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.

Ambiguity and Uncertainty

Ambiguity and uncertainty are not words that Small Business owners embrace in their daily vocabulary. Even fishing professionals, sailing the chilly vastness of the North Atlantic in search of Cod, Haddock and Mackerel, don’t use those words. They set out on their fishing forays with a sense that they will find fish using their experience and knowledge, helped along by some modern technology.

Call the SBA with a question that requires a definitive answer, though, and you get an uncertain or ambiguous answer. Call multiple SBA representatives with the same question and get multiple answers.

Small Business owners have come to rely on the SBA during the COVID-19 pandemic to provide a vital financial lifeline to keep their businesses alive as they struggle with the various challenges of the pandemic disaster. When a Small Business owner asks questions, whether they’re general questions about the EIDL process, or specific questions about the Small Business’ EIDL application, they expect specific and hopefully detailed answers.

Question to the SBA: “Now that the loan will be declined for Reconsideration because the IRS hasn’t processed the tax return, how long does the applicant have to file another Reconsideration?”

I don’t even remember what the answer was because it was so vague and ambiguous.

“Good morning SBA, what is the current turnaround time, on average, for EIDL Reconsiderations?” or
“Hello SBA, if I file a Reconsideration request today, how soon can I expect that my file will be assigned to a Loan Officer at the Reconsideration team?”

The Small Business owner cannot get reasonable or certain answers to these questions.

Trevor worked in retail electronics in the 1980’s in customer service. When a customer brought a VCR or stereo system in for repair, he could provide the customer with a reasonable expectation for turnaround time for their repair. Even if they had to order parts for the device to repair it, they could know within a reasonable range of time, when those parts were due to arrive and when the technician could be expected to complete the repair.

They knew the repair intake process, the repair tech servicing queue, the quality control check process, and even when the product was on the truck for delivery back to the store for customer pickup. And this was with electronics repairs where anything could happen with the electronic device once it was on the repair bench and the tech tried to solve the repair problem.

Customers had a reasonable expectation to receive unambiguous information about the repair process.

“Hi there SBA! Can you please give me a status on my EIDL Reconsideration file?”
The Answer most often: “In process.”

What does that mean? Where in the process is the file? Has a Loan Officer reviewed the tax returns, read the transcripts from the IRS, etc.???

As a Mortgage Banker, Trevor knew every step of the way where the Applicant’s file was in the loan process: appraisal on order, appraisal received, verifications received, submitted to Underwriting, quality control review, clear for closing, and etcetera and etcetera.

While writing this blog, one of our clients for Reconsideration sent me a text message,
“This is like the old Heinze ketchup commercial, ‘Anticipation, it’s making me wait.’ Guessing no news is good news?”

When a Small Business owner begins their business day, they do so with a clear understanding of how their business operates, what they have to do to achieve their business goals, and their certainty in their methods for success. When they run up against the constant lack of clarity and certainty with their urgent EIDL financing requests at the SBA, their COVID crisis anxiety increases exponentially.

This is unacceptable.

The Small Business Administration, in its mission to advocate for Small Business, needs to do a spectacularly better job of providing clarity and specificity and to remove ambiguity and uncertainty from the process.

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 [email protected] 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.

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.

Small Business Must Roll the Dice

This comment in an online forum about SBA EIDL loans says it all about two key concepts:

“…who knows what this winter is gonna be like here so I’m afraid to give it back yet.”

The business owner has EIDL monies left over and had considered (oh so briefly) prepaying the loan with the remainder of the monies. And then the new surge hit.

Concept #1: Utilization of EIDL monies as a way to replace lost revenue for working capital due to the COVID-19 pandemic. There is no finish line; no concrete timeline; complete uncertainty.

If you have not used all your EIDL monies, we recommend holding on to the funds through the coming months. You want to have a better understanding of a “diminishment” of the COVID-19 pandemic to such a level that there’s no fear of upcoming possible lockdowns where you have to close your business. Likewise, to know there’s no upcoming lockdowns to gauge if you will have customers coming through the door.

Concept #2: “who knows what this winter is gonna be like…” speaks to the SBA’s continuing failure to recognize the drastic difference of this disaster from all “traditional” natural disasters. The EIDL processing guidelines and the Loan Agreement and the lack of clear, unambiguous guidance on how to use the monies from and EIDL all need to be addressed by the Administrators of SBA.

We’re eight months into this pandemic; that’s more than enough time for this Federal Agency to have created at the very least some better guidance on how to use the monies beyond stating, “Working capital” in the Loan Agreement.

Business owners are terrified to use the funds incorrectly, many of them saying, “I don’t want to go to jail!” This is absurd.

SBA! Please, please, please, we are begging your Administration, recognize the unique features of the COVID-19 pandemic disaster and modify your guidance for EIDL funds so that business owners can use the money without fear of contravening the terms of their Loan Agreements!

We’re all holding on out here for this disaster to end. We’re all holding on out here, trying to survive and keep our business’ doors open. We’re all holding on for more detail from SBA and a resiliency to the fact this disaster is like no other disaster in American history.