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!!?

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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.

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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. 

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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.

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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!

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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.

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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.

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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.

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17 Q&As from Our YouTube Channel

From the very beginning of the pandemic, Linda Rey and I set out to provide thoughtful, truthful, and accurate information to struggling Small Business Owners.  Literally, on March 18, 2020, we discussed how scammers, sharks, bad bloggers, and click-baiters, would emerge from the slimy depths of the internet to give bad information, poor advice, and misleading directions.

We’ve been answering questions ever since. During the pandemic, while we processed hundreds of EIDL applications for a total of $70M in approved funding, we answered questions on free phone calls, email inquiries, and our live YouTube broadcasts.

We’re passionate about Small Business and we want to do our small part to demonstrate our commitment to their success. Here’s a sampling of recent comments and questions we’ve received in response to a variety of our YouTube videos.

Q: The only choice, it seems, is to bk the loan if you truly can’t pay. I’d say ignoring sounds like a bad idea. Many of these youtubers have people thinking forgiveness is coming. One was cheering because he heard people saying loans were being charged off. He has no idea that’s not a good thing, yet he pumped that nonsense.

Our Response:

The Federal government has a long memory.” That’s why ignoring your COVID-19 EIDL is a BAD idea!

Even if you’re making your payments, you might be inadvertently ignoring simple basics to comply with the terms of the Loan Agreement you signed. Things like submitting annual financial statements or notifying SBA of changes to your business. Failing to comply is literally considered a DEFAULT by SBA in the Loan Agreement!!!!

Our Post-Closing EIDL Blueprint has all the info you need to remain compliant and NOT IGNORE the COVID-19 EIDL!

As for filing bankruptcy: this is another one of those topics tossed around carelessly by the pseudo-experts. While filing bankruptcy could potentially discharge the debt, that means you may have to ALSO file a personal bankruptcy. AND THAT MEANS starting all over with your credit. Or, even worse, having to include your other personal assets and liabilities in your personal BK just because you listened to some fool pretending to give expert advice!

There are other ways to manage a challenge with payments. Our Post-Closing EIDL Blueprint discusses remediation in depth.

Q: I’m closing my small business down due to health reasons. There’s no personal guarantee. Am I personally affected?
 

Our Response:

Trevor and I are truly sorry to hear about your having to close your business! We have seen so many small business owners suffering during these uncertain economic times.
 
You should be aware that, even absent a personal guarantee, according to the SBA’s Loan Authorization and Agreement (LAA), you may still have a personal liability for a defaulted loan. Meaning, SBA could potentially come after you for repayment of the debt. This is one of those murky areas where SBA’s poor communications fails to provide clarity.

If a business has a COVID-19 EIDL and is closing down, you must contact SBA, whether or not there’s a personal guarantee. SBA has a process for every situation and challenge, and closing a business is no different.

Q: You need to go back and research personal property. It clear states that you guaranteed the loan . With your personal assets. So that’s what my attorney’s said and my CPA if the loan is over 200 thousand

Our Response: 

1. We created our Post-Closing Blueprint to delve deeper into complicated concepts like this.  If you purchase the guide today, you will receive free updates through December 2024. We’re updating the guide occasionally due to the changing landscape of the COVID-19 EIDL requirements.  In our recent experience, SBA is literally changing the rules on the LAA, and, we know that internally they are still working out procedures for the new challenges facing the COVID-19 EIDL Borrowers, including defaulting loans, hardship accommodations, and the concepts of personal guarantee and personal liability.

2. SBA’s communications for this complicated topic are terrible. As with so much about the SBA program, it is nearly impossible to get clear guidance on a challenge or an answer to a question.  Your Attorney and your CPA are reading this one way, and I’m reading it in a different way because of my background as a Loan Officer.

The other element to your comments is that it is difficult to properly explain these complicated concepts in our videos. We do our best, but our Post-Closing Blueprint provides a more comprehensive discussion on these topics.

Our intention with our guide is to provide background to help the Small Business Owner come to an understanding of complicated SBA concepts instead of solely relying on a “pat” answer to a complicated question posed to an attorney or CPA, which is, IMHO, what happened in this case.

Our guide gives you all the information and tools you need to manage your COVID-19 EIDL. We made our best effort to untangle the complications of SBA’s confusing communications.

Q: ⁠what if you have less than 20% ownership but also have a personal guarantee w loan over 200,000?

Our Response: 

We define and explain the personal guarantee in great depth in our expert guidebook “Post-Closing Blueprint” but a short answer is this: personal guarantee means the guarantor(s) (business owner(s) with 20% or greater ownership interest) will take over the responsibility to repay the loan in the event the business entity cannot make payments.  The assets of the business owners are not considered collateral for the purpose of the EIDL, but those personal assets can be seized in legal proceedings that result in a judgment.

Click to Watch Video Where we Answer This Question
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Q: Thank you for your response. However, I do know of a loan over $200,000 with (4) personal guarantees. None of the members personally own more than 20% but collectively own over 51% of the company. Each name is and was included in the loan and it was approved. Was this a mistake to have the loan issued in the first place? Are the members liable as a collection even though they don’t personally own more than 20%. Thanks Again guys love your videos.

Our Response: 

I often saw where an SBA Loan Officer would request a “list” of all owners with less than 20% ownership and require that all ownership percentages total out to 100%.  But the “list” did not require SSNs or similar personal information, only a full name and percentage of ownership.  The fact that a person with <20% has their name on a “list” with an EIDL application does not mean they are on the loan.

If they were required to sign the EIDL LAA, that’s a whole other story, and likely the application was prepared incorrectly.  If so, SBA probably didn’t question it as so many of those early applications went through an automated process.

Q: Would the same apply to a sole prop business?

Our Response:

It’s not unusual for Small Business Owners with COVID-19 EIDLs to express confusion and concern about various requirements and restrictions imposed by this SBA program.

That’s why we created our comprehensive expert guidebook “Post-Closing Blueprint” as your single source “go-to” reference guide before you interact with the SBA.  We urge Small Business Owners to purchase the guide now because the EIDL is a 30-year loan and many questions and issues will come up.

If a Sole Proprietor has the equipment they use for the business enterprise, then the equipment can be considered collateral.

Click to Watch Video Where we Answer This Question

Other “intangible” assets such as Accounts Receivables, payments due on contracts, etc., are considered collateral. Our guidebook delves into the definition of collateral and business assets in detail.

Click to Watch Video Where we Answer This Question

Q: Any chance they may extend the 10% hardship payment longer than 1 year?

Our Response:

The SBA’s hardship accommodation is actually six months, not one year.  And, as per the SBA’s comments on their website, at their discretion, SBA may extend a hardship accommodation an additional six months.

In fact, the EIDL program generally allows for SBA to provide multiple hardship accommodations throughout the life of the 30-year loan!

As you may know from watching our YouTube videos, we only focus on facts, and we tend to demur from pure speculation. We don’t want to disappoint, that’s why we don’t speculate and why we prefer to focus on facts.

That’s why we stridently urge Small Business Owners to aggressively communicate with their U.S. Senators and Congresspeople to implore the federal government to both reauthorize the SBA and to enhance remediation for Small Business Owners with the COVID-19 EIDLs.

Congress controls the process!  Let them know how you feel and about the help you need to continue your recovery from the pandemic!

Q: The issue…for me at least…the economy is still crap. And my business has not recovered 100% so my income has declined and cost of living has increased. I really fear I will have to BK at some point.

Our Response:

We’re always disappointed to hear how Small Business Owners continue to struggle in this post-pandemic era.

We believe the U.S. Congress can certainly do more to relieve the suffering by providing some guidance to SBA to either increase deferments for the COVID-19 EIDLs, or to lower the interest rate, or, heavens-to-Betsy, offer FORGIVENESS!!!!

In the meantime, with our experience over decades in business ourselves, through all kinds of economic “storms” including recessions and the global mortgage meltdown, maybe we can offer you some kind and positive advice?

First, Trevor, a retired Loan Officer and “student of economic history” believes the economy is doing much better than most folks believe!  Yes, he knows that’s an unusual take, but it’s based on actual economic metrics, and ignores all those confusing media messages (you know, “There’s a recession coming!” “No recession!” “Is it recession yet?” and blah-blah-blah).

Second, from our own experiences, we believe that, when the going gets tough, the tough get going by focusing on ONE THING: Marketing!  We have so often seen how small businesses suffer at the hands of their own failures to increase marketing efforts.  In our opinion, the best way to overcome most business challenges is to get out there and try to find more customers.  The only way to do that is to invest 85% of your time and effort (and money) on MARKETING.

We can personally attest to how our increased marketing efforts have helped us to build our new business initiative after the SBA’s COVID-19 program ended, effectively “putting us out of business” in May 2022.

Marketing works! We truly hope you’ll find a way to overcome the business challenges facing your small business and that filing for bankruptcy will only be a distant and unrealized concept!

Q: I feel its vital folks out there get a sense for what is really happened to small businesses and what heartache and hardship we were put through. I mean the sba can cancel the interest and allow businesses to pay back the loan at hardship accommodation mode for 5 years. This is going to take a long time for mom and pop places to recover from. And county level officials need to be proactive and hold urgency when small businesses get their licenses taken away. We cant wait for legislation for next year for this to help. We need help at real time! Both parties need to mature up.

Our Response:

SBA cannot cancel interest and is not currently allowing hardship accommodations for 5 years.

We discuss SBA’s hardship accommodation and other loan remediation policies, including providing strategies for Small Business Owners to negotiate and communicate with SBA in our comprehensive Post-Closing Blueprint guidebook.

We stridently urge businesses with the COVID-19 EIDL to purchase our guide as their “GO-TO” reference before interacting with the SBA.

Q: Does the SBA automatically put a lien on you assets if the loan amount is 50k ? If I am current would their be a lien on my property?

Our Response:

We answer this question in detail in our Post-Closing Blueprint.  We encourage business owners with a COVID-19 EIDL to purchase our guide as the “GO-TO” reference before interacting with SBA for any questions or concerns about the EIDL.

The short answer: SBA put a UCC lien against the business assets for a COVID-19 EIDL if the loan amount was greater than $25,000.00.

There is no lien against your personal assets.

The lien is there from the beginning of getting the loan; they don’t put additional liens later on.

Q: They accused me of fraud six ways from Sunday, they denied my loan by accusing me of fraud, isn’t that negligence and character defamation? They did the same to hundreds of legitimate SBOs, so I’m wondering why we’re not banding together and filing a class action…I was shocked at how focused they were on fraud, against all logic and common sense, and they refused to hear me out or entertain the idea that they were wrong. Maybe the reason they’re making such a big deal about the alleged d fraud is because they finally realized they were actually negligent AND defamed innocent people’s characters, but don’t want to get sued…?

Our Response:

Call SBA Disaster Customer Service at 1-833-853-5638. Explain briefly the history of your application, focusing on these four key elements:

ONE: You Signed the Loan Agreement for a COVID-19 EIDL (You should have this in front of you on the call with the SBA Disaster Loan number located in the upper left hand corner of the agreement)

TWO: You never received the funds
THREE: You were told your file was flagged for “fraudulent activity”
FOUR: You want to confirm that you do NOT have a COVID-19 EIDL loan with SBA that needs to be repaid.

The SBA representative will transfer to the servicing center if a loan was funded. You will need to repeat your story again, but your goal is to ensure you have NO DEBT for the COVID-19 EIDL program.

Please note that we offer a one-hour phone consultation where Trevor will call SBA with you on the line if you prefer to have our expert professional assistance. You can schedule the paid consultation call here.

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Q: ….so I get it…that’s why I continue to make monthly payments. Yet I wonder if defaults reach a serious level what in your opinion will Congress or the SBA attempt to do to prevent their defaults from snow balling well beyond any foreseeable limits? Obviously the US government isn’t benevolent unless you are a too big to jail bank but are the bureaucrats that heartless?

Our Response:

We literally have no idea how SBA and/or Congress will react to a high number of COVID-19 EIDL defaults. There’s no true precedent, except for maybe Hurricane Katrina where a portion of the SBA disaster loans were ultimately forgiven thanks to a strenuous campaign by political representatives from Louisiana.

Currently, the mood in the Senate, at least, led by Senator Joni Ernst, seems to be to demand that SBA aggressively enforce collections on ALL COVID-19 EIDLs.  There does not seem to be a mood to accommodate and support Small Business Owners, the so-called “backbone of the American economy.”

The best course of action we can recommend is this:
1: Begin a constant communications campaign with your United States Senators and your local Congressional representative.

2: Demand that Congress create a response to these defaulted loans and future defaulting loans to help business owners emerge as undamaged as possible, including forgiveness, loan remediation to include longer hardship accommodation periods (currently six months), and potentially reducing the interest rate on the COVID-19 EIDLs.

3: Demand that Congress reauthorize the SBA and EXPAND the SBA with funding and expanded Congressional guidance.

Q: I have an eidl loan that was $50,000. I am a sole prop, i do not have or own any business assets, did not put up any collaterall , i rent an apt, finance my car and basically have a dead seasonal service based self employment type ” business”. I cannot pay this loan back – what will happen?

Our Response:

We’re so very sorry to hear about your situation!  So many small businesses continue to suffer due to the economic ravages of the pandemic.

We know that SBA is wrangling internally with issues about defaulting COVID-19 EIDL loans. Their procedures are evolving frequently.

When all is said and done, even without collateral and without a personal guarantee, a defaulted federal debt is a serious problem. We address this issue in our comprehensive expert guide, the Post-Closing Blueprint.

We’re hoping you and other folks in your situation will rely on our guide as the primary reference source BEFORE you interact with the SBA to try to resolve the defaulted loan situation.

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!

Don’t ignore the debt; contact the SBA to work out a resolution. Use our guidebook to prepare you before you contact the SBA. We wish you all the very best in this terrible situation!

Q: a general question about ERC and worry about being scammed

Our Response:

In our experience, the IRS sends the refundable tax credit to THE BUSINESS, not to the ERC consultant. Hopefully, you did not give the consultant access to your bank account.  

The ERC consultant on our Referral Partners team gets paid by the Client AFTER the Client receives the IRS refund and the consultant has to trust the Client to pay the consultant fee.  

The IRS scam warning focuses on consultants who take fees upfront and/or who improperly process ERC requests, including with incorrect documentation or for ineligible businesses. Get our FREE ERC Guide.

We created a FREE ERC guide. Click on image to download.

Q: So what are my options if I’m not able to pay back my loan? I’m sure there are thousands of people out there that cannot pay these loans back

Our Response:

We’re sorry you’re experiencing difficulties with repayment of the COVID-19 EIDL.  So many Small Businesses suffered through the pandemic and subsequent economic difficulties.

We’re not sure what “…not able to pay back my loan” means, whether your business failed, or you’re still in business and cannot afford to make any payments at all, or if you need temporary assistance with a reduced payment until revenue improves.

We tried to anticipate all three of these situations and more in our Post-Closing Blueprint where we provide detailed guidance to answer questions like yours.  

We assembled our expert comprehensive guidebook based on our experience with SBA processing, our experience as financial services professionals, and over the past 9 months, speaking with Small Business Owners and the SBA to get the right answers to questions like these.

Our guidebook gives you strategic solutions including WHO and HOW to call at SBA, SBA forms you might need, TEMPLATES for submitting requests to SBA, and Step-By-Step instructions to help you resolve challenges with the SBA loan program.

Keep in mind that, while a business may be unable to pay these COVID-19 EIDLs, these are legal debts and SBA will require repayment in one way or another, either now or in the future through debt collection practices.  In other words, these loans are not simply a matter of “walking away.” Hope that helps!

Q: I am in the trucking business and with everything and the stimulus that I borrowed, it is going badly for me and I cannot pay the full monthly payment, if this economy does not improve, then they can do what they want with me and what I have been able to achieve so far

Our Response:

We are sorry to hear your business is still struggling.  The harsh realities of the pandemic combined with the following economic issues such as supply chain and inflation is certainly impacting millions of Small Business Owners.

SBA will allow you to pay a reduced payment of as little as 10% of the monthly payment (must be a minimum of $25.00) for a six-month period.  You can request this hardship accommodation on your MySBA portal.

If the issues are more urgent, then we recommend using our Post-Closing Blueprint to guide you on how to call the SBA, who to speak to, and the SBA’s forms and process.

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5 FAQs about the SBA EIDL Loan

square thumbnail to promote a live youtube show. Linda Rey and trevor are leaning on each other and the caption reads: EIDL UPDATE: COMMON SENSE or Chaos.

Click to download this free guide.
Click to download this free guide.

There are five sections in this post that address various issues people inquire about with us on an almost daily basis.

  1. Our Post-Closing EIDL Blueprint
  2. COVID-19 EIDLs are not Forgivable
  3. Fake Forgiveness Freaks
  4. IRS Form 982
  5. Our consulting services to assist COVID-19 EIDL Borrowers 

Our Post-Closing EIDL Blueprint is our comprehensive, expert guide that outlines all SBA EIDL obligations, restrictions and questions that may come up with the COVID-19 EIDL.

One of the FAQs we get on an almost daily basis is when a Borrower is having difficulties making payments. We address this in our Blueprint.

All the topics covered, in our Blueprint, can be found in the table of contents including “Make A Payment Toward Your EIDL.” You can then click through to “Hardship Accommodation.”

The navigation link takes you directly to the section on how to request lower payments.

COVID-19 EIDLs are not Forgivable

If you call SBA’s customer service number, as Trevor did this morning, the initial menu prompt states the loans are NOT Forgivable.

You can request a reduced payment by as much as 90% (see the section in our guide about “Hardship Accommodation”) for six months. It may be possible to request additional extensions (subject to SBA approval.)

A business owner cannot pause payments.

 

 

 

 

SBA’s position on difficulties repaying the COVID-19 EIDLs is this: They expect Borrowers to pay, no matter the circumstances. This includes the ever-so-drastic event of a business partner embezzling the disbursed funds, which happened to one of our clients.

You can learn more here about how we found out that our client’s “partner” was indicted today.

Fake Forgiveness Freaks

We know there is lots and lots of chatter on the internet and elsewhere about these loans being Forgivable, and apparently all kinds of misinformation from alleged “experts” on how to manipulate the SBA system to make the loan Forgivable.

These “fake experts” have folks chasing fantasies to get their loans Forgiven, including a new class of scammers offering to negotiate an “Offer In Compromise” with SBA–for a FEE of course.

SBA’s internal procedures are still evolving. That’s why we provide FREE UPDATES to our Post-Closing Blueprint through December 2024 so you have the latest and most accurate information about the program.

IRS Form 982

This form does not pertain to Forgiveness of an SBA COVID-19 EIDL. This form is used to reduce the tax liability when a person or business receives a “discharge” of indebtedness (such as settling a collection account for less than the full balance because the amount of settled reduction is considered taxable income disclosed on IRS Form 1099-C).

From the IRS website: “Form 982 is used to determine, under certain circumstances described in section 108, the amount of discharged indebtedness that can be excluded from gross income.“

Our latest information, directly from reputable sources at SBA, is this: If a COVID-19 EIDL defaults, SBA will attempt to recover the debt, but they will ultimately transfer the defaulted debt to the IRS for collection. IRS then can collect through liens, wage and benefits garnishments, and tax refund seizures.

Our Consulting Services

We offer consulting services to assist businesses in navigating a variety of questions and challenges with their COVID-19 EIDLs. We have been assisting with these services since September of last year.

If a U.S.-based business is in need of our services to assist with their COVID-19 EIDL, we will prepare and send a consulting proposal that outlines the objectives, scope of work, estimated time to complete, and cost.  

 

NOTE: We also offer consulting services for Natural Disaster loans and general business activities. Click HERE for natural disaster consulting. 

 

Aside from our specific expertise with the program and familiarity with required procedures and forms, we’ve come to learn that many CPAs and attorneys are providing incorrect information to their clients about this program. They may mean well, but their ignorance of actual SBA protocols can be very harmful, in our opinion, to the business due to the misinformation they provide.

A CPA or an attorney may have general knowledge of the COVID-19 EIDL program. With good intentions to help their clients, we’ve seen how their answers are attempting to be helpful, but often miss the mark with specifics about some of the complicated challenges and SBA communications of this program.

Pretend you inherited your Great Uncle’s 1963 Jaguar E-Type.
Trevor at Lime Rock Park, CT where Paul Newman Used to Race
 
It needs maintenance, or maybe a repair. You take it to your local mechanic, the one who has changed the oil and rotated the tires on your 2001 Honda for the past 22 years.
 
With good intentions, your mechanic may attempt to help you with maintenance or repairs on the classic Jaguar.  
But a mechanic who specializes in Jaguars–especially old ones–is probably a better choice, don’t you think?
 
Does that help you better understand the difference between your CPA/Attorney and Aurora Consulting?
 
We processed hundreds of EIDL files during the pandemic to obtain $70M in approved funding. We gave away free advice about the program to thousands of Small Business Owners. We spoke to hundreds of SBA Agents.
 
Since September 2022, we’ve assisted dozens of Clients and others with questions and problems with their COVID-19 EIDLs.
 
  • How many COVID-19 EIDLs did your CPA/Attorney process?
  • How many SBA Agents have they spoken to?
  • Did they read the SBA’s EIDL SOP (all versions)?
Where are you going to take that Jaguar now?
Facts of Forgiveness   Find out how congress is focusing on fraud vs. forgiveness despite business owners still struggling from the colossal impact of COVID.  

Advice from Trevor the Loan Officer: Obey The Speed Limit!

Working on EIDL Reconsideration files for more than a year, we’ve learned the many reasons that loans have been declined and why many Small Business owners are continuing to have tremendous difficulty with the SBA EIDL process. Simply, it’s mistakes folks make when completing their EIDL original applications.

Trevor, a 30 year veteran loan officer learned long ago to take his time when completing a loan application. He also learned long ago to triple check information, cross-verify documents and account numbers, and generally, obey the speed limit.

As a result, his loan applications have a higher rate of approval, including the many EIDL applications he’s submitted since last year.

The following two examples support our theory that Small Business owners are rushing and making mistakes.   Completing your application (or any other documents you submit to SBA) isn’t going to get you the money faster than the time you take to slow down to complete the EIDL application so that it’s accurate the first time. On average, Trevor spends approximately two hours to complete an application for each one of our clients.

Here are the actual mistakes…one of dozens and dozens:

“I put an incorrect phone number on my application because I sped through it.”
“In my rush…I put the bank account number (in place) of the EIN.”

Please slow down, pay attention and review and double-check the information you are providing to the SBA. They will not contact you to verify, they simply decline.

For information about Natural Disaster EIDL vs. the COVID-19 EIDL, please visit this page for information about that distinctly different process.

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.

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.

Planning and Projections for Your EIDL Loan

The request for a business plan can pop up at any time. We saw this before and during COVID. 
SBA was asking many EIDL applicants for Business Plans and Revenue Projections. Frankly, this is something you should have AT ALL TIMES if you consider yourself a Small Business Owner, even if you’re a “gig economy” Schedule-C Sole Proprietor. You can’t truly measure your success without a plan.

When Trevor was a 100% commissioned Loan Officer at a Mortgage Banking company, he had a 22-page Business Plan with Revenue Projections, and he was an EMPLOYEE.

We put together a list of questions for our clients so we can prepare the necessary information for their SBA EIDL applications.

We’ve developed questions to assist in preparing a 2021 Business Plan Summary and Revenue Projection:
SBA recently is asking many EIDL applicants for Business Plans and Revenue Projections. Frankly, this is something you should have AT ALL TIMES if you consider yourself a Small Business Owner, even if you’re a “gig economy” Schedule-C Sole Proprietor. You can’t truly measure your success without a plan.

When Trevor was a 100% commissioned Loan Officer at a Mortgage Banking company, he had a 22 page Business Plan with Revenue Projections, and he was an EMPLOYEE.

We put together a list of questions for our clients so we can prepare the necessary information for their SBA EIDL applications.

We are happy to share it with you here. Wishing you all SUCCESS in everything you DO!

We’ve developed questions to assist in preparing a 2021 Business Plan Summary and Revenue Projection:

QUESTIONS

  • What actions did you take in MARCH 2020 to adjust or “pivot” your business to survive the COVID-19 pandemic?
  • How did those actions help: have you maintained a steady flow of business, did your business decline?
  • Are you continuing those actions into 2021?
  • Have you originated new business concepts to continue your business productivity into 2021?
  • If yes, what are these new concepts?
  • How will the EIDL program assist you to maintain the continuity of your business?
  • How will the EIDL program assist you to support the “pivot” concepts you’ve created?
  • IF you never created any “pivot” concepts, would the EIDL program assist you/encourage you to do that? How?

REVENUE

  • What is the percentage decline in 2020 to your Gross Revenue from 2019?
  • What is the percentage decline in 2020 to your NET INCOME from 2019?
  • If your net income is lower, is that due to the pandemic? If so, how?
  • Without EIDL assistance, what do you anticipate to be your Gross Revenue in 2021 for EACH QUARTER?
  • With EIDL assistance, what do you project to be your Gross Revenue in 2021 for EACH QUARTER?
  • Will you incur new, different expenses in 2021 than you’ve had in 2019?
  • If so, what specific expenses and how much in dollars?

If you want more information about untangling how a business plan works, especially for financing purposes, click below for our business plan outline guide.

If any of our videos or blogs have been helpful, useful and productive, please leave us a positive review on our GOOGLE PAGE. It helps other business owners seeking vital SBA information for their business, not to mention, it’s a kind exchange of information.