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.
Lenders don’t actually like lending, and SBA can be useless thus leaving many business owners vulnerable to bad actors aka SHARKS circling the waters with expensive loans that will only cripple business owners with high interest rates and stringent terms!
Trevor grabbed his iPhone and recorded an almost psychotic rant after Linda Rey spoke with a Commercial Banker we’re hoping to add to our Lender Matrix. The Banker talked about how the underwriters have removed the passion from the process, which I understand.
We’re okay with that. We don’t really need an underwriter to be passionate. Business owners need financial professionals to havecommon sense, which has been removed from the process. There’s no common sense underwriting anymore, especially during the COVID-19 pandemic. Mind you, the banks are sitting on trillions in deposits!
Bottom line: If banks were actually lending money right now to small businesses to help support our economy, if banks were making smart decisions about how to interact with the ongoing COVID pandemic, then the MCA SHARKS would not be circling in the waters seeking to eat small businesses alive with high interest rate loans with horrible repayment terms.
There’s blood in the waters. The MCA loans, a loan that is based upon the credit card activity in your business for the last 3 to 6 months or 12 months, depending on the lender, and the interest rate is, uh, mind-blowingly high. And they take their money every time you swipe the Customer’s credit card. So it is the worst possible financing for a small business owner.
The problem is, it’s the only type of financing that’s out there. Those are the sharks. They’re swimming in the water. HEY BANKS! You need to step up. It comes from the top down. TOP DOWN! Banks: $2 trillion. WAKE UP! Smell the coffee. Figure out how you can make small business loans during the pandemic.
Use some COMMON SENSE and figure it out!
Assess your risk using a different model instead of sitting on all that cash while the SHARKS eat Small Businesses alive.
Business Financing Documents Checklist
Stop worrying about what's required when pursuing a business loan for your small business. This list will indicate what a lender, bank, SBA, etc. will want to know about you and your small business if you're looking for a business loan.
These are prudent documents that help tell your small business story. Without them, it's difficult for lenders to assess you as a risk when it comes to lending your small business money.
This is NOT SPECIFIC to the SBA EIDL loan.
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.
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.
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.
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.
Download our documents checklist so you’re properly prepared. You have to be better than the lender because they’re trained to say “NO THANK YOU”.
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.
When Linda Rey was building her Independent Insurance Agency, she had a mantra that goes back 20 years ago. We think it still applies: “There’s no immediate gratification in a long term Strategy.“
Different Solutions Cobbled Together.
When confronted with challenging circumstances for our clients to find a business loan, one of the creative solutions we lean towards is to bring together different financing solutions. What do we mean?
Maybe that number meets their original request, or maybe it only comes close, but maybe it gives the client sufficient capital to get started on a short term, “cobbled together” solution for our longer term financing strategy.
Our thinking is that it is better to start somewhere. Follow the yellow brick road.
What it is about us that allows us to cobble financing solutions together? No, we’re not talking about shoe repair! We’re Brokers and we work for the client, not the bank. That’s first and foremost.
Secondly, as a Broker, we have access to multiple products with different lenders.
An important consideration we’re mindful of when cobbling together the financing is to be mindful of the client’s longer term horizon. Depending on what’s on that horizon, there may be risks and challenges with certain types of short term solutions today, especially with something like seasoning.
When we talk about seasoning with cobbled-together-financing, we mean if you have a short term solution today that gets you over the hump and gets you started with your financing strategy, that short term solution may have to be seasoned for at least a year and showing on tax returns and other financial documents if you want to come in with a certain type of financing product on the other end of it.
So this is an important consideration because what solution we find today could affect your ability to access other finance products tomorrow.
We’ve discussed previously about how you should be preparing your financials with the thinking ahead of time that you may be securing financing. We think of ourselves as brokers but with a very long-term focus for our clients because we love business success stories.
Sometimes you have think short-term to achieve long-term goals. ~ Linda Rey
For example, we have a client who just purchased a commercial property recently with our assistance and our advice based upon cobbling together a short term solution on a long-term strategy.
This client did not have sufficient down payment to qualify for a commercial mortgage to purchase the commercial property. We referred that client to a colleague of ours who does residential mortgages. That colleague refinanced the client’s house and the client paid cash for the commercial property. Now we’re working on a smaller financing package to provide some working capital to decorate the new office space and do some much needed improvements and renovations on the property including a new roof. This is a good example of a successful cobble-together-financing solution.
In the longer-term, we’re going to to find a way to finance their commercial property to take out the short-term financing, and return the client’s primary residence back to a zero mortgage replacing everything with financing on the commercial property because tax wise, it’s a smarter move for the client’s business.
When you think something isn’t possible, call us or email us and make sure because you don’t want to wait too long for something that can be done RIGHT NOW.
