Frustrated with Calling the SBA

We know how frustrating it is to spend time and energy following up with the SBA on the status of Your EIDL loan or Reconsideration request!

We’re sharing our experiences from having worked on dozens of EIDL loans and our interactions with SBA Agents. We want to you to know you’re not alone in your frustration, but also to help you to understand how the system works.

1. WE LOVE SBA AGENTS! Every call we experience an SBA Agent who is very professional and eager to help business owners obtain the EIDL financing they need to survive this pandemic.

2. SBA Loan Officers are, to quote an SBA Agent, “Working 15 hour days” on loan requests and reconsideration requests.

3. Okay, once you understand the value of the intrepid SBA Agents and how enthusiastic and hard-working they are, let’s discuss the frustrations of follow up.

4. We did a video on “How To Speak With An SBA Agent” we recommend you watch that for tips on how to make your follow up call.

5. Next, know that SBA Agents don’t always have a complete picture on your loan status. Their system has notes about your file’s progress with “Codes.” We don’t know what those codes are, but let’s hypothesize that a typical code could be something like this: “9837: IRS Form received” or “9822: Email sent to Applicant”.

Trevor has seen coding like this in his previous career as a Mortgage Banker. It’s an efficient way for a system to track the progress of a file.We’ve spoken to a couple of Agents who told us they don’t know what some of the Codes mean when a file is in the Reconsideration system.

6. Apparently, the Reconsideration Team works like a “Black-Ops” enterprise. SBA Agents can’t speak with them and their Codes can’t be deciphered by the SBA Agent you call for a status.

7. Beware of general statements made by an SBA Agent such as “Reconsideration processing times are 5-6 weeks.” Another Agent told us that is not true; she’s seen Reconsiderations take substantially longer. She said the other Agent should never have made that statement. Moral of the story: Take anything an SBA Agent says on general matters with a grain of salt.

8. Don’t think you’re going to call and get very clear guidance. The SBA is STILL overwhelmed with the number of new and Reconsideration requests. There’s a lot of moving parts, a lot of confusion, and long waiting times.

9. Remain consistently vigilant, and always polite. Check in regularly on your file. You won’t always get a definitive answer, but once in a while you might discover the SBA sent you an email that you didn’t know they sent! We’ve seen that happen…the email was sitting in the client’s spam folder. Other times, no such email was received. Moving parts. Confusion. Not quite controlled chaos.

10. Patience is a virtue. We know you need this money to help you survive this pandemic. We know the SBA is working diligently. We also know that sometimes some folks in an organization (Bank, SBA, etc.) get a file and it sits there waiting its turn because that person in the organization is overwhelmed, confused, slow, or, maybe, just maybe, even lazy. Think of the real world and how folks work in your business; the SBA is no different.

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 [email protected]

Tough Questions from Lenders

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

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

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

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

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

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

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”.

Subscribe to our Financing Fodder playlist on Youtube.

Download “Homework”! You’ll thank us later!

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.

The Dreadful Disorganized Document Disaster

Our resident Chief Financing Rock Star, Trevor Curran, was a Mortgage Banker for 30 years. His specialty was helping first time homebuyers with low down payments to achieve the American Dream of Home Ownership. From the early days, with no computers, no internet, no email nor a beeper on his belt—until the day of his retirement in 2018, a mortgage loan application was all about the paper. Documents to support the application needed to be submitted, reviewed, dissected, parsed, and collated. Trevor’s clients submitted their documents in many and varied ways, including coffee-stained tax returns, crumpled paystubs pulled out of an old wallet, and badly-scanned PDFs. Considerable time was spent by Trevor and his loan processing team to put these documents into a manner acceptable for review by an Underwriter. And of course there was the pushback from clients. “Why do you need that (document)?” “I can’t find my tax return.” “The dog ate my homework.” Oh, wait, wrong story. Trevor’s response, time and time again, including in the early days when he would literally drive to the clients’ home, workplace, a McDonald’s parking lot, or the real estate office, to pickup their required documents, was, “We need these documents because the bank requires it since you’re asking the bank to lend you several hundred thousand dollars.” This obvious message was delivered in a kind and patient but firm manner. Still, it always seemed incredible, time and time again, how people could be so cavalier about their loan application requirements. “Don’t they want the house?” he would often ponder in the moments of extreme frustration. Now, as the primary processor for Aurora Consulting, Trevor’s manages the document flow and the loan applications for our business clients. When we launched this business we remember discussing how this document issue is going to be so much better because we’re dealing with serious business people. Unfortunately, we were mistaken. Especially over the past eight weeks as we have assisted over 30 businesses to apply for and receive Government Disaster Relief financing, the poor quality of document management is mind-blowing. Especially at a time like this, when the desperation of keeping a business alive requires this emergency infusion of cash. You’d think business owners and their representatives (CPA’s, mostly) would be sharper than ever to get documents submitted in an organized and prompt fashion. Again, mistaken. Moral of the story for anyone thinking they want to ask a Bank or Lender for money—whether you’re buying a house or financing a business—it’s all about the paper. Organize your documents, submit them in a clean, efficient manner, and submit them promptly. Rant over. Send us a message with how you’ve successfully managed your team to understand your high level of standard when it comes to managing your documents.

Download our Documents checklist

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

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

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

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

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

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

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

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

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

 

5 Mistakes Business Owners Make

Let’s get it out of the way right now. We say 5 mistakes, but there are more. Don’t shoot the messenger. Part of the reason we post our blogs & vlogs is to raise awareness that financing doesn’t have to be as difficult. Don’t get us wrong, it can be a long process, but you have more control than you think.

These are the top 5 mistakes we’ve experienced with business owners when they are seeking financing.

1. Thinking the Bank knows everything about you.  You have all, or most, of your accounts with your local bank, including your operating account, savings, personal account, maybe even merchant services & payroll. It’s easier to bank in one place.  You think the bank maintains a detailed file on your financials, that they know how much revenue passes through your accounts every month.  This would be an incorrect assumption. The bank will still ask you for your full set of financial statements and much, much more.

2. Old Financials.  A business plan that’s five years old won’t fly. If you’re updating your Accounts Receivable aging report or your Profit and Loss statement on an infrequent basis, you will have some work to do and this most certainly will delay the process. You control the timeline when you apply for credit financing. Having updated documents at the ready lets you submit them with all speed and alacrity to move your financing request along.

3. Incomplete Financials.  No business plan? Many businesses don’t have one whether it’s a new business or an existing business. There are many, MANY financial forms that a lender will require. It will be your responsibility to provide complete, comprehensive information that many businesses, unfortunately, do not have easily accessible. Lender’s will have a debt schedule form and if this is inaccurate, it will slow down the process and delay your approval.

4. Too Busy, Too Rushed, Too Overwhelmed…Too Late. Bad decision-making often arises from lack of time and a local preparation. However, it happens that then you’re faced with a sudden, unexpected need for working capital. This sounds like opportunity, but if you’ve not been minding the store in the meantime, you will be faced with a high probability that you could be without options or very few options if any at all.

Bad decision-making begets more bad decisions by way of choosing financing options that is super expensive and over priced such as Merchant Account Financing (Merchant Cash Advance – MCA), hard money, equity investors, refinancing a personal residence and/or hitting the credit cards. This leaves you vulnerable to a lack of income & profit taking away any joy in running your business. We bet that you didn’t get into business to be broke and stressed out.

5. Failure to Fight.  Your Banker wants to make the loan work for you, because they truly value your relationship with the Bank.  When you get bad news, don’t take it lying down.  Dig in with your Banker—in person whenever possible—and get to the solution-seeking.  What do you need to do to flip this decision from a negative to a positive?

We have seen good people who own good businesses make bad decisions. We are truly fortunate and grateful that we have forged many valuable relationships with Bankers & Lenders. They know that sometimes they can’t do the deal, but they value the relationship with their client. If the Bank doesn’t make a decision favorable to your business, that doesn’t mean you should make a subsequent bad decision.

The more proactive and prepared you are, the more options you will have.

The Deal Closes When It Closes

Trevor worked many years ago with a top producing loan officer at a mortgage Bank. This top-producer brought in a lot of business and Trevor was the new kid on the block climbing the ladder, building his business. In his travels, Trevor met a local real estate attorney who could potentially refer business. Trevor had been working with that attorney on a home purchase transaction. The attorney said, “Oh, no, that’s where you work? I’ll never do business with your company because so-and-so is a nightmare and your company is a nightmare.” That other top-producing loan officer had a terrible reputation. This loan officer had a bad habit of not responding to anybody’s phone calls inquiring asking, “What’s going on with the deal? When is it closing?”  He simply did not answer phone calls. This was in the days before email, the days of beepers and telephones and he simply did not respond to anyone. The attorney told Trevor, “I beep this guy all the time, he never calls me back. I guess your company is just slow to get things done that’s why he doesn’t respond. Why should I expect you’d be any different?” So when Trevor confronted his fellow loan officer about this complaint, his response was very laid back.  He said, “I have one philosophy. The deal closes when it closes.” WOW. He made Trevor and the entire company look bad. On the positive side of the story, he kind of wasn’t wrong because there is a process to getting a loan approved and closed. The fact that he was a terrible communicator is a different issue entirely; he never spent any time communicating to manage expectations. We did a video on managing expectations, emphasizing follow up. Sometimes the timeline to close can really be a bit much, and especially with how many people are involved in the loan process. We’re working now on a business acquisition deal, and the sellers were involved. They just could not get their head around what was needed, even after the loan was approved, and they knew the Lender was going to do this deal. Their responses to requests for documents through the entire process were, “Why this? Why that?”  Week after week, all they did was push back. The Seller’s  attitude was constantly to fight the process.  Then, when they’d actually submit a document at 10 a.m. in the morning, they’d follow up by sending an email at 1:30 in the afternoon, “So when are we closing?” This is not really understanding the loan process either. So, to take that “top-producer-bad-communicator’s” phrase and reconfigure it,  “The deal closes when it closes.” There is a real process to achieving the loan approval and getting to the closing. As  long as all parties are communicating and cooperating, it will close in a reasonable time, but it doesn’t mean it’s closing in 10 minutes.  Communication and cooperation, those are key elements. For our part, we maintain clear communications. As often as this particular seller was impatient, we still kept a clear head and kept our communications positive, responded accordingly.  Ultimately, we got what we wanted from the seller in the way of documents we needed. We did another video describing how the lender reviews everything. If you spend so much time asking, “Why?” And spending so much energy fighting the process when you could have gotten what was needed to expedite the process. With this particular seller it was constantly “When are we closing?” and, “Where’s my money?” We understand how financial professionals can get jaded. Someone like the former colleague in the industry can say to themselves, “Okay, I’m kind of exhausted with these calls.”  And they shut down because they know the deal will close when it closes. People can get upset about the process, but when all is said and done, if there’s clear communication, you have to understand the process and you have to be patient.

It’s Not Your Bankers Fault

How to Manage Your Credit Score Video Thumbnail
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If your credit score is low and your financing request isn’t approved,  it’s not the Banker’s fault when she delivers the bad news of a loan denial to you.

Your Banker wants to be your friend, your “go-to” financial resource to help you build your business.  But there are are areas out of the Banker’s control, not the least of which is your credit history and subsequent credit scores.

Certainly you should be aware of your credit score…with the caution that, as a consumer, you cannot access the true credit scores used in financial services-related decisions.  This score is otherwise known as the “FICO CLASSIC” and all the credit monitoring services in the world cannot provide you with access to this score.  Thus there can be wide variances between the scores you find online and the “true” score your Banker will pull when you apply for credit financing.  In our experience at Aurora Consulting, we’ve seen variances in either direction, positive and negative, as much as 100 points in the scores.

But if you have very low scores, chances are very good that you are aware of your credit history circumstances.  That is, scores less than 620, and certainly any scores that are in the 500’s.  Many consumers with scores at 620 and above, where they’re not hitting the high-700’s or even the 800’s, tend to believe they have “bad” credit. This is not always the case, and often that kind of score range, down to 620, will qualify for business credit financing.

But if you are fairly certain, even with the incorrect consumer-access scores, that you have credit circumstances that are pushing your scores down below 620, you need to be aware and to disclose that to your Banker.

And you should be specific with your Banker about those circumstances.  For example, “I’m currently delinquent on the mortgage on my other house,” or, “I have several small collection accounts from three years ago that I have not yet paid off.”  If you’re clear and honest with your Banker about your potential credit history, it helps to manage those expectations, both yours and hers, when presenting a financing request application.

At Aurora Consulting, our process with each client includes a credit report that we run at the very outset of our relationship with the client. Because we’re working on behalf of the client, we have a different perspective on the credit review process.  And we actually have successfully placed loans with credit scores in the 500’s.   The options in that range can be limited. But there are options.  And, like with your Banker, we find it very helpful when the client is clear with us upfront about concerns for their credit history and scores.

Finally, being aware of your credit status is important for you personally and professionally to be aware of how you are managing your money and your bill-paying as you grow your business. When the Banker denies a loan request due to low credit scores, the issue is the lack of awareness of this money-management, not the Bank’s lending protocols.

You can find out more about the “Myths Of Credit Repair” by downloading our free white paper.

WATCH OUR VIDEO HERE.