The Second Round PPP loan and the Targeted EIDL Advance both require businesses to prove their revenue reduced in 2020 from 2019 levels. But many businesses created a smart, creative “Pandemic Pivot” and their revenues are either the same as 2019 or maybe higher. Thus, they are disqualified!
We’re going to see a lot of folks have this problem. Frankly, we’re mad angry at the entire “25% and 30% reduction in revenue” required under the Second PPP and this targeted advance. It was a political compromise for the morons in government who didn’t want to step up and provide proper assistance to American Small Business Owners.
Why should you, or any other Small Business Owner be disqualified from a much-needed program simply because you were smart enough and creative enough to “pivot?”
That doesn’t take away the fact that COVID is ONGOING and the harm to your business—with or without a pivot—is ongoing.
It’s so ridiculous. And, yes, we’ve dedicated this to today’s “Trevor Rant Thursday!”
PPP Application: Who Underwrites The Loan Amount? THE BUSINESS OWNER DOES —> NOT THE BANK!
FYI: the banks, the loan officers, they are NOT supposed to re-underwrite your PPP loan application! They are simply supposed to verify you have submitted all pertinent documentation. Period. This is a common misconception!
The PPP program is a “self-certification” program, including calculating the math to arrive at the loan amount on the application.
In the SUBJECT LINE put: “Reconsideration: EIDL #XXXXXXXX
In the body of the email state simply:
“I hereby request a Reconsideration of my EIDL Loan #XXXXX. Please find attached the following documents:”
(LIST YOUR DOCUMENTS)
Clear, color scan of front and back of Driver’s License
Your Reconsideration letter should be SUPER SIMPLE. Don’t overload the Loan Officer with details of your struggle.
Keep your explanation to a few concise sentences, such as:
“My business was a new enterprise. We were beginning to produce and sell product when COVID-19 caused a severe economic injury. We have pivoted our Business Plan to adapt to the challenging circumstances of the pandemic (see attached Business Plan Summary and Revenue Projection). We need assistance from the SBA EIDL program to help us to move forward and survive the pandemic. If we do not receive this assistance we will likely fail as a business. If we fail, our employees will be out of work and our business will no longer contribute to the fabric of the American economic community.”
CREDIT AUTHORIZATION wording: “I hereby authorize SBA to obtain an updated credit report for my EIDL Reconsideration.”
CREDIT EXPLANATION: Do not discuss your credit score. Simply address the challenges in life and/or business that affected your ability to pay credit accounts on time. For example: “In early 2019 I experienced severe financial crisis due to (DIVORCE/MEDICAL/JOB LOSS/ETC). I have worked to improve my credit.”
KEEP your explanation short, and concise. The Loan Officer will not “judge” you; they simply require an acknowledgment of your previous credit history problems.
Business Plan Summary: Keep it concise and explain the changes you made to adapt to the pandemic and how your business will succeed with these same challenges over the coming 12-24 months.
Business Revenue Projections: Broken down by Quarter with annual totals for the next 12 months.
Be sure to include on EACH explanation letter your full name, Business name, Business address, EIN and EIDL #.
Sign and date EACH document, including tax returns. WET signatures are preferred.
Next steps after submitting:
After 5 calendar days, call SBA to confirm receipt. At that time SBA Agent might give you feedback on status, but probably too soon.
Be sure to check SPAM folder as SBA emails often wind up there
Be patient with the process. Timelines for Reconsiderations can be all over the map: days, or weeks, or months. Patience and persistence are the key characteristics of success with SBA EIDL Reconsiderations.
I hope you find this information useful! If this process seems overly complicated or onerous, our Consulting program covers all aspects of Disaster Relief Financing, including Reconsiderations, and PPP loans, State and Local Grants and any other Stimulus programs to help a business to survive this horrible disaster.
The more folks we speak to about Disaster Financing, both in online forums and in our free phone consultations, the more HORROR STORIES we’re hearing about financing “professionals” who purport to do what we do with assisting Small Businesses with SBA Disaster loans.
There’s the “guy” who wanted 30% of the proceeds of a PPP loan. (ILLEGAL)
There’s the company that wanted to set up the business with a usurious, disgusting, despicable, practically-criminal Merchant Cash Advance (MCA) loan just so the client could pay the company’s upfront processing fee for the SBA loan.
There’s the company that took monies for the EIDL application, inputted incorrect information AND filed multiple applications for ONE company under different iterations (LLC, Sole Prop).
Same thing with some YouTubers who seek to build their audiences with “bait click” junk where they claim to have knowledge of the exact workings of the Second Stimulus Legislation. We saw that same garbage back in April before the CARES Act passed.
Please, please, please, BE CAREFUL. Here are a few considerations to help you in your decision making when it comes to exploring disaster financing options:
Check their online reputation. It’s so easy and free to read reviews! Make the time.
Read their website. If it looks like a “template” and looks like the 76,000 other financing company websites out there, then it may not be a company with long standing professional or ethical standards. They’ve had 11 months to build a quality website.
Beware of bold proclamations. Unless you can see with your own eyes that a professional or “expert” has documented experience successfully processing SBA Disaster Loans, then you must listen with some skepticism. HINT: “bait click” titles with their YouTube videos or BLOGs are dead giveaways.
You shouldn’t have to borrow money to pay an upfront fee to hire a professional. Ethical professionals will work with you to make payment arrangements. Why? Because they’re confident in the results they can deliver.
A note about fees. For EIDL Loans, SBA allows a professional to charge up to $2500. And, they can charge more than that by requesting approval from SBA and demonstrating that the value of their services are commensurate with the fee they charged. You can find this language online in SBA Form 159D.
Read their Consulting agreements. The language should be “plain English” and should describe EXACTLY the nature of their services and responsibilities. The agreement should clearly state the fees being charged. The agreement cannot GUARANTEE a result and the compensation cannot be dependent upon a loan approval. SBA requires this language.
Beware any financing professional who defends the MCA program. These loans lead to HORRIBLE HORROR STORIES for business owners. The terms are onerous, expensive, and the Lender gets paid before your business sees a penny of your income. WHAT? Yeah, that’s why with all these sharks circling in the waters, you must be extra careful to protect your business.
There are other financing products out there…difficult to obtain, yes…but there are alternatives to the MCA loans. Anyone defending these products “to the death” is someone to avoid doing business with, period. (Extra punctuation language presented to punctuate the point!)
A word (or two, or more) of advice from a financing professional of 30+ years: We strongly recommend, before you act out of desperation and anxiety, please take a moment, slow down for a moment and take care of how you handle your decision-making process when applying for the second PPP loan and any other Disaster loans. The money’s not going anywhere.
Back in April, we managed 25+ businesses for EIDL and PPP applications. We now have close to 100. At the time, when The CARES Act rolled out we waited before submitting applications. As a result, our clients received substantially more money than if we used the “math” and other guidelines in the first days of the roll out.
If you scroll any online groups specialized in disaster financing, you will see all the confusion among business owners about the program. There’s no clear guidance on the SBA website. There’s no clear guidance from Lenders/Banks no matter how good they relay their message.
We’ve had so many calls with one of our trusted lender resources about the placing of new PPP loans either with his bank or elsewhere. This is the professional who, last April, provided us with the final ACCURATE guidance on how to calculate PPP application numbers.
We like the Carpenter’s Rule: “Measure Twice, CUT Once.”
Take your time; take care with your applications. Trevor followed this rule for his 30+ year career as a Mortgage Banker and it helped him to literally make Dreams come true for First Time Buyers.
For our part, we haven’t submitted a single Forgiveness application yet for our clients because we’re waiting for the new Legislation to kick in which guides Forgiveness NOT to subtract the EIDL Grants from the Forgiveness amounts.
We encourage you all in the strongest, most honorable and passionate and sympathetic terms possible: SLOW DOWN. Take your time and apply when you have all the facts.
Here we outline several fundamental concepts you can follow that helped Trevor to successfully submit hundreds of approved mortgage applications. Trevor was a Mortgage Loan Officer for 30+ years; we continue to use these principles now to assist Small Business Owners like YOU to get SBA and other Disaster financing:
📌 ALWAYS Apply. Don’t “disqualify” yourself.
📌 Don’t leave anything blank. When something doesn’t apply to you on the application form write “N/A”. If application requests a numerical value and it’s a ZERO then enter “0”.
📌 Use the last four digits of account numbers for credit accounts. The Loan Officer will see the credit accounts on your credit report. Putting the last four digits helps match your application information with the credit report. In other words, don’t enter “FirstBank VISA”
📌 Enter full and accurate account numbers for each bank account in the assets section of an application. Whenever possible, enter type of account “checking” “savings” etc.
📌 The more complete an application, the better your chances of approval and the more efficient your process. TREVOR’S GOLDEN RULE ABOUT APPLICATIONS: Your Loan Application is the “roadmap” the “instruction manual” that guides the lending decision-makers about your qualifications.
📌 Review and revise your application for accuracy (including adding up the math and correcting spelling mistakes. Use the “Carpenter’s Rule” when you complete an application: “Measure twice, cut once.”.
📌 Match your personal and business information EXACTLY to supporting documents. If your business bank account is under the name “Trevor’s Handsome Dude Pool Service LLC” be sure that’s the same name that appears on your application documents. Same with tax returns and other supporting documents. SPELLING COUNTS.
📌 FRONT LOAD the application. Find out what documents are required and submit them with the initial application whenever possible. Make the Loan Officer’s job easier, you’ll have a more positive experience as a result.
📌 Documents submitted in a quality format. PDFs only: NO PHOTOS! Clear, legible scans. Always try to “label” documents such as “ABCBank JAN 2021 statement” or “Trevor Driver License” Again: when you make the processing staff and Loan Officer job easier, you get a better result.
📌 NEVER TAKE NO FOR AN ANSWER. Be tenacious, be politely persistent. If a Loan professional or Lender provides a negative response, ask “Why?” and “What can we do to move this application to a favorable position?” and “What other information can I provide that helps support a positive decision for my application?”
Small Business is the BACKBONE of the American economy. Know that, own that, don’t let them tell you “No.”
The money is there for you to get it; your business deserves it. Feel no shame about asking for assistance to help your Small Business survive this horrible COVID-19 disaster.
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.
SBA Failed the American Small Business owner during the COVID in the way it implemented the EIDL program guidelines as set forth in the CARES Act.
Under the CARES Act provisions for the Economic Injury Disaster Loan (EIDL), SBA was to provide a totally-forgivable Grant of $10,000 PER BUSINESS paid within 3 days of filing application for EIDL program online. There was never any requirement or provision of anything different from that simple language in the Legislation.
SBA subsequently and arbitrarily changed the Grant to a distribution of $1000 per employee, along with capping EIDL loans at $150k when they’re supposed to go up to $2M as per Congressional Legislation.
The $1000 per employee nonsense was exactly that, complete nonsense and a violation of The CARES Act and a capricious and arbitrary decision by SBA without direction or permission from Congress.
CONGRESS DECIDES HOW U.S. TAX DOLLARS ARE SPENT, NOT FEDERAL AGENCIES.
When taken to task in a Senate hearing, SBA Administrator Jovita Carranza and US Treasury Secretary Steven Mnuchin both replied like Ralph Kramden, “Hummina…hummina…hummina…” and meekly stated that they made these arbitrary decisions to change the program (and ignore Congressional mandate) because SBA was worried they would “run out of money”.
Imagine if the US Navy was in danger of running out of money? Would they stop sailing ships and flying fighters? NO. They would ask Congress for more money.
THAT is the most massive #FAIL on the part of SBA Administration (and Treasury, for their part) in not returning to Congress to request additional funding.
In making these decisions, SBA failed in its fiduciary duties to the American Small Business owner. FYI: In the currently proposed Second Stimulus Legislation, Congress made sure to hold SBA accountable by requiring definitive reporting deadlines that SBA must return to Congress to report on progress of the funding of the various programs.
We strongly urge EVERYONE to stop watching all the alleged YouTube experts expounding on the exact rules of the new Stimulus. When this is actually signed into LAW, SBA still has to create the RULES. Until SBA creates the RULES, NO ONE can say with any certainty what they are. Not me, not anyone. We can only interpret what we read. I read the Legislation several times. To Trevor’s practiced eye (30 years lending with Government programs), some language remains unclear and confusing.
Our interpretation—and that’s all it is—doesn’t mean a hill of beans until SBA MAKES THE RULES. Instead of watching YouTube “experts” watch kitten videos. It could prove to be a better use of your time.
How to Apply for an EIDL Loan
An updated sample of the EIDL application with Trevor's commentary on what changes the SBA has implemented when underwriting your EIDL loan.
Linda Rey manages the marketing for our business financing practice. She recently posted relevant information on Reddit about our recent experiences with EIDL loans, both new applications and the Reconsideration process. A troll responded with, “Old news.”
COVID-19 is ongoing with no definitive end point in sight.
“Old news” doesn’t describe the continuing inquiries we receive from anxious business owners. A quick scan of any relevant online forum about EIDL programs reveals the simple truth: business owners still struggle with EIDL loans they’ve obtained (utilization) and fighting for monies they need to survive.
The U.S. Congress and the Small Business Administration (The SBA) responded with amazing alacrity in the early days of this crisis to provide vital support to Americans and American businesses. Yes, there’s been tremendous chaos around those initiatives.
In our opinion, that chaos, specifically about EIDL program loans, arises from two sources.
First is the overwhelming number of requests. According to an SBA Press Release on October 28th, 2020, SBA has funded nearly 9 million loans worth $7 billion. Chaos or not, the SBA did an incredible job of helping American businesses with the two COVID-related loan programs, EIDL and Paycheck Protection Program (PPP).
Our second opinion about the chaotic state of SBA EIDL response focuses on the SBA’s internal operations mindset. We mentioned in our introduction the drastic difference between a natural disaster such as a tornado, flood or wildfire, and the COVID-19 disaster. This pandemic is like no other disaster ever experienced in American history. And yet, with all their heroics on the frontlines performed primarily by the amazing SBA agents, loan officers, and processing staff, the upper level SBA Administration applied standards more relevant to the traditional natural disaster phenomenon.
To this day, we are dumbfounded by the SBA’s Administration’s failure to radically adjust the thinking and ultimately guidelines and processes for the EIDL program.
As amazing as our Government’s response has been to the financial uncertainties of this pandemic, there is surely more assistance to come in the future. As of this writing there is no second stimulus package negotiated or finalized in Congress. It is our opinion this will change as the pandemic moves into the second year of human distress. With any future stimulus package there are sure to be improvements and revisions to existing SBA programs.
Presenting this information at this time, in our professional opinion, will help business owners understand the basics of the EIDL program in anticipation of just such changes. When you install a fire extinguisher in your house, you probably took a moment to read the directions, didn’t you? Hopefully, you’ll never need it, but a basic understanding of when and how to use the extinguisher will surely come in handy in the event of catastrophe.
SBA now has a way to upload required documents for your Reconsideration request directly to the SBA website. Previously (as recently as the morning of October 21, 2020!), the SBA Reconsideration Team sent you an email with the list of documents. You would then email the documents and SBA could take up to ten days to upload your documents to your file.
With this new method, YOU upload the documents!
Remember: You can still apply for an SBA Economic Injury Disaster Loan (EIDL) through December 31st.
IF your loan was declined or you did not receive sufficient funds to help you through this crisis you can request a Reconsideration from SBA.
Our client received the email and within an hour we had uploaded the requested documents. Notice in the email: the STATUS of your….has been UPDATED.
In this case, the loan had previously been declined by SBA.
We requested a Reconsideration on October 17th; SBA responded with LIGHT SPEED on October 21st.
In the screen shot of the SBA portal website, you can see the new TAB “UPLOAD DOCUMENTS.”
If we haven’t viewed dozens of these SBA portals we wouldn’t realize what this meant as there is no other guidance on the SBA website or by email. Unfortunately, we all have to figure it out on our own.
Here at Aurora Consulting, we are committed to providing accurate and timely information about the SBA Disaster Loan programs. Stay safe! Stay well!
7 Tips to Submit Documents for Your EIDL Application
Grab these 7 tips to better prepare you on how to submit you documents to the SBA. You have to guide SBA to an approval. We’ve seen that they don’t try to make it work if something is confusing or sloppy; they easily decline.
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.
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.
