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.

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.

SBA Reconsideration Team URGENT UPDATE

SBA now has a way to upload required documents for your Reconsideration request directly to the SBA website. Previously (as recently as the morning of October 21, 2020!), the SBA Reconsideration Team sent you an email with the list of documents. You would then email the documents and SBA could take up to ten days to upload your documents to your file.

With this new method, YOU upload the documents!

Remember: You can still apply for an SBA Economic Injury Disaster Loan (EIDL) through December 31st.

IF your loan was declined or you did not receive sufficient funds to help you through this crisis you can request a Reconsideration from SBA.

See our video on How To Request a Reconsideration, including How To Write an SBA Reconsideration letter.

Our client received the email and within an hour we had uploaded the requested documents. Notice in the email: the STATUS of your….has been UPDATED.

In this case, the loan had previously been declined by SBA.

We requested a Reconsideration on October 17th; SBA responded with LIGHT SPEED on October 21st.

In the screen shot of the SBA portal website, you can see the new TAB “UPLOAD DOCUMENTS.”

If we haven’t viewed dozens of these SBA portals we wouldn’t realize what this meant as there is no other guidance on the SBA website or by email. Unfortunately, we all have to figure it out on our own.

Here at Aurora Consulting, we are committed to providing accurate and timely information about the SBA Disaster Loan programs. Stay safe! Stay well!

7 Tips to Submit Documents for Your EIDL Application

Grab these 7 tips to better prepare you on how to submit you documents to the SBA. You have to guide SBA to an approval. We’ve seen that they don’t try to make it work if something is confusing or sloppy; they easily decline.

What To Do If Your EIDL Loan Was Declined For CREDIT?

We’ve had many interactions and exchanges with the SBA about clients whose EIDL loan was declined due to a low credit score.

What can you do if that happens? Our EIDL Blueprint is a guide for you to work through this process.

1. Ask for a Reconsideration. Often EIDL loans are automatically rejected by the computerized underwriting system. What you want is a human being to review your loan request. You get to a human by requesting a Reconsideration.

2. Prepare a Reconsideration letter. At the top of the letter include your name, company name, address, EIN (or SSN if you’re Self-Employed), and EIDL Loan number. REMEMBER: all your information must exactly match the information you inputted on the SBA website when you applied for the EIDL loan. If your name was not included as an owner or Authorized Preparer, then you cannot write the letter; only names that were inputted on the original EIDL application.

3. In the body of the letter, keep it short and concise. Request a reconsideration due to your credit explanation. Write a brief credit explanation in the next paragraph. For example, something like this, “The late payments on my credit report and the resulting lower credit score were directly a result of the COVID-19 pandemic. My income/revenue dropped dramatically and I could not pay my bills on time.”

4. Keep your credit explanation short. If you have any documentation that supports the explanation, be sure to include PDFs of that documentation with your request.

5. Sign and date the letter.

6. Send your request to pdcrecons@sba.gov.

Our advice is this: no matter how bad you think your credit is, do not lose hope. Request a reconsideration no matter what!

Can I Apply For Another EIDL LOAN?

We received this question on Twitter:
I already received an EIDL loan. Am I eligible to apply for another?

The History of the Economic Injury Disaster Loan (EIDL) PROGRAM was that it was established back in 1953. It was created for individual disasters declared in any one of the United States causing homeowners and business owners an economic injury .

For example, this month it may be a tornado in Ohio county. Two weeks from now it could be a flood in the state of Mississippi.

COVID-19 created its own unique disaster. The Small Business Administration (SBA) responded by offering an EIDL loan for the pandemic. We make this distinction because we want to answer this question accurately.

The fact is, you can apply for  multiple EIDL loans, according to the SBA as long as they are for different disasters that have affected you.

In other words, if you received a COVID-19 EIDL loan in April, but your county was affected by a tornado in September (and it’s declared a disaster area), then you can apply for another EIDL for the tornado disaster. We confirmed this with the Small Business Administration (SBA).

You cannot apply for more than one EIDL LOAN for the same disaster. However, the SBA has a provision for up to 24 months (or two years after the disaster), for you to request additional funding above the amount of your original EIDL loan.

Let us know if this is helpful and what other disaster financing questions you may have.

How to Apply for an EIDL Loan

An updated sample of the EIDL application with Trevor’s commentary on what changes the SBA has implemented when underwriting your EIDL loan.

COVID-19 Recommendations For Your Business Survival

We were recently invited to attend a professional event as guest speakers. At first we thought we would attend via video conferencing. We then discovered that the event organizers expected us to physically visit their office to participate in the event. This raised serious concerns for us, especially since Trevor was ill with COVID-19 over the Summer.  We sent an email to the event organizers expressing concerns and asking a series of questions about their safety protocols.

As soon as we hit the “SEND” button, we realized they could have been more proactive in providing information to us FIRST about the safety protocols. Thus was inspired the following advice to our business owners. We hope you will find this useful. We welcome comments about this advice.

DO MORE FOR YOUR CUSTOMERS WITH YOUR COVID-19 SAFETY PROTOCOLS AND MESSAGING

The time is right for you to help your customers with concerns about visiting your business. Step up your safety protocols and your message about those protocols. Many more Americans are aligned with recommended safety guidelines including mask-wearing and social distancing. As a business trying to survive through this pandemic, get the word out to more people that you understand their concerns.

With the ongoing COVID-19 crisis your customers have concerns about meetings outside of their home or office. Be proactive in your understanding of their concerns. Apart from any local, State or Federally mandated safety protocols, determine how you can add to those fundamentals. If you’re not required to provide free masks, do it anyway. If you’re required to have a certain size of plexiglass divider, install larger dividers. If you’re required to have a specified number of hand sanitizer stations, add more.

You can’t really go “over the top” during this pandemic; the more you do to acknowledge the concerns of your customers about their own safety and that of your employees, the better the likelihood of increasing your customer attendance.

Once you’ve done that, then you need to “go tell it on the mountain” and broadcast the level of protections you’ve implemented.

Get the word out through every channel possible. Your messaging could include a phrase like this: “We want to provide you with assurances of safety protocols before you visit our store/restaurant/office. We want you to feel safe during these uncertain times.”

With messaging like this, you are both acknowledging the “pain points” that many people are feeling and you are increasing the numbers of customers likely to visit. It’s not enough to attract customers who already feel more comfortable going out and about during the pandemic with less anxiety; you need to pry the other, more anxious customers out of their protective environments.  Your message and your protocols will accomplish that goal.

Take a proactive stance that can only raise your customer’s confidence in your attempts to keep them safe. We have some suggestions for advance messaging before a customer visits your office/store/restaurant:

  1. Consider providing a list of the safety protocols you’ve implemented. On the list, note which ones are government recommended and which ones you’ve added for the extra level of caution.
  2. The next suggestion is a really difficult concept because you are acknowledging the customers’ concerns in a way that many businesses fail to do. Essentially, you’re going to remove some of the burden of safety precautions from the customer.

While it may seem that the following questionnaire might frighten away people, we believe the opposite to be true: you will actually attract more customers.

Understand that the vast majority of Americans are already worried about being infected with the COVID-19 virus. Ignoring that concern, assuming that everyone is taking precautions into their own hands or trusting a business with only minimal safety protocols is a fatal mistake for a business trying to survive the pandemic.

Become a “partner” with your customers by acknowledging their worries. Create a dialogue to demonstrate your intense interest in their safety and that of your employees.

We recommend that you include in your messaging these additional information points about your focus on the safety of your customers and employees:

  • Describe how many other people will be in attendance on the day of the event/meeting/reservation, including before and during your customer’s visit.
  • Provide detailed descriptions of the protocols in place currently at your business.
  • Provide a diagram of the business space demonstrating the measurements in relation to your customer’s ability to maintain social distancing. Note the plexiglass and hand sanitizer locations on the diagram.
  • We recommend you send a questionnaire to customers either before they attend a meeting at your office or visit your store/restaurant. Make this questionnaire part of your safety protocols in advance of the customer’s visit.

We know that many businesses are providing a short form of this questionnaire only at the moment of entry. In our opinion, while this is compliant with recommended guidelines, it doesn’t do enough to soothe the worries of many more people. And you want to attract as many customers as possible to survive this pandemic.

We’ve set up a minimal questionnaire. You’re welcome to copy this and use it along with your local, State or Federally-mandated questionnaires:

Please REPLY to this email with your answers to the following questions so that we can assure your safety of you and the safety of our other customers:

  • What is your personal opinion on mask-wearing requirements? 
  • Do you wear masks constantly, occasionally, rarely, or never?
  • Have you been diagnosed with COVID-19 or been in proximity recently with someone diagnosed with the virus?
  • Have you attended a social or professional event with more than six people in the last 30 days?

We recommend you provide this questionnaire, along with the list of safety protocols at the moment a customer confirms attendance at a meeting or even when they make a reservation at your restaurant. We know that many business owners may be fearful that such communications may actually scare customers away. Frankly, we cannot imagine how your interest in clear communications and a dedication to customer/employee safety can be more frightening than the actual COVID-19 virus!

Remember that you want to attract the customers who are taking extreme precautions. They may even be the customers reluctant to venture out of their homes.

Wishing you the best during these difficult times! Stay safe, stay well.

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.

Download our EBOOK on how to rebuild your credit. 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.