did you check your SPAM folder?”

But he’s busy running a little country marketplace (with, apparently, useless employees who can’t even stack milk cartons with correct expiration dates), so it wasn’t until we got him on the phone late one afternoon when we knew the store would be quiet and we forced him to stop what he was doing and scroll through every single email, including SPAM.  And, there it was!  The SBA email from two months before, now long expired, with his loan approval.

Like the milk episode, this caused more work for us. His distractions of simply running his business kept him both from hiring competent employees (who were distracted in their own ways), training those employees, and taking the time necessary to attend to a vital funding that would dramatically have eased his economic suffering due to the COVID-19 pandemic lockdowns.

Trevor realized that he noticed this trend in the late years of his mortgage career, too. Folks who were requesting that Trevor’s bank lend them hundreds of thousands of dollars, were so distracted in their daily lives (they always had the excuse of being busy…and thus distracted.), they couldn’t find the time (or bandwidth) to pay attention enough to basic documents or questions needing to be answered to get their loans approved. This to buy their dream house.

Like the young men at the local market who are too distracted to pay attention to “sell-by” dates on the milk cartons, so many of us are distracted to the point of distress. You’re literally ruining your lives, either personally or professionally, or both, with your failure to recognize and control your distractions. These distractions are not solely the fault of our smartphones. Or even social media.  There are all kinds of static-inducing disruptions to our days.

Trevor, as a student of economics and history, he puts these distractions down to a single phenomenon, one that is (finally) getting more attention in the media. That phenomenon is directly related to money.  More specifically, earning money and the cost of living. We’ve watched this distressing trend grow from the early 1990’s, through the boom times and recession times, and especially after the global recession that resulted in 2010 from the mortgage meltdown.

People have been struggling to “catch up” with costs, and earn a decent basic living for decades; but that struggle received a new infusion of chaotic confusion after the global recession. The rich definitely got richer, none of the bankers or financing titans went to jail or paid any kind of price for causing this worldwide calamity, but the average working person today has paid, and continues to pay, the price for that more than decade old recession.

COVID-19 only exposed the brutal reality of this financial duress in the most blunt terms possible.

But, those of us who have struggled and continue to struggle, we fail to recognize this calamity. Instead, like bugs scattering when you lift a stone up, we simply go about our days, go about our business, go about “living” in a way that seems to us to be satisfactory.

Wake up.  Your distractions are killing you. You need to save your own life and you need to slow yourself down and you need to focus.

Take your pick of the things that are killing you, or will kill you, or your children: Climate change. COVID-19. Politics. Driving fast combined with distracted driving. And on and on.

We have three suggestions, or “rules” on actions you can take to reduce, and hopefully, eliminate, distractions from your life.

Rules to not be distracted:

  1. Take Care
  2. One At A Time
  3. There’s Plenty of Time

Take Care

We use this rule with our financing practice. Think of the old carpenter’s adage: “Measure twice, cut once.” That’s essentially what “Take Care” means. Whatever activity you’re undertaking, whether you’re stocking the milk cartons, preparing financial documents for your business or to buy a home, making decisions that could affect your or your children’s well-being, take the appropriate care with that process. Look at the solutions, the consequences, the pro’s and the con’s; look at the mechanism, about what it will take to accomplish whatever it is you’re doing or deciding on. Then, put all that good brain-power you just expended to work.

One At A Time

We refuse to waste time arguing, or reading about, whether or not multi-tasking is a good or bad thing. We prefer to think from the positive perspective: doing ONE thing, allocating time and energy to that one thing, and accomplishing that ONE thing, is a worthy enterprise. It works. Time and time and time again: when you’re focused on ONE thing, from spending time speaking to an elderly parent, or preparing your documents for your tax returns, or whatever task or mission you need to accomplish, large or small, when you do only the ONE thing at one time, not multiple things at the same time, your results are so much more gratifying and accurate.

This also saves time from having to go back and redo something again.

There’s Plenty of Time

We’re convinced that somehow we all have come to believe that time is running away before our very eyes and that if we don’t hurry up, we’ll miss out on something.

There’s this trend, apparently, among the younger folk, to take time for getting the most out of their young lives now. That’s why they don’t want to be trapped in jobs that are mind-sucking-soulless-energy-sapping endeavors to earn money and nothing more. A good meal with friends; rock-climbing; doing nothing for its own sake. These activities sound more like retirement, but in reverse because the people doing them are all young. It’s as if they believe they’ll run out of time.

We posit this concept: when you’re young is actually the BEST time to invest in yourself for your future, whether that’s education or earning, or any combination of the two.  Further, spend your time wisely. The time’s not running out; but YOUR time to create something good for yourself in your life is running out, because economics will catch up to you with bills you’ll have to pay, families you’ll have to clothe, house and feed, and energy that wanes as your years progress.

Embrace your life by all means; live for your moment. But do it in a way that is well-considered. Take into account that, short as all our lives are relative to the Universe at large, there’s actually plenty of time.

Distracted while writing this: We confess that, as we wrote this, we were distracted a few times. Maybe that’s part of the writing process, taking time to think, although some of the best writers in the world say you should lock yourself in a room alone with no distractions and do nothing but write. Hemingway started every one of his days that way: with no distractions and focused on his writing and we all know how that turned out for him.

We don’t believe we allow ourselves to be distracted in the ways that we see so many other people churning through their lives.  And, we can honestly say this: we have accomplished some fairly incredible things in our lives by following these three aforementioned rules. Focusing and refusing to be distracted.

We hope our little discourse didn’t distract you too much.

Break It Down

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.

Planning and Projections for Your EIDL Loan

The request for a business plan can pop up at any time. We saw this before and during COVID. 
SBA was asking many EIDL applicants for Business Plans and Revenue Projections. Frankly, this is something you should have AT ALL TIMES if you consider yourself a Small Business Owner, even if you’re a “gig economy” Schedule-C Sole Proprietor. You can’t truly measure your success without a plan.

When Trevor was a 100% commissioned Loan Officer at a Mortgage Banking company, he had a 22 page Business Plan with Revenue Projections, and he was an EMPLOYEE.

We put together a list of questions for our clients so we can prepare the necessary information for their SBA EIDL applications.

We’ve developed questions to assist in preparing a 2021 Business Plan Summary and Revenue Projection:
SBA recently is asking many EIDL applicants for Business Plans and Revenue Projections. Frankly, this is something you should have AT ALL TIMES if you consider yourself a Small Business Owner, even if you’re a “gig economy” Schedule-C Sole Proprietor. You can’t truly measure your success without a plan.

When Trevor was a 100% commissioned Loan Officer at a Mortgage Banking company, he had a 22 page Business Plan with Revenue Projections, and he was an EMPLOYEE.

We put together a list of questions for our clients so we can prepare the necessary information for their SBA EIDL applications.

We are happy to share it with you here. Wishing you all SUCCESS in everything you DO!

We’ve developed questions to assist in preparing a 2021 Business Plan Summary and Revenue Projection:

QUESTIONS

  • What actions did you take in MARCH 2020 to adjust or “pivot” your business to survive the COVID-19 pandemic?
  • How did those actions help: have you maintained a steady flow of business, did your business decline?
  • Are you continuing those actions into 2021?
  • Have you originated new business concepts to continue your business productivity into 2021?
  • If yes, what are these new concepts?
  • How will the EIDL program assist you to maintain the continuity of your business?
  • How will the EIDL program assist you to support the “pivot” concepts you’ve created?
  • IF you never created any “pivot” concepts, would the EIDL program assist you/encourage you to do that? How?

REVENUE

  • What is the percentage decline in 2020 to your Gross Revenue from 2019?
  • What is the percentage decline in 2020 to your NET INCOME from 2019?
  • If your net income is lower, is that due to the pandemic? If so, how?
  • Without EIDL assistance, what do you anticipate to be your Gross Revenue in 2021 for EACH QUARTER?
  • With EIDL assistance, what do you project to be your Gross Revenue in 2021 for EACH QUARTER?
  • Will you incur new, different expenses in 2021 than you’ve had in 2019?
  • If so, what specific expenses and how much in dollars?

If you want more information about untangling how a business plan works, especially for financing purposes, click below for our business plan outline guide.

If any of our videos or blogs have been helpful, useful and productive, please leave us a positive review on our GOOGLE PAGE. It helps other business owners seeking vital SBA information for their business, not to mention, it’s a kind exchange of information.

PROACTIVE & PREPARED   Get a simple, easy to follow guideline on what you can include in your business plan to keep you focused on growing your business.

Ambiguity and Uncertainty

Ambiguity and uncertainty are not words that Small Business owners embrace in their daily vocabulary. Even fishing professionals, sailing the chilly vastness of the North Atlantic in search of Cod, Haddock and Mackerel, don’t use those words. They set out on their fishing forays with a sense that they will find fish using their experience and knowledge, helped along by some modern technology.

Call the SBA with a question that requires a definitive answer, though, and you get an uncertain or ambiguous answer. Call multiple SBA representatives with the same question and get multiple answers.

Small Business owners have come to rely on the SBA during the COVID-19 pandemic to provide a vital financial lifeline to keep their businesses alive as they struggle with the various challenges of the pandemic disaster. When a Small Business owner asks questions, whether they’re general questions about the EIDL process, or specific questions about the Small Business’ EIDL application, they expect specific and hopefully detailed answers.

Question to the SBA: “Now that the loan will be declined for Reconsideration because the IRS hasn’t processed the tax return, how long does the applicant have to file another Reconsideration?”

I don’t even remember what the answer was because it was so vague and ambiguous.

“Good morning SBA, what is the current turnaround time, on average, for EIDL Reconsiderations?” or
“Hello SBA, if I file a Reconsideration request today, how soon can I expect that my file will be assigned to a Loan Officer at the Reconsideration team?”

The Small Business owner cannot get reasonable or certain answers to these questions.

Trevor worked in retail electronics in the 1980’s in customer service. When a customer brought a VCR or stereo system in for repair, he could provide the customer with a reasonable expectation for turnaround time for their repair. Even if they had to order parts for the device to repair it, they could know within a reasonable range of time, when those parts were due to arrive and when the technician could be expected to complete the repair.

They knew the repair intake process, the repair tech servicing queue, the quality control check process, and even when the product was on the truck for delivery back to the store for customer pickup. And this was with electronics repairs where anything could happen with the electronic device once it was on the repair bench and the tech tried to solve the repair problem.

Customers had a reasonable expectation to receive unambiguous information about the repair process.

“Hi there SBA! Can you please give me a status on my EIDL Reconsideration file?”
The Answer most often: “In process.”

What does that mean? Where in the process is the file? Has a Loan Officer reviewed the tax returns, read the transcripts from the IRS, etc.???

As a Mortgage Banker, Trevor knew every step of the way where the Applicant’s file was in the loan process: appraisal on order, appraisal received, verifications received, submitted to Underwriting, quality control review, clear for closing, and etcetera and etcetera.

While writing this blog, one of our clients for Reconsideration sent me a text message,
“This is like the old Heinze ketchup commercial, ‘Anticipation, it’s making me wait.’ Guessing no news is good news?”

When a Small Business owner begins their business day, they do so with a clear understanding of how their business operates, what they have to do to achieve their business goals, and their certainty in their methods for success. When they run up against the constant lack of clarity and certainty with their urgent EIDL financing requests at the SBA, their COVID crisis anxiety increases exponentially.

This is unacceptable.

The Small Business Administration, in its mission to advocate for Small Business, needs to do a spectacularly better job of providing clarity and specificity and to remove ambiguity and uncertainty from the process.

3 Confusing Errors with the SBA

1. Was your EIDL Loan Declined for “Unverifiable Information?”

We’ve seen the latest SBA reaction to new EIDL applications and EIDL Reconsiderations: They decline the loan due to unverifiable information. Based on conversations we’ve had with SBA personnel and documents we’ve submitted, this appears to be mostly the SBA’s way of preventing fraud on these loans by requesting additional levels of documentation, essentially to prove it’s a real and legitimate business and not a fake farm in Maine.

Your best course of action follows the advice we continually give: Be patient and persistent with the process. We know you’re desperate for the money and in our professional opinion, SBA is overreacting to fraud by making all the legitimate businesses jump through hoops to get this desperately needed funding.

Be prepared to submit the following:

  • 2019 tax return
  • Signed IRS 4506T
  • SBA Form 2202 Schedule of Liabilities
  • Driver’s License
  • VOIDED check

Be prepared for other possible verifiable information about your business such as:

  • Articles of Formation
  • Proof of filing your EIN with the IRS or DBA certificates or other registrations with your town, city, county or State
2. How to submit your Driver’s License to the SBA for your EIDL loan or Reconsideration

Since December, we’re seeing more and more that SBA Loan Officers are requesting an image of your Driver’s License by way of an actual smartphone photo that you snap and email directly to the Loan Officer. In other words, they won’t accept a PDF. As with our other video about “unverifiable information” this appears to be yet another level of fraud prevention on the part of SBA to confirm that you are a legitimate and real person.

3. Wet Signatures and your SBA EIDL Reconsideration

More and more since February, on the many Reconsiderations we’re working on, the SBA loan officers are requesting an ink or “wet” signature on forms and documents you submit. In other words, they’re not accepting electronic signatures. For the average Small Business Owner, this might not be much of a hassle, unless you don’t have access to a printer and scanner.

Many folks these days don’t. It’s certainly inconvenient for our process at Aurora Consulting since we’re busy assisting our clients on their Reconsiderations and preparing their documents and sending to them for electronic signatures so they can keep running their business to keep their business alive during the pandemic.

As we have always stated in our documents submission videos for the SBA Reconsiderations: Be sure you sign and date your forms and now, more than ever, sign with a pen, scan it and submit it.

Information keeps changing because procedures keep changing.

Tax Refund vs. Eligible Income

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!

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.