3 Confusing Errors with the SBA

1. Was your EIDL Loan Declined for “Unverifiable Information?”

We’ve seen the latest SBA reaction to new EIDL applications and EIDL Reconsiderations: They decline the loan due to unverifiable information. Based on conversations we’ve had with SBA personnel and documents we’ve submitted, this appears to be mostly the SBA’s way of preventing fraud on these loans by requesting additional levels of documentation, essentially to prove it’s a real and legitimate business and not a fake farm in Maine.

Your best course of action follows the advice we continually give: Be patient and persistent with the process. We know you’re desperate for the money and in our professional opinion, SBA is overreacting to fraud by making all the legitimate businesses jump through hoops to get this desperately needed funding.

Be prepared to submit the following:

  • 2019 tax return
  • Signed IRS 4506T
  • SBA Form 2202 Schedule of Liabilities
  • Driver’s License
  • VOIDED check

Be prepared for other possible verifiable information about your business such as:

  • Articles of Formation
  • Proof of filing your EIN with the IRS or DBA certificates or other registrations with your town, city, county or State
2. How to submit your Driver’s License to the SBA for your EIDL loan or Reconsideration

Since December, we’re seeing more and more that SBA Loan Officers are requesting an image of your Driver’s License by way of an actual smartphone photo that you snap and email directly to the Loan Officer. In other words, they won’t accept a PDF. As with our other video about “unverifiable information” this appears to be yet another level of fraud prevention on the part of SBA to confirm that you are a legitimate and real person.

3. Wet Signatures and your SBA EIDL Reconsideration

More and more since February, on the many Reconsiderations we’re working on, the SBA loan officers are requesting an ink or “wet” signature on forms and documents you submit. In other words, they’re not accepting electronic signatures. For the average Small Business Owner, this might not be much of a hassle, unless you don’t have access to a printer and scanner.

Many folks these days don’t. It’s certainly inconvenient for our process at Aurora Consulting since we’re busy assisting our clients on their Reconsiderations and preparing their documents and sending to them for electronic signatures so they can keep running their business to keep their business alive during the pandemic.

As we have always stated in our documents submission videos for the SBA Reconsiderations: Be sure you sign and date your forms and now, more than ever, sign with a pen, scan it and submit it.

Information keeps changing because procedures keep changing.

Tracking Receipts for Your EIDL Funding

The question posed by an anxious Small Business Owner: “Do we have to turn in receipts for everything we spend on the advanced GRANT? If I get it, I’m scared to make sure I document everything properly that I need to. How are you spending yours? I’m unsure where I can use it and what’s off limits.”

Even though the “Advance” technically doesn’t have to be repaid, it’s still considered part of the EIDL program by SBA.

Therefore, in common sense terms you should keep records and receipts. In general business terms: Why would you NOT keep records and receipts? These are tax deductible items after all since they’re expenses against your business income. AND…tracking income and expenses is an essential monitoring tool to grow a business.

How can you know if you’re earning and growing if you’re not tracking income and expenses?
These are the reasons why it makes perfect business sense to track receipts and to keep good records.

Our opinion: There’s been so much confusion around these programs, mostly due to SBA’s terrible messaging and lack of clarity on these very questions. It’s disgraceful that we all have to hunt around the internet to collect “anecdotal” evidence from other Small Business Ownres to educate ourselves about the important fine points of these programs.

There should be a simple to read guide on the SBA website that anticipates and answers these questions.

We’ve had clients telling me since last April how they’re “terrified” of using their EIDL monies incorrectly. That’s an absolute shame.

In the early days we were more forgiving of SBA’s failures because, well, it was COVID and EVERYONE EVERYWHERE was overwhelmed. But a year into this thing you’d think SBA would have gotten its act together, especially in the light of their allocating SBA staff to contacting EIDL Borrowers for “Resolution Letters” and “Hazard Insurance” (good luck getting a definition of what that’s supposed to be!).

How about, instead of wasting tax dollars on staff salaries for that nonsense SBA allocated those folks to processing the loans? Or that they invested tax payers’ money on creating online materials that’s accessible to every Borrower and interested prospective Borrower with clear, detailed information on the EIDL and PPP programs?

Short answer: The terms of the EIDL Agreement are clear: receipts and records can be requested by SBA in the future.

Seriously, if we ran our respective businesses this way, we’d be OUT of business.

Reconsideration Step by Step

Please find below our point by point recommendations on how to to submit your Reconsideration request to SBA:

  • NEVER file a 2nd application. You must only submit a Reconsideration request.
  • Send an email to PDCRecons@sba.gov with your request
  • In the SUBJECT LINE put: “Reconsideration: EIDL #XXXXXXXX
  • In the body of the email state simply:
    “I hereby request a Reconsideration of my EIDL Loan #XXXXX.  Please find attached the following documents:”
    (    LIST YOUR DOCUMENTS)

Documents to include:

  • Credit Authorization letter (see below)
  • Credit Explanation letter (see below)
  • IRS 4506T
  • SBA Form 2202 Schedule of Liabilities
  • Business Plan summary (see below)
  • Business Revenue Projection (see below)
  • VOIDED check
  • 2019 Federal tax return (all pages)
  • 2020 DRAFT tax return (all pages; indicate DRAFT)
  • Clear, color scan of front and back of Driver’s License

Your Reconsideration letter should be SUPER SIMPLE. Don’t overload the Loan Officer with details of your struggle.
Keep your explanation to a few concise sentences, such as:
“My business was a new enterprise. We were beginning to produce and sell product when COVID-19 caused a severe economic injury.  We have pivoted our Business Plan to adapt to the challenging circumstances of the pandemic (see attached Business Plan Summary and Revenue Projection). We need assistance from the SBA EIDL program to help us to move forward and survive the pandemic. If we do not receive this assistance we will likely fail as a business. If we fail, our employees will be out of work and our business will no longer contribute to the fabric of the American economic community.”

  • CREDIT AUTHORIZATION wording: “I hereby authorize SBA to obtain an updated credit report for my EIDL Reconsideration.”
  • CREDIT EXPLANATION: Do not discuss your credit score.  Simply address the challenges in life and/or business that affected your ability to pay credit accounts on time.  For example: “In early 2019 I experienced severe financial crisis due to (DIVORCE/MEDICAL/JOB LOSS/ETC).  I have worked to improve my credit.”
    KEEP your explanation short, and concise. The Loan Officer will not “judge” you; they simply require an acknowledgment  of your previous credit history problems.
  • Business Plan Summary: Keep it concise and explain the changes you made to adapt to the pandemic and how your business will succeed with these same challenges over the coming 12-24 months.
  • Business Revenue Projections: Broken down by Quarter with annual totals for the next 12 months.
  • SBA Form 2202

Be sure to include on EACH explanation letter your full name, Business name, Business address, EIN and EIDL #.

Sign and date EACH document, including tax returns. WET signatures are preferred.

Next steps after submitting:

After 5 calendar days, call SBA to confirm receipt. At that time SBA Agent might give you feedback on status, but probably too soon.
Be sure to check SPAM folder as SBA emails often wind up there
Be patient with the process. Timelines for Reconsiderations can be all over the map: days, or weeks, or months.  Patience and persistence are the key characteristics of success with SBA EIDL Reconsiderations.

I hope you find this information useful!  If this process seems overly complicated or onerous, our Consulting program covers all aspects of Disaster Relief Financing, including Reconsiderations, and PPP loans, State and Local Grants and any other Stimulus programs to help a business to survive this horrible disaster.

Calm, Cool Heads Collect During COVID

A word (or two, or more) of advice from a financing professional of 30+ years: We strongly recommend, before you act out of desperation and anxiety, please take a moment, slow down for a moment and take care of how you handle your decision-making process when applying for the second PPP loan and any other Disaster loans.  The money’s not going anywhere.

Back in April, we managed 25+ businesses for EIDL and PPP applications. We now have close to 100. At the time, when The CARES Act rolled out we waited before submitting applications. As a result, our clients received substantially more money than if we used the “math” and other guidelines in the first days of the roll out.

If you scroll any online groups specialized in disaster financing, you will see all the confusion among business owners about the program.  There’s no clear guidance on the SBA website.  There’s no clear guidance from Lenders/Banks no matter how good they relay their message.

We’ve had so many calls with one of our trusted lender resources about the placing of new PPP loans either with his bank or elsewhere. This is the professional who, last April, provided us with the final ACCURATE guidance on how to calculate PPP application numbers.

We like the Carpenter’s Rule: “Measure Twice, CUT Once.”

Take your time; take care with your applications.  Trevor followed this rule for his 30+ year career as a Mortgage Banker and it helped him to literally make Dreams come true for First Time Buyers.

For our part, we haven’t submitted a single Forgiveness application yet for our clients because we’re waiting for the new Legislation to kick in which guides Forgiveness NOT to subtract the EIDL Grants from the Forgiveness amounts.

We encourage you all in the strongest, most honorable and passionate and sympathetic terms possible: SLOW DOWN. Take your time and apply when you have all the facts.

We know that it is worth the wait.

5 EIDL Reconsideration Updates 

We’re working on quite a few Reconsiderations for our clients. Here’s some advice for you all based on our recent conversations with SBA Agents and documents requests from the Reconsideration Team at SBA:

  • IRS 4506T: The IRS is requiring a “wet” signature on the form. That means you have to physically sign a paper version with a pen, scan it in to your computer and submit. We’ve been using DocuSign for our clients’ forms successfully for the most part, but recently hit a snag with one file where the Reconsideration Team kept requesting a new 4506T. In my conversation with an excellent SBA Agent, she revealed this concept of the “wet” signature. Trevor was a Mortgage Loan Officer prior to our Consulting business and we’ve used DocuSign for years. Oh. Well.
  • Revenue Projection and Business Plan. We’ve noticed from posts in a Facebook Group and now with two of our own clients that SBA is requesting a revenue projection for the next 12 months. Between you and me and the wall, I’m not sure how any Small Business can project revenue during an ongoing pandemic, but SBA is asking for it. We haven’t determined yet how we’re going to respond to this request. The “Business Plan” aspect can, according to SBA, be a simple narrative of how you’re keeping your business running.
  • SBA changing over the online portal the weekend of JAN 15-17. We’ve already noticed glitches in the online portal over the last few weeks. One SBA Agent opined this is probably the result of the system changeover. To that end, we recommend not submitting a new EIDL Application, or uploading requested documents through the portal, or submitting a new Reconsideration until after JAN 18. That’s our strategy for our clients, anyway.
  • Funding Approved EIDL loans. For most of the past 10 months we’ve seen our clients receive funds within 48 hours of signing Closing Documents. In two instances in the past two weeks, funding took 5 calendar days. Nail-biting continues during the disaster.
  • Continuing confusion of the EIDL Grants. We read an excellent article in an NFIB blog yesterday. The author sought to clear up this ongoing confusion about the $10,000 CARES Act EIDL Grants that many businesses either did not receive or received only partial amounts. Add to this the confusion over the NEW EIDL Grants under the Second Stimulus Legislation.

While we believe the NFIB is a “trusted resource” we defer to our own Chief Financing Rock Star, Trevor Curran who has 30+ years as a Mortgage Loan Officer originating Government loans: wait for the official Governmental guidance.

SBA has not yet released any rules regarding these EIDL Grants. There’s no update on the SBA website, and nothing in the email newsletter we received this morning from our SBA Regional office. While your anxiety over getting this much needed money continues (we feel your pain, we were shorted the Grant too!), our advice is to continue waiting for the official guidance from SBA on this matter.

We’re happy to share our professional experiences to provide vital—albeit anecdotal—information that you can use to achieve a successful result with your SBA EIDL and PPP requests! We hope this information helps!

 

Submitting documents to SBA

If you’re submitting documents to the SBA, you’ll  need to do it the RIGHT way to ensure a smooth process! Here’s our advice (based on Trevor processing loans for over 30 years) on the best way to submit documents:

1. PDF ONLY. No photos, no other file types. With the volume of documents and applications they’re working on, SBA Loan Officers simply do not have the time to convert your documents to PDF. They’ll probably set it aside until they have time.

2. Separate PDFs for separate documents. A PDF of a voided check should be separate from a PDF of a photo ID and etc. When SBA has to separate your documents from a single PDF it slows down your entire process.

3. Label the PDF on your end. For example of a labelled PDF: “COMPANY NAME YTD Income Statement JAN 1 to SEP 30 2020” or “COMPANY NAME Voided Check”

4. List the documents you’re submitting in the body of the email. For example, SUBJECT LINE: “Company Name: Documents submitted DATE”. Then, in the body of the email: “Attached to this email: YTD Income Statement JAN 1 to SEP 30 2020, Voided Check, Photo ID”

5. We recommend using the NOTES App on your iPhone to scan documents. Ridiculously easy.

6. BEST Scanning app of all: “ADOBE Scan” which you can download to your smartphone from your respective app store.

7. When scanning with your smartphone, keep the document within the scanning borders. Most often the scanning app will give you a highlighted “border” for the document.

8. Always scan documents on a flat surface and scan straight, not slightly tilted.

Watch our WTF Wednesday video where we discuss why these are important.

For a Smooth Ride

7 Tips to Submit Documents for Your EIDL Application

Grab these 7 tips to better prepare you on how to submit you documents to the SBA. You have to guide SBA to an approval. We've seen that they don't try to make it work if something is confusing or sloppy; they easily decline.

Frustrated with Calling the SBA

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

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

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

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

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

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

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

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

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

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

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

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

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

What To Do If Your EIDL Loan Was Declined For CREDIT?

We’ve had many interactions and exchanges with the SBA about clients whose EIDL loan was declined due to a low credit score.

What can you do if that happens? Our EIDL Blueprint is a guide for you to work through this process.

1. Ask for a Reconsideration. Often EIDL loans are automatically rejected by the computerized underwriting system. What you want is a human being to review your loan request. You get to a human by requesting a Reconsideration.

2. Prepare a Reconsideration letter. At the top of the letter include your name, company name, address, EIN (or SSN if you’re Self-Employed), and EIDL Loan number. REMEMBER: all your information must exactly match the information you inputted on the SBA website when you applied for the EIDL loan. If your name was not included as an owner or Authorized Preparer, then you cannot write the letter; only names that were inputted on the original EIDL application.

3. In the body of the letter, keep it short and concise. Request a reconsideration due to your credit explanation. Write a brief credit explanation in the next paragraph. For example, something like this, “The late payments on my credit report and the resulting lower credit score were directly a result of the COVID-19 pandemic. My income/revenue dropped dramatically and I could not pay my bills on time.”

4. Keep your credit explanation short. If you have any documentation that supports the explanation, be sure to include PDFs of that documentation with your request.

5. Sign and date the letter.

6. Send your request to pdcrecons@sba.gov.

Our advice is this: no matter how bad you think your credit is, do not lose hope. Request a reconsideration no matter what!

Can I Apply For Another EIDL LOAN?

We received this question on Twitter:
I already received an EIDL loan. Am I eligible to apply for another?

The History of the Economic Injury Disaster Loan (EIDL) PROGRAM was that it was established back in 1953. It was created for individual disasters declared in any one of the United States causing homeowners and business owners an economic injury .

For example, this month it may be a tornado in Ohio county. Two weeks from now it could be a flood in the state of Mississippi.

COVID-19 created its own unique disaster. The Small Business Administration (SBA) responded by offering an EIDL loan for the pandemic. We make this distinction because we want to answer this question accurately.

The fact is, you can apply for  multiple EIDL loans, according to the SBA as long as they are for different disasters that have affected you.

In other words, if you received a COVID-19 EIDL loan in April, but your county was affected by a tornado in September (and it’s declared a disaster area), then you can apply for another EIDL for the tornado disaster. We confirmed this with the Small Business Administration (SBA).

You cannot apply for more than one EIDL LOAN for the same disaster. However, the SBA has a provision for up to 24 months (or two years after the disaster), for you to request additional funding above the amount of your original EIDL loan.

Let us know if this is helpful and what other disaster financing questions you may have.

How to Apply for an EIDL Loan

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