Business Owner vs SBA vs Congress

 

The United States Small Business Administration (SBA) is under tremendous pressure from two sides with the COVID-19 Economic Injury Disaster Loan (EIDL) program. Under the CARES Act of 2020, the loan program provided massive financial support to Small Businesses during the pandemic. 

Now, many of those loans are in default status. A default status can occur due to any number of reasons including a missed payment or three, a failure to make full payments, or a failure to make full payments, or the ultimate default: failure to make any payments at all by ignoring the debt obligation.

Play Video

On the one side is the Small Business Owner who seeks Hardship Accommodation to repay the COVID-19 EIDL due to continuing economic challenges as they manage their businesses in these post-pandemic times.

Then, there’s the powerful political pressure on the opposite side by the politicians.

We’ve seen in recent months how members of the United States Senate and the House of Representatives—Senators and Congresspeople—are thumping their chests for political talking points and demanding that SBA collect on every penny of COVID-19 EIDLs, including demanding SBA pursue collection activities against small businesses that defaulted on their loan payments.

This second aspect is probably the most brutal because these same politicians are often the same people pursuing sound bites of “Small Business is the backbone of the American economy.”  And yet…here we are.  They would prefer to beat the drums of debt collection to drive business owners into bankruptcy, to heap massive debts with penalties and interest upon their shoulders for years, or even decades to come, with nary a care about their literal constituents, the small business owners.

For our part, as SBA EIDL experts, we’ve seen all sides of this terrible situation.

As a result, we often defend the people working at SBA. We believe they are good people struggling to do their best to meet this huge task dumped on them by the politicians without the requisite support necessary for a mission of this magnitude.

A viewer of our YouTube channel commented in response to our more forgiving and understanding perspective of SBA, “Sorry folks, you’re wrong the SBA doesn’t care…”

We responded, “You’re attributing some nefarious quality of personality to a bureaucracy. That is, on the face of it, absurd.”

We’ve spoken to hundreds of SBA representatives and the majority truly do care about their constituents, the small business owner.

What you need to do is to blame the Congress of the United States for this debacle because the SBA is underfunded, overworked, and overwhelmed as an agency tasked with such a massive undertaking, both during and after the pandemic.

First, Congress required this tiny federal agency to manage the distribution of the huge tranche of pandemic relief funds to small businesses. As task for which SBA was ill-prepared and inexperienced.

Second, Congress is now beating the drum about collecting on the debts with no regard for either the small business owners facing economic challenges nor the SBA inexperience in collecting debts on such a huge scale.

The Congress has not reauthorized this federal agency in more than two decades. By comparison, in 2023, Congress reauthorized the Federal Aviation Administration, providing expanded regulatory authority and a pile of money to upgrade technology and hire air traffic controllers.

No such undertaking is in the works for the SBA.

We appreciate you as a follower of our channel, but, please, before you tell us we are “wrong,” try to take a moment and reflect on our expertise in this area, the expertise drawn from real-time experience that informs our advice, our guidebooks, our consulting services and our YouTube videos.

Sorry, but not sorry.

Fear-Mongering For Free

We’ve had people accuse us of trying to frighten business owners about the consequences of failing to comply with the terms of or failing to repay their COVID-19 EIDLs.

These folks, in our opinion, are getting their fake-expert-opinion-troll advice from a crowdsourced knowledge base. 

That’s where a bunch of people get together on a chat and discuss their thoughts, actions, and results, on any given topic, and in this case, it’s the COVID-19 SBA EIDL Program.

While those forums can be an excellent starting point on a journey to research and learn, one should discern that when it comes to a complicated topic, the crowdsourced knowledge base, taken as their only source of expertise, is a disaster in the making.  

Especially when it comes to the SBA and the COVID-19 EIDL program.

You have to take the information you gather from online forums and then seek out actual experts before you make final decisions on any given action. 

You’re not simply gathering other people’s opinions to decide if a pizza restaurant is up to the standards you expect because you’re a person who loves pizza and you want only the best pizza!

We learned how the SBA’s COVID-19 EIDL program works by working on hundreds of actual files, and speaking to hundreds of SBA Agents and thousands of Small Business Owners. 

Before COVID, we both worked in financial services. That’s where we get our expertise and our expert opinions due to prior experience with financial services processes and products.

Some folks interpret our approach as trying to frighten business owners to sell our products and services. 

There’s so much wrong with that. First, we’re trying to warn business owners that there are serious restrictions and important responsibilities they need to be mindful of. If ignored, there are consequences.

Second, are these people business owners? Logically, they must be because the COVID-19 EIDL program was for business owners to survive the lockdown during the first global pandemic in our lifetime.

If that’s the case, did they go into business to not make money? That’s absurd.

Our vocal efforts are to warn folks to not listen to bad crowdsourced advice which is to give up, walk away, and not pay the loans if their business is in trouble. 

With this cavalier approach, costly consequences are possible.

We don’t do this because we’re “hucksters” and “shills” based on the opinion of two people accusing us of this activity. 

We do this because we have business owners contacting us EVERY SINGLE DAY with their worries and anxieties. 

These folks can be worried about something very simple, such as changing the address of the business or spending the remainder of the EIDL funds. They seek sound, trustworthy guidance to know they won’t be in trouble with the SBA or the government.

During the pandemic, we heard from a couple of business owners who hired us or asked for our advice and they said, 

I don’t want to screw this up and get in trouble.

Trevor was a mortgage banker. He’s had similar experiences with trends in the mortgage business, whether it’s the rise of sub-prime mortgages, or people taking advantage of federal programs to save their homes when they didn’t need saving, and more. 

If you look back at his mortgage blog going back nearly twenty years, you’ll see he’s offering the same warnings about trends and bad advice.

Is it a bad thing that we care passionately about Small Business? So be it. We’re okay with that. We’ve met some incredible people along the way that we truly admire. 

However, our passion has given fuel to trolls and haters because sometimes our passion comes off as aggressive and arrogant. It’s because we know what needs to be done and we’ve seen the bad advice and costly mistakes as a result.

We created our comprehensive expert guidebook the Post-Closing EIDL Blueprint for those business owners who care about consequences and as a way to budget cash flow instead of costly consulting hours to get the job done. 

We created it because we KNEW these questions, these challenges, and these worries would come up.  We knew we would only be around to provide direct advice for a short time because we are building other businesses.

When we warn folks and it sounds like “danger,” it’s with the hope that people will hear our message to be careful with their responsibilities under the loan agreement and repayment. 

  • Do we value our expert backgrounds? Yes.
  • Do we feel that we deliver value? Yes.
  • Did we go into business to NOT earn a living. No!

We decided to sell our experience and processes that we know work. It’s no different than a marketing expert getting paid to share their experience and knowledge.

Take the information you gather from the crowd, coalesce that information into basic answers to your questions, and then seek out a professional expert to give you more information. 

If you take that course of action, you will dramatically improve the odds of making the best possible decision for you and your business.

When you’re done, treat yourself to a nice pizza, because…who doesn’t love PIZZA!!?

#SelfEmployed #Taxreturn #taxfiling #payrolltaxes #COVIDEIDL #EIDL #SBAEIDL #COVID19EIDL #DisasterLoan #EconomicInjuryLoan #EconomicInjuryDisaster Loan #Pandemic #Pizza  #SmallBusiness #Entrepreneurs #366Glitch #Glitch #SmallBusinessMistakes #Glitch366 #SmallBusiness #Entrepreneurs #USTreasury #DefaultedLoan #LoanDefault #EIDLDefault #DefaultedEIDL #default

Are LLCs Immune from COVID-19 EIDL Debt Collection?

 

We received the under-noted comment/questions on one of our YouTube videos. Both our video and this comment serve to demonstrate the continuing dysfunction of the United States Small Business Administration (SBA), especially with its terrible communications and procedures.

Question: Are you speaking on EIDL loans granted to LLCs? Isn’t the whole point of an LLC to limit liability? How can SBA go after anyone personally if the LLC entity that took out the loan is dead and no personal guarantee was made? I think it’s important to differentiate between these nuances in these discussions.

Our Response: Thank you for your most excellent observation!  You are absolutely correct on your two key points:

  1. The LLC should protect the “corporate veil” concept, and SBA acknowledged that fact in a written memo to Congress last autumn.  BUT…BUT…BUT…once these loans go to collection at the US Treasury and the IRS attempts to collect on the debts, will the IRS also honor the corporate veil?  Technically they should, but the purpose of our discussion in our videos is to warn people to expect the unexpected because this COVID-19 EIDL Collection process is new and developing literally day-by-day.
  2. Yes, you are correct there should be more clarity about these nuances, but there is NONE from SBA. ZERO. NADA. ZILCH. As for our part in these discussions, we are only observers attempting to assist Small Business Owners in understanding the possible consequences and ramifications of failing to pay their COVID-19 EIDLs, especially since our message is focused on countering the internet opinion trolls who would have everyone believe they can simply walk away from these loans with no consequences.

We started working with the COVID-19 EIDL program in March 2020 as the pandemic started to unfold.  From the outset, we discovered, as seasoned financial services professionals, how badly SBA communicated information about the COVID-19 EIDL program.

These failures in communication cover the breadth of platforms: SBA website, FAQs, legal documents, applications, even simple sentences embedded in SBA forms and website information.  Then there is the consistent failure of SBA to properly train and educate its representatives.  We have an old saying here at Aurora Consulting: “Ask the SAME question of 7 different SBA Agents, get 13 different answers.”

We’re seeing these terrible communications come to a chaotic climax with the many small businesses struggling to repay the COVID-19 EIDls.  Whether a business is attempting to repay the loan by requesting accommodation for reduced payments, or the simple exercise of setting up the initial payment profile on the SBA website, confusion rules the day.

In December of 2023 and so far this month, January of 2024, SBA appears to be “bulk” shipping defaulted COVID-19 EIDLs to US Treasury for collection actions.

Even loans where small business owners made payments have been shipped off for collection.

And, again, there is no communication from SBA.

Worse, if a loan has been sent to US Treasury and the small business owner wants to make a lump sum payment to bring the loan current, or, worse, if they have recently made the lump sum payment to SBA only to receive a notice from US Treasury for collection, when you call SBA they hew to a scripted standard line: “You will have to ask US Treasury.”

The failed communications extends to US Treasury. IF you can get a representative on the phone, you are told to contact SBA about making the payment to bring the loan current.

THIS is an absolute nightmare.  If the SBA were a commercial lender subject to the laws and regulations of federal banking codes, they would probably come under investigation by the Justice Department or State banking authorities for these egregious behaviors.

We will update small business owners as this situation unfolds with the real-time real-world experience we garner from working with small business owners and the SBA.

We offer a one-hour consulting call with our Resident Retired Loan Officer, Trevor, to help small business owners understand their situations and recommend next steps in their repayment or default strategies.

Forced to Take the COVID-19 EIDL


We received an inquiry from a Small Business Owner with a COVID-19 EIDL. Her (unedited) inquiry reads as follows: 

“I was forced when I feel under duress during Covid to accept a loan from the SBA that I did not want to be forced into simply because the workers I had were independent contractors versus employees. The nature of my business is most of the instructors will not be employees. They are independent contractors so we are in a bind. If I did not accept the loan, my business would have immediately collapsed, and I would have lost all of my students and the instructors as well. Do you offer assistance with this to avoid bankruptcy.”

We’re passionate in our commitment to supporting Small Business. That’s why we give away a lot of free expert information and advice. It’s why we offer a one-hour paid consultation call where you can speak directly with Trevor, pick his brain, gain some clarity, and, sometimes, he’ll call the SBA with you on the line to help with challenging situations or questions.

The business owner quoted above never followed up with us to book the one-hour paid consultation call. It’s a shame because we would have done two things to help. 

First, we would’ve explained the process of remediation on the repayment of the COVID-19 EIDL, with a focus on avoiding default and bankruptcy. Second, as we’ve seen in many of our calls, we would have provided some relief and in fact, other business owners have often said at the end of the call, “I feel so much calmer now.

Trevor was a Mortgage Banker for 30 years. He learned a long time ago how to explain complicated financial procedural concepts to Clients, and how to remove emotion from the process. But let’s address something in the quoted message above about being “forced into” accepting the SBA’s COVID-19 EIDL.

First and foremost, no one forced anyone to take those funds. The application process was 100% voluntary based on need. If you needed the support immediately or thought you might need it soon, the funds were there for you to request.

Next, it appears the business was not eligible for the Paycheck Protection Program (PPP) loan(s) due to the nature of the employment relationship between the business and its workforce. 

The business owner states that the instructors for the business are not employees, they are independent contractors. She states that “…the nature of my business is most of the instructors will not be employees.

Let’s review and discuss these concepts and challenges.

The SBA’s PPP loan became available through approved Lenders as a result of legislation included by Congress in the COVID CARES Act. The PPP provided a low-interest rate of 1%. If the PPP loan was issued prior to June 5, 2020, it would have a two-year repayment term. After June 5, 2020, the repayment term is five years.

The program provided for 100% Forgiveness of the loan, essentially making this a “grant” of sorts. The purpose of the program was to keep people paid as employees, not needing to request Unemployment benefits. 

For example, if your business was required to close to the public or to staff due to state-mandated pandemic lockdowns, the Congress of the United States wanted your business to continue to pay your employees their salaries as if the business was open.

The loan solved two problems. 

First, avoiding the government process of Unemployment benefits both in terms of cost to the government and access to receive those benefits by the unemployed workers. In other words, the employee would still get their regular paycheck, and not have to go through the worry and wait for an approval of the unemployment benefits.

Second, the business could maintain its staffing so that, once lockdowns were lifted, the business wouldn’t have to go out to find new employees and replace departed employees.

While we worked to help our clients obtain approvals for the SBA’s COVID-19 EIDL program as paid consultants/preparers, we provided a courtesy service to many of those clients to process their PPP loan applications. We were not permitted by law to charge a fee for assisting. We processed several dozen PPP loans.

One issue that kept coming up during our review of the eligibility of a client’s PPP application was this misunderstanding of employee versus independent contractor. When we asked the question, “How many F/T employees does the business employ?” we would get an answer, for example, “9 employees, not including me (the business owner).” 

When we reviewed the business tax returns, under the line for “Salaries/Wages” we’d often see that line item blank. That means no W2 employees. That means the “9 employees” are not actually employees; they’re independent contractors. 

And, sure enough, on the line of the tax return for “Contract labor” there would be a dollar amount entered.

We’d have to call the business owner to explain the difference of employment classification and the reason why the business was not eligible for the PPP loan. We explained how the independent contractors working for the business would need to apply for their own, individual PPP loans because they were essentially small businesses.

Many of the business owners pushed back on our assertions of the ineligibility for the PPP loan. “But they work for me” was a common response. Okay, well, by itself, that’s a violation of IRS and Department of Labor employee classification rules. Let’s set that aside for now. 

In that particular moment, we attempted to request PPP loan assistance, and it didn’t matter what the business owner thought about their relationship to the people who worked for the business. They were not employees, thus, no PPP loan.

The proceeds of the SBA’s COVID-19 EIDL could be used to pay employees. The program’s purpose is to provide the business with money to make up for revenue lost due to a disaster to be used to pay ordinary operating expenses.

This raises the question, “Can you use the COVID-19 EIDL funds to pay independent contractors working for the business?”  

If the funds were used to pay those contractors while the business was on lockdown, without the contractors actually doing any work, then the answer is most likely, “No, you cannot use the funds to pay independent contractors.”  

As previously mentioned, those independent contractors would have to apply for their own, individual PPP loans.

On the other hand, if the independent contractors were performing actual work services for the business at the time of the lockdown…and after…then, yes, the business could use the funds to pay those contractors as long as it matched previous operational standards of work and payment. 

Meaning, if your independent contractor provided, let’s say, 38 hours of billable work hours to your business before the pandemic, and continued to provide similar services during the pandemic, then, yes, you could pay those contractors as an “ordinary operating expense.”

As we’ve discussed so far, many small business owners had challenges with this misclassification of their working staff.  And those challenges became a horror-movie-level monster when these businesses were confronted with their need for the PPP loans, and the use of the EIDL funds.

We don’t know where the concept of misclassification of employees came about. 

However, we know it’s been happening for quite some time. And we don’t know how it came to be that so many small businesses jumped on the “independent contractor” bandwagon. 

What we do know is that too many small businesses treat their actual employees like independent contractors. From the employer side, the business saves on contributions to payroll taxes, disability insurance, unemployment insurance, and more. 

The business avoids uncomfortable situations revolving around the issues of employee benefits. And most of the time, the business treats the independent contractor like an employee with work rules, scheduling requirements, and more. 

The true definition of an independent contractor is that a person sets their own work schedules and standards. The small business can only provide basic guidance on the task to be achieved by the contractor. The independent contractor determines if, when, and how they will accomplish the result requested by the business.

Don’t believe us? You can read the classification rules on the IRS website for more information. 

But these misclassification issues are legendary around the United States. Employees are paid as independent contractors but are required to work under employment rules and standards.

For their part, we’ve seen how the “employee” who’s really an independent contractor thinks they’re doing great because they get more money in their paycheck. They’re not aware of two important features of their “misclassified” employment status.

First, they’re not employees. Their employer literally cannot tell them what to do, when to do it, and so much more. Secondly, the misclassified employee is responsible for their own payroll taxes, including paying a “self-employment” tax on their annual tax return. Those additional taxes they pay actually make their overall annual take-home pay LESS than if they were properly paid as a W2 employee.

Let’s return to the email from the business owner who was “forced” to take the EIDL.

While we never spoke with her because she didn’t book the paid consultation call, we’ll hazard the guess that she’s guilty of the misclassification of her staff like so many other business owners.  We’re confident because of her annoyance at being blocked from the PPP loan due to the employment classification of “independent contractors.” 

We make this fair assessment because of our previous experience during the pandemic of speaking to thousands of small business owners, and how so many of them misclassified their employees.

Somewhere along the way, this small business owner decided to pay her employees as independent contractors, probably as a result of a conversation with her tax professional or bookkeeper so that she could lower her payroll expenses and improve bottom-line cash flow.  We’ve seen this too often.

That strategic decision she made is the reason she was “forced into” the COVID-19 Economic Injury Disaster Loan, not for any other reason, but a bad decision she made to operate her business.

But is it a bad thing to have received the COVID-19 EIDL? We don’t think so.

The program for the COVID-19 pandemic was a modified version of the SBA’s traditional natural disaster loan; a program created in 1953 to help small businesses recover from a natural disaster. The loan program helps to repair physical damage from the disaster and recoup lost revenue as a result of the disaster. 

The loans are low cost with terms as long as 30 years. That makes these loans very attractive from an affordability perspective. 

We know from our experience of speaking to so many business owners during the pandemic, that many business owners had never taken on any debt for their businesses. Borrowing money to manage their business was a new, and often, unwelcomed concept for them. 

We argue that had business owners, like the person in this example cited above, made better quality, strategic decisions for their business, they would have fared better in so many ways, not only by having access to the PPP loan.

We also encountered so many businesses with tax returns that zapped all their revenue with mountains of expenses, all with a view towards lowering net income and ultimately paying a lower income tax bill. 

However, that lower net income could harm the business when trying to obtain financing because lenders often determine the maximum loan amount based on the net income.

We digress.  Again, was it a “bad thing” to have taken a COVID-19 EIDL? In our humble, professional opinion, NO, not at all.

The program has some basic features that make this financing package very attractive indeed.

First, is the low-interest rate. As a for-profit business during the pandemic, the interest rate is 3.75%. For non-profits, the rate is 2.75%. Even at the time of the pandemic, those rates were far below market rates for business financing. Even more so today with the recent increases in interest rates.

Next, the loan is a fixed-rate loan. The rate…and the payment…never change!  This is unusual in commercial financing because many business loans feature a variable rate feature.

The SBA’s COVID-19 EIDL is a 30-year loan.  With the combination of low-interest rates and extremely long-term (most commercial loans are substantially lesser terms of repayment period), the money is, as one of our colleagues and financial services professionals recently said, “free money!”

But wait, there’s more.

There’s no prepayment penalty. If a business owner truly despises the idea of carrying debt on the books, they can create an aggressive repayment plan to pay off the 30-year loan earlier with no penalty. Again, unusual! 

Many commercial lenders charge a penalty for paying off their loans early, and those penalties can be hefty.

Because the loan is a debt for the business, in most all cases, the interest is going to be tax deductible against business income. That lowers the overall income tax bill every year. NOTE: confirm with your tax professional if this is true for your business

Therefore, if do the math: 

  • Low-interest rate
  • Long-term repayment period
  • Tax deductible interest

It probably does work out to be, quite literally, FREE money

We encourage you to consider this before you rail against the fact that your business was “forced into” taking on this burden of debt.  In fact, we don’t think it’s a burden at all for other reasons besides the litany of amazingness we’ve outlined so far.

If your business faces challenges making the monthly payments due to economic conditions, you can request a hardship accommodation to lower the monthly payment by as much as 90% (to a minimum of $25.00) for a six-month period! This is an incredible benefit of the program. 

We don’t know of commercial lenders offering anything even close to this feature of the SBA EIDL. And, yes, you can request an extension of the six-month period.  

Once cashflow is back on its feet, if you experience difficulties again in the future, at any time during the 30-year term of the loan, you can request another hardship accommodation!

There is one other “intangible” benefit that so many people avoid thinking about or talking about.  

During the pandemic, whether your business was on lockdown restrictions, or experiencing pain due the depleted economy, where folks may not have been buying your goods or services, or you couldn’t access important components in the supply chain to create your product or service, you probably experienced a severe downturn in revenue. 

We know this isn’t true for everyone, but it is true for many small businesses. So much so that, since it was the only true business-saving benefit at the time, the SBA’s COVID-19 EIDL may very well have saved your business!  

If no other feature of this program has value to you, certainly this single intangible benefit must. We encourage you to take the time to do the math on what you lost compared to how the funds saved your business.

At the time of this writing, we’re encountering hundreds of small business owners having difficulty with the SBA’s COVID-19 EIDL. From challenges in their own business to find revenue, to challenges of making payments on the loan, and other considerations as well. 

We see a lot of complaints about this program. And we also see a lot of folks trying to gain information on how to avoid repaying the loan. As a result, in place of embracing the good things about the program, we see business owners, such as the person who inspired this blog, complaining about how they were “forced into” taking the loan, or complaining about how student loans are being forgiven but not these loans, and on and on.

Focus on the positive, as they say. Use those features as a basis to feel more encouraged about how the program helped you, use those features to help you cease complaining, and instead, find positive ways to focus on the problems at hand that are causing you distress in your business.

Once you do, you might find that your business improves because you’re paying attention to the core issues causing problems and striving to find solutions to those problems. This leads to thriving in your business instead of simply “surviving.”

If you want expert guidance on your COVID-19 EIDL, our Post-Closing Blueprint is the solution you need!  We cover every aspect of this program from your responsibilities to restrictions on your business to problem-solving advice, even a chapter dedicated to “How to Speak to the SBA!

EIDL Q&A 101

Questions and Answers about EIDL

Small Business Owners have so many questions about the COVID-19 EIDL program such as: 

  • “Are EIDL loans forgiven if a business closes?” 
  • “What happens if I can’t pay back my EIDL loan?”
  • “Are business owners personally liable for EIDL loans?”  

Many business owners reach out to us through our website and our YouTube channel seeking answers to these questions because of our expertise with the EIDL program.

To find the answers to these and so many other questions, the normal course of action would be to visit the SBA website or to call the SBA to ask these questions. 

However, in our opinion, SBA has a terrible reputation in providing clarity about procedures and programs. In our experience working with SBA since 2018, the administration’s communications are simply terrible.

Another aspect to these questions is that each business has a unique “personality.” Answers to questions for any given “unique” business cannot be simple “one size fits all” responses. 

EIDL Q&A 101 blog Nov 27 2023

There’s too much room for nuance and a typical answer to a specific question posed by a business owner must be crafted to include the unique traits of that business.

This has been our experience in working with Small Business Owners and answering their questions during and after the SBA’s COVID-19 Economic Injury Disaster Loan (EIDL) program. No two situations are the same, and we find that our responses to the queries we receive must resonate with each different business situation.

A good example is a defaulted EIDL. The business closed due to no fault of the business owner; these things happen out there in the wide landscape of the small business world. The business has a $500,000 COVID-19 EIDL on the books, but since the business is closed, there’s no way to make payments on that loan. 

The business owner consults with their attorney and realizes that the option of filing two bankruptcies, one for the business and one for the business owner’s personal asset protection, are not viable options, especially on the personal side.

What is the business owner to do in this situation? When calling the SBA, the administration’s response is that the loan must be repaid, one way or another, including assignment to the United States Treasury for collection action by the IRS. 

The loan includes a personal guarantee provision, therefore the business owner is on the hook for full liability to make good on the defaulted loan. But how to repay the loan when the business is closed and has no revenue? How to protect the business owner when personal bankruptcy is not an option?

This is a description of an actual client scenario we’re currently working on here at Aurora Consulting. Through our expansive interview process, combined with the experience of our resident retired Loan Officer, Trevor, we examined the unique circumstances of this business and the business owner to arrive at a solution.  

The SBA provided zero assistance in arriving at the solution, other than a recent change to their collections practices which offered an opportunity to complete our recommended strategy.

We are inundated with questions from Small Business Owners on a weekly basis about the various aspects of the COVID-19 EIDL program. Often, those folks have discovered information from other sources. But too often that information is incorrect or incomplete based on a different business’ different needs. 

As mentioned above, each unique business has a personality all its own, and solutions that work for one business may not work for another.  

The day before Thanksgiving we fielded this question from a comment (note: we’ve not edited the comment below to correct any typos or grammar) on one of our YouTube videos: 

If the SBA did really care and didn’t wanted (sic) us to fail, the least they could do, is wipe all the acrued (sic) interest, my payments are $425 per month and my acrued interest is about $5,000 right now, so basically I’m only doing payments just to cover interest over interest and nothing is going to capital. I tried to do payments for about 5 months, but i gave up…

This comment is an excellent example of the lack of clear information about the loan program available from the SBA directly and, indirectly from multiple internet sources.

First, the SBA is a federal agency and, in the case of the COVID-19 EIDL, they’re a direct LENDER. There’s no “emotion” built into the program to “care” because the SBA is tasked by the United States Congress to first lend the money and secondly, to collect the debt through regular monthly repayments of the loans.

Next, “wipe” the interest is not something the SBA is permitted to do under legislation passed by Congress. The agency has provided deferments of payments for up to 30 months, but the interest still accrues on the loan because it’s a LOAN. It was not a gift or a grant. The American taxpayers funded these loans and SBA is required to protect the taxpayers’ interests to collect repayments, including interest.

Finally, the most challenging part of this person’s comment is the lack of understanding that they are paying some principal on the loan. During the deferment period, no payments are required, but if a borrower makes a payment, the total of that payment goes to the interest only.  Once the 30-month deferment period ends, regular amortization of the loan commences with each monthly payment going towards principal and interest.

We know from our own experiences of questioning SBA that their communications are not always clear on this aspect. And there’s nothing to be discovered on the SBA website that explains this aspect.   Likewise, SBA is not fully disclosing that the deferred interest will be due as a “lump sum” balloon payment at the end of the loan term of 30 years.

In 2021, we created an expert comprehensive guidebook, the “Post-Closing Blueprint.”  The purpose of this guide is to answer all the questions we could anticipate that Small Business Owners would have about the SBA’s COVID-19 EIDL program. 

Whether a business is challenged to repay the loan or has a simple question about how the repayment of principal and interest works, we anticipated these questions and answered them in our guidebook.

We did this for two reasons. First, because we saw how much confusion already existed around the program due to SBA’s poor communications. We knew that Small Business Owners would have these 30-year loans and their questions would come up from time to time.

The second reason we created the guidebook is because our availability would eventually become limited to answer questions like the ones posed above by the owner of the closed business with the defaulting EIDL and from the comment on our YouTube video. 

Currently, we continue to update our YouTube videos with relevant and timely information. We also respond to comments, offer one-hour paid consultations, and offer in-depth consulting. But we won’t be offering these services forever. 

Like so many other Small Businesses, we’ve found that it’s time for us to move on from the COVID-19 EIDL program and find other sources of revenue for our Small Businesses. We have so much valuable information to share with businesses that borrowed money from the SBA’s EIDL program.

Based on our success with obtaining about $70 Million in approved loans for our Clients and our estimate of assisting other small businesses with free advice with another $30 Million in loans, we’ve spoken to thousands of small business owners and hundreds of SBA agents. We worked on hundreds of EIDL files, and we have continued to interact with the SBA and small business owners in various capacities since the program ended in May 2022.

But we won’t be available as an expert resource for more than another year or two.  And these loans are 30-year loans. We’ve answered your questions with expert guidance in our “Post-Closing Blueprint” and we encourage you to purchase the guide as your “on the shelf” handy reference for any time in the future when you might need a simple question answered or when you have a complicated situation arise and you need our guidance before you contact the SBA.

By example, we answered the comment about the accrued/deferred interest and principal and interest payments with an entire CHAPTER in the guidebook.

We anticipated and covered every possible situation and question that could arise.  If you are the kind of small business owner who takes your responsibility under the COVID-19 EIDL program seriously, and you want to properly honor the restrictions and repayment obligations of the loan, our guide is your single-source resource. 

We continue to provide revisions and updates to the guide as SBA develops new responses and procedures. And we’re providing those updates FREE of charge to anyone who purchases the guidebook through December of 2024.

#SBA #DisasterLoan #SBADisasterLoan #EIDL #NaturalDisaster #SBAEIDL #Tornado #HurricaneIan #Hurricane #Wildfire #Drought #SmallBusiness #SmallBusinessLoan #EIDL #EIDLRepayment #PayEIDL #SBAPayment #PaySBA #SmallBusiness #COVIDEIDL #CAFSportal #paygov  #MySBA #COVID19EIDL #COVIDLoan #SBACOVIDLoan #SBACOVID #SmallBusinessLoan 

The Problem with Crowdsourced Knowledge

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

And it’s going to hurt. A lot.

Can SBA Forgive a COVID-19 EIDL?

No, but Congress can because they did it before.

    • Small Business Owners with COVID-19 EIDLs want their loans Forgiven
    • Facts about the Forgiveness of SBA EIDL loans
    • Congress is Focusing on Fraud, Not Forgiveness
    • Action Plan: What You Can Do
    • You Received a COVID-19 EIDL and You Can’t Pay It Back
    • Resources & References

Business Owners want their COVID-19 EIDLs Forgiven

The question most often asked by Small Business Owners who took an SBA COVID-19 EIDL during the pandemic is this: Why doesn’t SBA simply FORGIVE the COVID-19 EIDL?

The answer is simple: the United States Small Business Administration (SBA) does not have the regulatory authority to forgive Federal debt.  Only one institution can do that, the United States Congress.

In our internet travels we often see frustrated and angry Small Business Owners who want to have their COVID-19 EIDLs forgiven.  In search of answers, these folks often turn to infamous “click-bait” sharks who provide false and inaccurate information, mostly to get people’s hopes up that SBA will forgive these loans.  

We have seen occasionally where an online discussion will include a comment from someone saying something like, “SBA forgave Hurricane Katrina EIDLS!”  Sadly, comments like this add fuel to the false hopes fire because this is actually TRUE.  But we need to look further into how SBA was able to forgive the Hurricane Katrina EIDLS because that natural disaster impacted the future of SBA’s EIDL program in positive and negative ways.

We don’t say that the COVID-19 EIDLs should not be forgiven. 

What we have discussed time and again is the fact that the program does not currently offer forgiveness for these loans. We agree that many small business owners took on this debt “under duress.” Unfortunately, this program exists for exactly the reason that it was used by those small business owners: to assist with lost revenue as a result of a disaster. In this case, the disaster was the COVID-19 pandemic.

We set out in March 2020 to communicate factually correct information for small business owners about federal programs. Having gone through the mortgage meltdown of 2008 through 2010, Trevor knew the amount of misinformation put out by bad players on the Internet would be legendary and would confuse small business owners.

Like everyone else, we did not know where this pandemic was headed, and what the results would be on the economy of the United States, or on the livelihoods of millions of small business owners. But we knew one thing for certain, as Trevor learned during the mortgage meltdown: people would turn to the Internet, they would turn to communities online, they would seek out through desperation accurate information to help them manage the crisis.

We adhere to our original commitment to this day: provide factually accurate information that business owners can rely on for understanding the program, and in their decision-making processes to continue to maintain and grow their businesses.

We believe this commitment proves that we certainly do not trivialize any aspect of the small business owners’ struggle during and after the pandemic. But we will not relent from our consistent messaging that, at the moment, the COVID-19 E IDL loans are NOT FORGIVABLE.  We maintain this position, especially considering the volumes of misinformation here on YouTube and elsewhere on the Internet perpetrated by people who truly want to take advantage of the small business owners’ desperation. 

These unsavory players consistently provide inaccurate and often false information about forgiveness, trampling on the desperation and hopes of small business owners that the loan will be forgiven. These people provide this inaccurate information for one purpose: their own self-interested need to build an audience and earn money off the backs of unhappy small business owners.

If you look at the number of subscribers we have and compare those to many of the other channels, you will see our numbers are substantially smaller. We get that. We understand that not everybody wants to embrace the factually accurate messaging that we present. And we’re OK with that. Just as we were during the COVID pandemic when we provided similarly accurate information to help small business owners navigate the nightmare process of the COVID-19 EIDL program. We gave away accurate truthful and free information day in and day out. We did it here on YouTube, we did it on our blog, and we did it with free consultation phone calls. 

Circling back to the concept of forgiveness, we reiterate our consistent messaging that, if a small business owner truly wants to receive forgiveness for their COVID-19 E IDL, then they should implement aggressive letter writing, phone calls, social media, and texting campaign to their political representatives.

Only the United States Congress has the authority to make some or all these loans forgivable.

We recently researched the SBA’s natural disaster loan program for small business owners in Louisiana in the aftermath of the devastation caused by Hurricane Katrina. We discovered that Congressional legislation passed in 2007 and 2014, allowed $391M of Hurricane Katrina disaster loans to be written off and forgiven.

Facts about the Forgiveness of SBA EIDL loans

Congress controls the purse strings of the United States Government.  Congress directs the government how much money they can spend (see the recent debt-ceiling debacle), and how they can spend it. Congress enacts legislation to provide money for the government to spend, such as the CARES Act in 2020 which provided for COVID-19-related spending, including the SBA’s Economic Injury Disaster Loan (EIDL) program.

Who created the EIDL and who created the SBA? CONGRESS did!

The SBA EIDL was created in 1953 along with the creation of the Small Business Administration. The EIDL was created to assist Small Businesses to recover from a natural disaster. 

Hurricane Katrina Changed the EIDL Program.

SBA’s mandate from Congress to provide loans for natural disaster areas had a statutory limit of $5M per “jurisdiction.” 

The catastrophe of Hurricane Katrina and the damage caused in Louisiana prompted the representatives, Senators, and Congresspeople, to request that Congress lift the SBA’s statutory disaster loan limit of $5M per jurisdiction. These representatives argued that the devastation was so vast that much more disaster funding was needed.

In 2005, in response to Hurricane Katrina, The Republican-controlled Congress and White House agreed to lift the cap. That was the good news.  The bad news was the removal of the cap came with a requirement: SBA disaster loans could not be forgiven.  

This requirement changed the entire EIDL program to remove forgiveness on future EIDLs, not only Hurricane Katrina loans.

Sen. Mary Landrieu, D-Louisiana, and Sen. Carl Levin, D-Mich., among others, argued that this ban on loan forgiveness, without subsequent congressional action, was discriminatory.

“We have never imposed this restriction that is in this bill on any community in this country,” Levin said. “We have lent money to Rexburg, Idaho; we have lent money to Johnstown, Pa., we have lent money to Clifton, Az., we have lent money to Albion Borough, Pa; we have lent money to Vassar, Mich., in my home state.  But now we are telling the victims of the worst disaster we have had in this country that the Stafford Act provisions, which, under certain circumstances, could permit the forgiveness of a loan, will not be available to them.”

No matter the entreaties of the Louisiana representatives, the Republicans in Congress held firm to the prohibition on SBA disaster loan forgiveness.

Ultimately, the Louisiana representatives were partly-successful in their request: Congressional legislation passed in 2007 and 2014 allowed $391M of disaster loans to be written off and forgiven.

But that wasn’t the total amount of loans.

It is important to note that not all SBA disaster loans were forgiven.  Total loans for Gulf Coast hurricanes Katrina, Rita and Wilma amounted to $6.3B.  With only $391M forgiven, a large dollar volume of disaster loans remains due and payable to this day.

In 2021, New Orleans District “D” Councilmember Jared C. Brossett sent a letter to President Joseph R. Biden requesting further relief for disaster loans in the form of forgiveness.

For the SBA’s COVID-19 EIDL program to be forgiven, Congressional legislation will need to be proposed and passed.  

Congress is Focused on Fraud, Not Forgiveness

The Small Business Administration, like other Federal Agencies, features a special Office of Inspector General whose duties include auditing the agency to protect taxpayer money, including where criminal and fraudulent activity has impacted an Agency or program.

The SBA’s OIG has made substantial media pronouncements about the dollar value of fraud perpetrated on the SBA’s various COVID-19 programs, including the EIDL. *See SBA OIG report attached in our Fraud vs. Forgiveness download by completing the form below.

Sadly, when compared to the total dollar amount provided to Small Businesses, it is our opinion that OIG’s focus on what will probably be a small percentage of fraud relative to the total funding is a lot of noise about an important, but secondary issue. 

The primary issue facing Small Business Owners is recovery from the pandemic.  
Small Business Owners, focusing on recovery, may be struggling with making payments towards a debt obligation they never wanted in the first place, but had literally no choice but to receive to survive the pandemic.

The SBA’s OIG reporting to Congress is creating, in our opinion, an unreasonable focus on the fraud that occurred. This focus is a distraction from the attention and assistance the Small Business Owners really need: helping them continue pandemic recovery and providing better repayment options.

There are also calls from Legislators for the SBA to enforce repayment of the COVID-19 EIDLs. 

Due to recent complaints from several United States Senators who wrote letters to the SBA Administration that SBA should enforce collection on defaulted COVID-19 EIDLs and PPP loans, there does not currently seem to be a taste in Washington D.C. to allow for forgiveness legislation to proceed.

*See letter to SBA from Senator Joni Ernst attached in our Free Download when you complete the form to the left.

 
Action Plan: What You Can Do

From the outset of the COVID-19 pandemic in March 2020, we at Aurora Consulting LLC committed to supporting United States Small Businesses with accurate information on programs, procedures, and requirements available through the COVID-19 CARES Act.

We have stated repeatedly on our YouTube channel and in our Post-Closing Blueprint guidebook that SBA COVID-19 EIDLs are not forgivable. 

What to do?

  • Request Congress to reauthorize the SBA
  • Purchase our Post-Closing Blueprint an expert guidebook to your COVID-19 EIDL responsibilities and restrictions
  • Contact your Senators and Congresspeople to allow SBA to provide Forgiveness for EIDLs

You Received a COVID-19 EIDL Loan and You Can’t Pay It Back: What To DO?

We’re so very sorry when we hear about so many small businesses continuing to suffer due to the economic ravages of the COVID-19 pandemic.  We often hear from business owners who received an SBA COVID-19 Economic Injury Disaster Loan (EIDL) and now find they cannot repay the loan.  

Sometimes the challenges are simply a matter of cash flow: the business can keep itself afloat, but making the EIDL monthly payment is an additional burden on the income of the business.  Other times we’ve learned the business is hanging on by a thread—still open and operating but doomed to fail soon.  We also hear the terrible stories of businesses that have failed and closed altogether.

We are passionate about Small Business. We’re committed to supporting Small Businesses, so we’re extra level miserable when we hear of the troubles so many folks are facing to keep their businesses alive.

The pressing issue is the repayment of the COVID-19 EIDL: What to DO?

Generally speaking, the Small Business Administration holds a lien against the small business for any EIDL loan greater than $25,000.00.  Should the business fail and default on the repayment of the loan, the business assets become the property of the SBA to dispose of as needed for the purpose of recouping the remaining balance of the loan.

For loans greater than $200,000.00, the business owner(s) have personally guaranteed repayment. Thus, in the event of the loan defaulting due to inability to repay, and after disposing of the business assets to cover money owed, should there remain a balance of money owed, the SBA has the right to obtain a “deficiency judgment” against the business owner(s). That judgment can cause liens to be placed against personal assets, or, in the extreme, seizure of personal assets, garnishment of wages, and withholding of federal benefits, tax refunds, even Social Security benefits payments.

This is serious business. We urge all small businesses with a COVID-19 EIDL to purchase our comprehensive expert guidebook “Post-Closing Blueprint” to understand their responsibilities and to follow our recommended strategies should the loan repayment become difficult to manage. We’re hoping folks will rely on our guide as the primary reference source BEFORE they interact with the SBA to try to resolve the defaulted loan situation.

Based on our recent interactions with SBA as advocates for our clients, we know that SBA is wrangling internally with issues about defaulting COVID-19 EIDL loans. Their procedures are evolving frequently. SBA is developing a response to the ongoing problem of borrowers’ inability to repay their loans.

When all is said and done, even without collateral and without a personal guarantee, a defaulted federal debt is a serious problem.

One word of caution: a lot of the “urban mythology” out there would have folks believing “the SBA is never coming after me and my little business” leading them to simply ignore the debt obligation.   We believe this is a tragically horrible strategy.  The federal government has a long memory, and you don’t want to be on the receiving end of their collection efforts, ever.

Especially as several US Senators are urgently pressing the SBA to aggressively enforce collection on these debts, even those loans for less than $100,000! 

And again, we reiterate to all small business owners in the United States who took a COVID-19 E IDL to save their business: contact your political representatives. Put the pressure on Washington DC to get these loans forgiven.

Grab a 17-Page Sample Blueprint

References
  • Nine years after Katrina, federal government has forgiven $391 million worth of federal disaster loans. NOLA.com
  •  SBA OIG Report on Hurricane Disaster Loans for Gulf Coast hurricanes. 
  • NEW ORLEANS – District “D” Councilmember Jared C. Brossett Letter to President Biden
  • The Stafford Act: The Stafford Act Public Assistance program provides disaster assistance to States, tribes, local governments, and certain private nonprofit organizations.  FEMA Download
  • Blog written by TREVOR CURRAN. No AI was used in this publication.
 

#EIDL #COVIDEIDL #COVID19 #SBACOVIDEIDL #SBALoan #HurricaneKatrina #DisasterLoan #EIDLForgiveness #Forgiveness @EIDLRepayment #SBAForgiveness #SBADisasterLoan #SBADisasterLoanForgiveness #SBAEIDLForgiveness #SBACOVID19EIDLForgiveness #DisasterLoanConsulting #DisasterLoanConsultant #NaturalDisaster #NaturalDisasterLoan #Hurricane #Tornado #Wildfire #Drought #Flooding 

10 EIDL UPDATES

Visit our Videos on COVID-19 EIDL Updates

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

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

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

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

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

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

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

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

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

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

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

Grab it NOW

How to Apply for an EIDL Loan

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

How to Manage Distractions for Your SBA EIDL APPROVAL

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Rules to not be distracted:

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

Take Care

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

One At A Time

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

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

There’s Plenty of Time

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

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

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

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

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

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

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

Break It Down

Business Financing Documents Checklist

Stop worrying about what's required when pursuing a business loan for your small business. This list will indicate what a lender, bank, SBA, etc. will want to know about you and your small business if you're looking for a business loan. These are prudent documents that help tell your small business story. Without them, it's difficult for lenders to assess you as a risk when it comes to lending your small business money. This is NOT SPECIFIC to the SBA EIDL loan.

Blue Button Strategies

Here’s our recommended strategies while you are waiting for the infamous “BLUE BUTTON” to become functional on the SBA portal for your EIDL Increase request:

Manage your anxiety. Schedule TWICE daily check-ins, once in the morning, the second in the evening.  The money’s not going anywhere, it’s not running out, and you’re not going to miss a “place in line” with millions of other EIDL applicants if you don’t submit your request within a few hours.  You can wait the day. Doing so will reduce your stress.  When you feel yourself getting stressed about not checking the BLUE BUTTON every three minutes, do the following mundane, boring, functional stuff instead:

PREPARE.  We’ve seen SBA coming back recently and requesting additional documents for the EIDL Increase requests.  YES, it’s true, we’ve seen some requests were automatically approved.  That’s the BEST CASE, obviously. Don’t assume the “BEST CASE” scenario; assume the worst case and PREPARE for the SBA request.  Here’s a list of documents we’ve seen SBA requesting to approve the EIDL Increase.  One important note: don’t assume SBA already has your documents from the list below. If they ask for it, submit it again, in an updated form (current date for your signature instead of a date from two months ago, for example).

LIST:

  • 2018 and 2019 COMPLETE Federal tax returns
  • Driver’s License: COLOR legible PDF scan front and back. If the image is blurry, do it again until it is CRYSTAL CLEAR
  • VOIDED check for the destination bank account to deposit your funds. BE SURE this is the SAME account you entered on your original EIDL application. BE SURE you don’t reverse the ROUTING number for the ACCOUNT number. Yes, we’ve seen people do that!
  • SBA Form 2202. THIS is IMPORTANT.  Have a form that is current because SBA wants to confirm if you have incurred any other debt in the name of the business entity since you applied, including existing EIDL and PPP loans or other types of financing. Remember: ONLY business debt in the name of an business entity; personal debt does not go on this form. EIDL and PPP go on the form no matter whether you are an entity or a Sole Proprietor.
  • Business Plan and Revenue Projections for 2021.  See our BLOG post about how to prepare.

Here’s what we’ve experienced at Aurora Consulting in our two plus years of assisting Small Business Owners to obtain financing, including the EIDL COVID-19 loans and PPP loans:

  1. Small Business Owners don’t want to be bothered with the basic building blocks that are boring
  2. They don’t want to take the boring time to write boring business plans
  3. They don’t want to take on the mundane task of doing some basic fifth grade math to calculate income and expenses
  4. They don’t want to bore themselves to tears by spending time organizing basic documents into a neat and orderly and presentable fashion

Maybe YOU are NOT in this bucket. GOOD.

Much of what we do at Aurora Consulting is to shepherd our clients through these basic and boring tasks.  Here’s the problem: BORING leads to financing success.

Eliminate your stress about the BLUE BUTTON by BORING yourself.  It’s much simpler than you think.