Maseratis, Jaguars, Mercedes, Investments, Swimming Pools…. Getting Caught for PPP/EIDL Fraud.

The List Grows…. More Frontline Zeroes of the Pandemic.

In recent weeks, I have been writing about how some small business owners took advantage of the generous funding to help small businesses during the height of the pandemic (The Zeroes of the Pandemic). Each day, more and more light is being shed about those who have defrauded our nation with EIDL or PPP fraud and again, I wanted to share more examples of what some people tried to get away with that in essence, shut out many of our clients and small business owners who deserved PPP or EIDL funds. In most cases, their actions made it easy for the government to catch.

Part III – An addition to the Small Business Owners (Real or Fake) Who Are Accused or Convicted of the Largest EIDL/PPP/CARES Act Fraud

By Thomas W. Tramaglini, Managing Director at BRP Onesta

info@BRPOnesta.com

www.backofficedepot.com

www.thomastramaglini.com

About Thomas Tramaglini Introduction

Many small business owners benefitted from COVID Relief programs in 2020 and 2021. Specifically, over a $1.2 Trillion dollars were provided to small businesses through programs like the Payroll Production Program and the Economic Injury Disaster Loan. Yet, since the onset of these programs, the government has been going after small business owners who abused these programs. Either by submitting inaccurate and in some cases fraudulent documents or by misusing the funds small business owners, one by one the government is going after small businesses.

NBC Calls PPP Fraud the Biggest Fraud in a Generation

Recently, Ken Dilanian and Laura Strikler of NBC recounted much of the fraud which had occurred with PPP and suggested that prosecutors called PPP the largest fraud in U.S.

History.

“Even if the highest estimates are inflated, the total fraud in all Covid relief funds amounts to a mind-boggling sum of taxpayer money that could rival the $579 billion in federal funds included in President Joe Biden’s massive 10-year infrastructure spending plan, according to prosecutors, government watchdogs and private experts who are trying to plug the leaks.

“Nothing like this has ever happened before,” said Matthew Schneider, a former U.S. attorney from Michigan who is now with Honigman LLP. “It is the biggest fraud in a generation.”

Most of the losses are considered unrecoverable, but there is still a chance to stanch the bleeding, because federal officials say $600 billion is still waiting to go out the door. The Biden administration imposed new verification rules last year that administration officials say appear to have made a difference in curbing fraud. But they acknowledge that programs in 2020 sacrificed security for speed, needlessly.”1

These Small Business Owners Lied About The Number of Employees They Had

If you read the dockets on sites like Arnold & Porter, many of the cases involve small business owners flat out lying on their PPP applications about the number of employees they had. While I believe that this could have been a practice more prevalent than what is known, the cases also show falsified documents made to back up the claims for how many employees a company did employ.

I guess these people did not read much Mark Twain. Twain once said, “Honesty is the best policy – when there is money in it.”

Liliana Gonzalez Used PPP funds for a Swimming Pool

Liliana Gonzalez lied about the number of employees she had and used some of her funds to put in a new swimming pool. When audited about how Gonzalez used her funds, the US Department of Treasury found that clearly, she misused the funds.

In a plea agreement description, Attorney Goldberg said:

“You’re seeing picking and choosing to do audits, or they’re getting information through the affidavits in the paperwork asking for the forgiveness that doesn’t add up. So, that’s when you’re going to see prosecutions like this come out of the woodwork on a loan for $170,000,” said Goldberg.

The public loan information for the PPP loan Gonzalez received indicates she claimed to have ten employees at her home business. Each making more than $81,000.

The loan was supposed to help Gonzalez retain employees during the pandemic, but prosecutors say the information was made up.

“There’s a lot of paperwork and affidavits and things that have to be filed in the forgiveness portion. And that’s opening up people to more liability and, of course, scrutiny in looking at these loans closer to make sure that they’re being used for what was asked for and what the government allows,” said Goldberg.

The PPP loan was then used to build a swimming pool, according to prosecutors. Goldberg says prosecutors are pursuing more significant penalties and more time behind bars as a deterrent.”2

Robert Williams Sentenced to More than 10 Years for PPP Fraud

“According to court documents, Williams obtained federal loans provided through the CARES Act that resulted in a loss of up to approximately $2.7 million. Williams applied for these loans at Midwest Regional Bank, PNC Bank and submitted false information to receive funding.

The investigation included a review of numerous PPP loan applications and financial accounts during the summer of 2020. Williams completed and submitted approximately thirty different PPP loan applications that contained materially false statements and false supporting documents related to the ownership of a business and the business’ payroll including the number of employees and monthly payroll expenses.

Investigators also determined that Williams did not use the PPP loan funds for any appropriate business expenses but used funds for his own personal benefit including the purchase of vehicles such as a Maserati Levante and a Jaguar, F-Pace. Williams also assisted several other businesses in brokering and submitting fraudulent PPP loan applications. During the investigation the FBI seized approximately $466,000 and vehicles. Williams has also agreed to an order of restitution for $1,231,491.” 2

It is clear that the government is beginning to find more and more cases where small business owners submitted fraudulent documents in their applications.

In my two articles, I ranked my top 15 Accused or Convicted of Fraud. I am not sure were any of these “small business owners” would fall on that list. Either way, it is horrible to see the means that people went to in order to defraud those who really needed the help. I fully expect to continue to see more cases of small business owners who submitted fraudulent 941 forms or purchased things which were just dumb, like Lamborghinis and Jewelry.

For now, again in case you missed it, here is our “Top Fifteen Alleged or Convicted List for Pandemic Relief Fraud.”

1) ($14M) Apocalypse Bella (https://www.justice.gov/usao-sdny/pr/two-texas-men-and-one-oregon-man-charged-fraud-scheme-obtain-over-14-million-covid)

2) ($11.1M) Amanda Christian (https://www.justice.gov/opa/pr/twenty-two-charged-connection-more-11-million-paycheck-protection-program-fraud-scheme)

3) Charles Petty ($11.1M) (https://www.justice.gov/opa/pr/twenty-two-charged-connection-more-11-million-paycheck-protection-program-fraud-scheme)

4) ($11.1) Charmine Redding (https://www.justice.gov/opa/pr/twenty-two-charged-connection-more-11-million-paycheck-protection-program-fraud-scheme)

5) ($7.6M) Jacob Carter, Quadri Salahuddin, Anwar Salahuddin, Christal Ransom (https://www.justice.gov/usao-sdny/pr/four-defendants-charged-76-million-covid-19-fraud-scheme)

6) ($7.2M) Don Cisternino (https://www.justice.gov/usao-mdfl/pr/seminole-county-man-charged-covid-relief-fraud)

7) ($6M) Christopher Lick (https://www.justice.gov/usao-ndms/pr/starkville-man-charged-more-6-million-covid-relief-fraud-false-statements-and-money)

8) ($5.8M) Julio Enrique Lugo (https://www.justice.gov/usao-mdfl/pr/davenport-couple-charged-58-million-covid-relief-fraud)

9) (4.5M) Christina Burden (https://www.justice.gov/usao-ndca/pr/oakland-woman-charged-million-dollar-scheme-defraud-pandemic-relief-programs-struggling)

10) ($3.8M) Gregory Blotnick (https://www.justice.gov/usao-nj/pr/new-york-and-florida-resident-charged-38-million-paycheck-protection-program-fraud-scheme)

11) ($3M) Anuli Okeke (https://www.justice.gov/usao-edny/pr/two-former-employees-new-york-branch-major-bank-and-accountant-charged-cares-act-loan)

12) ($2.2M) Abdreq Aaron Lloyd, Russell Schort (https://www.justice.gov/usao-or/pr/two-oregon-men-face-federal-charges-pocketing-millions-covid-relief-fraud-scheme)

13) ($1.9M ) John Jhong (https://www.justice.gov/usao-nj/pr/sussex-county-man-charged-19-million-paycheck-protection-program-fraud-scheme)

14) ($1.6M) Alicia Ayers, Andrea Ayers, Traci Proctor (https://www.justice.gov/usao-sdny/pr/three-defendants-charged-16-million-covid-19-fraud-scheme)

15) ($1.6M) James Kyle Bell (https://www.justice.gov/usao-dc/pr/nevada-man-pleads-guilty-election-fundraising-scam-and-cheating-taxpayers-out-paycheck)

Source: Arnold & Porter, 2021 https://www.arnoldporter.com/en/general/cares-act-fraud-tracker

There are other people or groups of people who have been accused or convicted (some for more greedy amounts than below and can be found here: https://tinyurl.com/2d5rm823.

References

1 – https://www.nbcnews.com/politics/justice-department/biggest-fraud-generation-looting-covid-relief-program-known-ppp-n1279664

2 – https://www.winknews.com/2022/04/14/cape-coral-woman-pleads-guilty-to-ppp-loan-fraud-accused-of-using-money-for-a-pool/

3 – https://www.justice.gov/usao-edmo/pr/judge-sentences-st-louis-man-more-10-years-federal-prison-bank-fraud-conjunction

*Disclaimer to reader – We believe that every person is entitled to due process and until convicted of any crime, anyone accused should be innocent until proven guilty. All contents in this article, including names and claims were confirmed in by research through the United States Department of Justice or the State the person is accused from.

Dr. Thomas W. Tramaglini is the Managing Director for BRP Onesta, a company that supports small businesses. By offering a host of important and affordable services that small business owners tend to not have time to do themselves, the team at BRP Onesta can help small businesses grow infinitely. Although located in on the famous Jersey shore, BRP Onesta serves clients in all 50 states, Puerto Rico, Mexico and Canada.

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Damaging Mistakes That Small Business Owners Make When Financing Their Businesses

Business owners tend to rely on borrowing money to grow their businesses.  However, it is not without pain that many small business owners and entrepreneurs experience when borrowing money.  In this article, we explore a bunch of damaging outcomes that occur when small business owners borrow money for their businesses.  By sharing what we see every day from small business owners we hope to share some foresight for small business owners who wish to access financing for their businesses.

By Thomas Tramaglini, Managing Director at BRP Onesta
info@BRPOnesta.com
www.backofficedepot.com
www.thomastramaglini.com
About Thomas Tramaglini

Small Businesses Need Financing

The typical small business regularly seeks and utilizes working capital of some type to address various needs including growth.  A recent dataset from Anna Serio suggested that in 2021, 57% of small businesses sought financing in amounts less than $100,000.  In another recent article published by Fundera, nearly 3 in 10 small businesses fail because they do not have access the capital they need. 

So, small businesses need working capital to fulfil their short and long term needs and they seek funds in all sorts of avenues, from SBA loans to Merchant Cash Advances.  In 2021, we surveyed over 1,000 small business owners about their experiences with seeking funds for their small businesses. 

Our data showed several commonalities which were interesting:

  • 68.8% of small business owners said that they sought working capital without restrictions
  • 43.1% of the small business owners said that speed in receiving funds mattered over most other factors, including rate
  • 92.5% of small business owners we surveyed said they wanted an SBA loan but only 1.3% said they had received an SBA loan.
  • The most popular loan product sought in 2021 was a Line of Credit

What are the unintended consequences of borrowing money to finance your small business?

Clearly, small business owners look for financing for their small businesses.  The data supports our work with small business owners as they seek financing that is fast and easy.  However, many times small business owners face the unintended consequences of borrowing money.  From our data and experiences, we have put together a list of some different consequences that we see small business owners encounter when borrowing money. 

Using Personal Credit to Finance a Business

This is one of the biggest areas we encounter small business owners taking a hit.  Small business owners take personal loans and use personal credit to finance their businesses.  When small business owners finance their businesses using personal credit or personal loans they generate lower credit scores, reduce the amount of credit they can use for their personal lives and jeopardize losing everything.

Risking Personal Assets

This occurs when small business owners pledge their personal assets to back what they are doing for their businesses.  For instance, some small business owners personally guarantee loans they take or even worst, they collateralize their homes and savings.  When businesses cannot pay their bills, the lenders will come looking for you to satisfy your commitment.

Co-Mingling Company Credit with Joint Credit

Small business owners who have joint credit with other family members (such as spouse or children) run the risk of having people who are not associated with the business hurt the company’s credit or business owner’s personal credit.

Not Paying Your Bills on Time

Not making payments on loans or credit cards on time each time they are due can hurt your ability to borrow money for your business or attain vendor accounts. 

Using Your Family’s Money

Routinely, we see small business owners using their family’s savings or personal credit for their business.  Once this becomes a regular practice, business owners cannot carry enough cushion to get them through hard times if they come up.  The idea is that eating up your personal credit for business expenses weakens your safety net.

Failing to Build Corporate Credit Correctly

From time to time we find small business owners either confused or misinformed about how to develop corporate credit.  Incorporating your business allows your business to be separate from your personal wealth.  If one understands that there is a process for building appropriate corporate credit and follows that process correctly, it is easy to separate personal and business wealth.  However, often we see someone trying to build their corporate credit by getting a Uline account or a Grainger account and failing to harness how to build progressive corporate credit.

Trying to Accelerate Corporate Credit Too Quickly

Having adequate business credit takes time and many business owners try to build their credit too quickly.  It takes time to build corporate credit to levels where small business owners can access financing without a personal guarantee or strictly on their business credit.  Some business owners turn to just applying for corporate cards and getting declined, or those cards go on their personal credit.

Poor Follow Up on Building Corporate Credit

It takes effort to consistently build your corporate credit.  In many cases, small business owners fail to keep track of their progress and waste their business credit.  They tend to miss key benchmarks or elements that can increase their credit. 

Overextending Borrowing Capacity

There are many times we see small business owners take on debt and do not truly understand what that means to their profit margins, etc.  For instance, we see small business owners regularly take Merchant Cash Advances.  Those advances can carry 50-55% interest so if you do not have profit margins that would yield enough to make these MCAs work, then it is probably not a good idea.  We see small business owners utilizing these risky practices regularly. 

So what?

Small business owners want access to business financing but at what cost?  In this article we provided real things that happen when small business owners take on financing.  In many cases, small business owners never see what is coming until it is too late. 

The best financing programs for small businesses at those that utilize corporate credit, which carry low interest and that do not carry a personal guarantee.  To build adequate corporate credit, small business owners need to build their portfolio of tradelines which have a record of successful payments and depth.

To learn more about our programs that help build corporate credit, please click here.

References:

1 https://www.fundera.com/resources/small-business-lending-statistics

2 https://www.finder.com/business-loan-statistics

3 https://www.fedsmallbusiness.org/medialibrary/FedSmallBusiness/files/2021/2021-sbcs-employer-firms-report

Dr. Thomas Tramaglini is the Managing Director for BRP Onesta, a company that supports small businesses. By offering a host of important and affordable services that small business owners tend to not have time to do themselves, the team at BRP Onesta can help small businesses grow infinitely. Although located in on the famous Jersey shore, BRP Onesta serves clients in all 50 states, Puerto Rico, Mexico and Canada.

Applying for an SBA loan? What brokers and banks cannot do to small business owners.

Hundreds of thousands of small business owners apply for loans from the US Small Business Administration (SBA) each year. However, small business owners should know what SBA agents and banks can and cannot do before applying. This article shares some things that small business owners should watch out for when applying for an SBA loan.

By Thomas Tramaglini, Managing Director at BRP Onesta
info@BRPOnesta.com
www.backofficedepot.com
www.thomastramaglini.com
About Thomas Tramaglini

Small business owners are easy targets.

According to the SBA, over 50% of all small businesses have borrowed money in the past 5 years. And continually one of the most popular loan products we are asked about are the SBA 7a, Express, and 504 loan products.

One thing we regularly see is that many small business owners are taken advantage of by banks or brokers. With so much misbehavior and shenanigans out there, we wrote this article to outline several things that banks, and brokers cannot do to small business owners while they apply for an SBA loan.

Two reasons why banks and brokers take advantage of small business owners

The team at BRP Onesta helps small business owners start, maintain, and grow their businesses. Each year we see hundreds of small business owners who are taken advantage of for two basic reasons:

  1. Small business owners do not know the rules so they will do whatever is asked of them by banks or brokers.
  2. Brokers know that SBA loans do not pay much. That is, unless the SBA loan is for millions, merchant cash advances, equipment loans and term loans pay much better than SBA loans. Therefore, it is not uncommon for brokers to ask for up-front fees or due-diligence costs. In many cases, brokers lie to small business owners by telling them the costs are reimbursed at the closing or refundable if the loan does not fund.

Things that SBA banks and brokers would love to do but are prohibited from doing so.

Small business owners beware – these are things that small business owners we interact with typically are asked to do or participate in.

Due Diligence Costs: Due diligence costs are fees paid up front for legal fees before submitting the loan. Not only is this practice illegal,

Commissions, referral fees, broker fees: These fees are common in different loans, including equipment and real estate loans. Even Merchant Cash Advances and term loans have these structured in different ways. Banks are not allowed to charge any commissions, broker fees or referral fees. In some cases, fees can be assessed if provided using SBA Form 159.

Fees for legal services: Most banks do not charge fees for legal services unless the lender is being billed by an attorney at an hourly rate for set services.

Fees for services: This is a common issue with loan brokers who promise small business owners that they will be working on their SBA loan package for them. Sometimes these services can be approved if provided on SBA 159 (after loan approval) but up-front fees like due diligence are not allowed and illegal. If you are a small business owner and you are asked for an upfront fee, you are probably getting ripped off.

Add-On Interest is charged one time, in advance, and added to the loan balance. The amount of interest in not compounding or decreasing according to loan balance. This is not allowable. And while SBA loans do not allow for some early payback without penalty (usually because of the guarantee from SBA), SBA loan interest is based on balance remaining.

What do small business owners do to protect themselves?

It is imperative that small business owners do things to protect themselves as they apply for SBA funding. Even if small business owners do not get approved for an SBA loan, they should not be taken advantage of.

Small business support companies like BRP Onesta provide realistic, free origination on SBA and other loans. We are honest, care about the business owner, and work with the business owner to provide a pathway for funding, even if he or she is not ready.

If you would like to have free qualification review for an SBA loan, please contact us at any time. We can usually provide a pre-approval in 5 minutes.

Dr. Thomas Tramaglini is the Managing Director for BRP Onesta, a company that supports small businesses. By offering a host of important and affordable services that small business owners tend to not have time to do themselves, the team at BRP Onesta can help small businesses grow infinitely. Although located in on the famous Jersey shore, BRP Onesta serves clients in all 50 states, Puerto Rico, Mexico and Canada.

Increased PPP/EIDL Oversight: Three Things Small Business Owners Should Do Now.

In the State of the Union Speech this past week, President Biden called for increased oversight into COVID-19 Relief fraud. This article provides some details of what the government is doing to find EIDL and PPP fraud. We include several easy steps that every business owner should take to be ready for if and when they are investigated or audited.

By Thomas Tramaglini, Managing Director at BRP Onesta
info@BRPOnesta.com
www.backofficedepot.com
www.thomastramaglini.com
About Thomas Tramaglini

Joe Biden wants to be the new ‘Sheriff” in town when it comes to Pandemic Program Fraud

In last week’s State of the Union Address, President Joe Biden announced increased investigation of fraud in the Pandemic’s Relief Programs. Both borrowers and lenders need to be aware that the federal government will continue to work with the Department of Justice to find those who abused the system.

However, it should be expected that there will be more and more investigations coming.

Politically, with the government doling over $1.2 Trillion in EIDL and PPP funding it would make sense that the Biden Administration might try to score some easy points against greedy small business owners by showing that the Administration is tough and protects the American people from fraud.

Practically, as demonstrated by the Department of Justice and other organizations such as the Federal Trade Commission, some small business owners committed fraud. However, it is my guess is that there is plenty of fraud to be found as the government does not usually go after small business owners unless they know that they can find the fraud.

How bad was the Fraud?

The purpose of this article not to describe how inherent the fraud was but from what some watchdogs are showing, it was pretty bad. However, Yahoo Finance writer Dani Romero’s post on March 4 was pretty telling:

“Data from Accountable.US, a watchdog group, found that individuals with no employees, and making over six-figures annually – but received $20,833 in PPP funding, which was the maximum by the legislation.

Separately, a new paper published by the National Bureau of Economic Research reveals that was used accordingly. Of the $510 billion of PPP loans distributed in 2020, $115 billion to $175 billion went toward supporting jobs that would have otherwise have been lost, while about $335 billion to $395 billion ended up with business owners and corporate stakeholders, the paper found.”

The Department of Justice Coming Down Hard on Pandemic Relief Abusers

The government is promising to find those who cheated the government during the pandemic. I have written other articles on the schemes that some heroes of the pandemic have utilized. For instance, some business owners used fraudulent 940/941 forms which they submitted to banks and received funds. Other small business owners changed their business’ documents and were able to get funding (Several Examples Here).

Last week, the Department of Justice charged the CEO of an alternative lender MBE Capital with both fraudulent loan and lender applications. According to the docket, “Martinez [the CEO] used false representations and documents to fraudulently obtain the approval of the SBA for his company, MBE Capital Partners, LLC (“MBE”), to be a non-bank lender through the PPP. Martinez then used that approval to obtain approximately $932 million in capital to issue PPP loans and earn over approximately $71 million in lender fees. In addition, Martinez engaged in a scheme to obtain a PPP loan for MBE in the amount of approximately $283,764 through false statements regarding the number of employees of MBE and the wages paid to MBE employees and using the forged signature of MBE’s tax preparer. Martinez was arrested yesterday and will be presented today in Manhattan federal court before U.S. Magistrate Judge Katharine H. Parker.”

BEWARE! The DOJ is Showing Their Cards – They Are Using Data Analytics and Collaborative Tools Across Agencies to Find Those Worthy of Investigation

In several of the dockets and press releases that are available, the Department of Justice has indicated that it is using data analytics using collaboration between government agencies to find those who might have committed fraud.

I think that this is likely easy considering all they need to do is match data across databases. For instance, it cannot be very hard for the DOJ to match application data or funding data from the SBA to the information in the IRS. In fact, one of the reasons why so many EIDL expansion loans have been declined after approved for the original funding is because many of the applications could verify what the business owners reported on their original application to their taxes.

Could you be next?

Most small business owners who received their PPP or EIDL funds submitted correct and accurate data. Some did not.

It is surely plausible that small business owners did not try to defraud the federal government of Pandemic Relief Funds but made a mistake.

However, those who know that they used fraudulent documents or hired someone to submit the documents should understand that if the DOJ finds discrepancies that are blaring, expect an audit at a minimum.

“They are only going after the big fish” – NOT!

While the President in his State of the Union speech said he would be going after the most egregious cases, the database of fraud by Arnold & Porter suggests that there have been convictions with small business owners receiving as little as $10,000 in funding.

What does this mean for most business owners?

Most small business owners have nothing to worry about. However, with the announcement of more oversight and investigation, as well as the commissioning of a COVID-19 Fraud Enforcement Task Force and appointment of a Chief Prosecutor for Pandemic Fraud small business owners can expect that the government will be looking at two possible probes in their review:

  1. Were Pandemic Relief Program funds received legally?
  2. How were Pandemic Relief funds used?

Three things that small business owners can do to ensure they are ready for an audit or investigation.

  • Small business owners should review their loan application and forgiveness application to make sure that the proper loan amounts were applied for, received, and forgiven.
  • Some small business owners used a service or someone to apply on their behalf for their funding. Those who did this should know who did the application, what documents they provided, as well as have contact information for an auditor to contact.
  • Maintain a list with back-up of all expenditures which were made using the Pandemic Relief Funds.

Dr. Thomas Tramaglini is the Managing Director for BRP Onesta, a company that supports small businesses. By offering a host of important and affordable services that small business owners tend to not have time to do themselves, the team at BRP Onesta can help small businesses grow infinitely. Although located in on the famous Jersey shore, BRP Onesta serves clients in all 50 states, Puerto Rico, Mexico and Canada.

What is a Merchant Cash Advance (MCA)?

Working capital loans are important to small business owners as funds allow small businesses to expand or at a minimum become nimbler than it currently is. However, small business loans, especially SBA and bank loans are not easy to get so many small businesses resort to easier options like merchant cash advances. In this article, we describe in some depth merchant cash advances. We also provide some implications and offer lower cost avenues to borrowing money for small businesses.

By Thomas Tramaglini, Managing Director at BRP Onesta info@BRPOnesta.com www.backofficedepot.com www.thomastramaglini.com About Thomas Tramaglini

Lack of Lower-Cost Options for Small Businesses

In recent articles I have provided an overview of the lower-cost options available for small businesses. Loans such as SBA loans are rare. For instance, in 2021 there were over 32 million small businesses in the United States and only a little over 12,000 SBA loans funded in the same year. That means, that the funding rate to small business is 0.00038%. That comes down to about 1 in 37,000 chance a small business would get an SBA loan.

These are not good odds for the typical small business owner, unless you are comparing to getting struck by lightning (1/114,195) or dying in an airplane crash (1/205,552).

Barriers in Place Make Sure Small Businesses

Overall, small businesses asking to borrow money present high risk to banks. Most banks do not want to lend to small businesses because about 1 in 6 small business owners (Voigt & Campbell, 2017). So, for banks to get to the place where they feel comfortable, they ask for and analyze every piece of paperwork they can. Banks also use terms such as Global Cash Flow (which most business owners cannot determine) and require full financials (which most small business owners do not have).

In short, it is my perspective that unless a small business has millions in accounts receivable or years of showing profits of 6-figures, the likelihood of getting a small business loan is grim.

The Devil is in the Details

According to the SBA data from the 7a lending report, in 2021 SBA loans totaled around $6.3 Billion. In comparison, the MCA industry alone (Rumore, 2021) totals around $19 Billion per year. Therefore, MCA dollars are about 3 times more prevalent in lending than SBA 7a loans.

Alternative Loans or Online Loans

Because it is so difficult for small business owners to get a small business loan at a bank (see This Blog Post for Data), there are options that present a much easier route. One such option are alternative loans or online loans from lenders who offer much shorter terms (6 months to 5 years). There are many advantages to these loans (time, less paperwork, fast approvals) and you can learn more about or apply with the options listed here. It is important that if you want to apply for a term loan or line of credit with one of these lenders you speak with someone who has knowledge of these products. Although the approval process is relatively fast, these lenders will still ask for financials, taxes, and other documents. Further, you can assume you will receive a hard pull on your credit and in some instances, they will ask to secure your loan. Our team of advisors has the knowledge of the different programs out there, can explain your options, and will prevent your application from getting shopped around the internet which will hit your credit negatively.

The Merchant Cash Advance

A Merchant Cash Advance (MCA) is one of the easiest funding options for small business owners because MCAs are unsecured, do not require strong credit, usually do not require collateral, and also require little documentation (if any). The average MCA file can be funded within a day and usually requires several months of business bank statements.

An MCA is not a loan but an advance of a business’ future receivables. Lenders gauge how much to advance a small business owner in several ways, including previous credit card sales and revenue going into their business bank account. Variables such as industry, number of deposits, daily balances among others are used by the lender to hedge risk. Regardless, MCA lenders offer to advance a portion of a small business’ future sales as well as an agreement with the business owner on the percentage of future sales which are being sold to the lender.

Interest and Terms

MCAs do not carry interest. Advances carry factor rates, which are also called buy rates that are simply an agreement of how much of a small business’ future sales will be paid to the lender. Some advances may also collect repayment terms by taking a portion of business’ credit card receipts each day as well until their agreed sale of future receivables is completed. MCA payback frequency varies depending on the risk and bank account statistics. For instance, if a borrower wants to have a monthly or weekly payment the lender gauges that opportunity off the average daily balance of the business in the business bank account. When daily balances are variable or lower MCA lenders may require a daily payment.

Probably the most negative part of an MCA is cost of money. MCAs can be expensive. That is, MCAs can be as high as +50% in payback. Also, most advances carry origination fees for the work by the lender, which can be as high as 10% of the loan. MCA cost of money is like how credit card cash advances operate and, in some cases, better.

Advantages of MCAs

Merchant cash advances have several advantages for small business owners, and some can include:

  • Fast funding – Some MCA companies can fund small businesses in 90 minutes.
  • Most MCAs do not have UCC liens
  • MCAs are not usually reported on personal credit
  • Funds are unsecured
  • Payment frequency can be flexible at times
  • Most MCAs do not carry a personal guarantee
  • Easily refinance options which can cut costs
  • No early payback penalties
  • Small business owners can build a relationship with the lender ultimately securing better programing
  • Few required documents (including taxes) for funding

IMPORTANT – Speak to Someone with Expertise and Who Cares (without obligation or cost)

It is imperative to speak with someone who is impartial when it comes to your borrowing options. MCA brokers make money off of your MCA (Points added for MCA brokers to the buy rate and in turn the sell rate is 10-20% higher than the buy rate). Many of the rip-off and illegal collection activities of lenders have been exposed and prosecuted in recent years as well (SEC and FTC have become more involved in holding some lenders such as Quarterspot, Yellowstone Capital, and RAM Capital.

That said, you should speak to someone that knows about the different options and importantly, tells you what they believe you can be approved for and WHY! This includes should include SBA and USDA to MCA options.

Up front, I believe that phone sales can be very valuable, if the person calling you is ethical and follows the rules of calling.

However, if you are called and asked the following it is probably an MCA broker and you should think twice before engaging in their questions.

Common MCA Broker Script:

  • What industry are you in?
  • What is your average revenue?
  • How many deposits do you make a month?
  • How many years have you been in business?
  • How many positions do you currently have?
  • What is your credit score?
  • Do you have any bankruptcies or judgments?

Our Team Cares – We Offer Lower Cost Options

Are you curious about what you would qualify for or want a specific product? Call us at (888) 315-2822 or simply request a no-obligation call. One of our team members will go over what we believe you can qualify for. In many cases, you do not compensate us in any way as we participate in volume profit sharing with lenders and never pass those costs on to you. What that means is that if the buy rate is 25% (cost of money from the lender) we will not increase your cost 10-20% to arrive at a 45-50% sell rate. Most of the time we can even cut your current payments without paying interest on interest.

Importantly, we care and will never push you in the wrong direction. So, if you currently have an MCA or MCAs and you want to consolidate those MCAs, give us a call. If you want to save money on a new MCA, we can get you there.

References

(Rumore, 2021) https://businessdebtlawgroup.com/state-of-merchant-cash-advance-during-coronavirus-pandemic/

(Voigt & Campbell, 2017) https://www.nerdwallet.com/article/small-business/study-1-in-6-sba-small-business-administration-loans-fail

Dr. Thomas Tramaglini is the Managing Director for BRP Onesta, a company that supports small businesses. By offering a host of important and affordable services that small business owners tend to not have time to do themselves, the team at BRP Onesta can help small businesses grow infinitely. Although located in on the famous Jersey shore, BRP Onesta serves clients in all 50 states, Puerto Rico, Mexico and Canada.

7 Things Every Small Business Owner Should Be Ready for When Applying for A Grant

Small business grants opportunities are out there! In this post we address some critical things that might serve as a roadblock to a small business owner getting the grant they apply for.

By Thomas W. Tramaglini, Managing Director at BRP Onesta info@BRPOnesta.com www.backofficedepot.com http://www.thomastramaglini.com About Thomas Tramaglini

Grants: They are out there – but are you ready?

Small business owners ask us all the time for grants which they can apply for that will support their new or established business. That is why we always keep an updated list of grants on our website which every small business owner should visit regularly.

Yet, in many cases small business owners are not successful in attaining a grant.

Grants represent a great way to access capital for a business, however there are several things which small business owners should be aware of before applying. Below, we provide a list of some important things which will help any small business owner in their pursuit of a small business grant.

1. Do your research

The people who provide Grants to small businesses are usually from non-profits or the government. In most cases grants have a specific purpose. Many times, small business owners will just “Apply” for a grant without seeing what type of grant is out there. One simple thing to do is to use a grant database to find the right program to apply for.

We have a few grant databases here to conduct your search

Grantors want to give funds to those who help the organization reach its goals. Some of the best examples are grants that support minority small businesses or veterans. If you are neither then don’t apply because you surely will get rejected.

2. Think like a grant reviewer

A great way to think about your grant application when you write it is to think like a grant reviewer. That is, if you are going to be the person or team reviewing the grant you are writing what would they be looking for.

Most grants have a list of what they are looking for in the grantee. Take that list and make your own list of grant requirements and use that to guide your application. Even have someone else review your application with the list you provided as a guide. Most grants are graded on a scale or rubric, so this is a helpful technique when writing your application.

3. Keep accurate records of what you are applying for

One common mistake that many small business owners make is that they do not save information regarding what they applied for. Then, when the grant reviewer(s) asks questions, or for supporting documents, the small business owner shows either insincerity or disregard for the grant which leads to q quick decline.

So – Take notes. Keep a file. Do whatever is necessary so that you are ready when the grant reviewer asks questions or for supporting materials.

4. Grants are usually not like EIDL and PPP

Over the past few years, small business owners have had a taste of PPP and EIDL programs. For the most part, there were few guardrails which small business owners had with the pandemic funds being doled. Regardless, there were a bunch of knuckleheads who did not follow the minor rules (Actual Rules Here) and paid the price for it (Fake 940/941s. More Lamborghinis, Rolexes and Real Estate, Oh My).

Grants have technical components that one must usually follow, and nobody is entitled to grant funds. Grant applications should demonstrate that the business owner is worthy of the funds.

5. Make sure that you are writing like you can write

On many occasions I have seen grant applications declined because they are poorly written. I have sat on grant panels myself and seen some awful demonstrations of the English language. Nobody expects a trucker to write like F. Scott Fitzgerald but run on sentences, misspelling, failing to proofread, and just not being to the point is what I have seen kill an application. Even for the worthiest small business owner. So, if you have been writing using slang or short texting words, a word to the wise – do not use those in grant applications.

If you are unsure if you are writing a good piece, send it to me anytime and one of my team members or I will look at what you wrote (info@brponesta.com).

6. Make sure you have the following:

In many cases, grant organizations will ask for the following things. If you need any assistance with any of these things, which are pretty much what every small business should have regardless, contact our team of advisors now.

  • Articles of Organization or Incorporation
  • Corporate Financials (P&L, Balance Sheets)
  • Business Bank Statements
  • Tax Returns
  • Business Plan
  • Operating Agreements
  • Privacy Policy
  • 2 Year Corporate Financial Outlook
  • Website Address
  • Company Overview

7. Use a grant writer

Most small business owners are not grant writers. In fact, most small business owners do not have the time to write grants or are not experienced in writing grants. Therefore, companies like ours (contact our team of advisors as we write grants) exist to help small business owners.

We are well schooled in the grants that are out there, as well as how to effectively write those grants.

If you are a small business owner and you want us to write one or more grants for you, we have a bunch of different grants and grant writers who will help you at an affordable rate. If you are interested contact our team of advisors now.

Sign Up for Our Secret Sauce Newsletter for Small Businesses and receive the link to 1 Tradeline Who Gives Business Credit for Free Click Here

Dr. Thomas W. Tramaglini is the Managing Director for BRP Onesta, a company that supports small businesses. By offering a host of important and affordable services that small business owners tend to not have time to do themselves, the team at BRP Onesta can help small businesses grow infinitely. Although located in on the famous Jersey shore, BRP Onesta serves clients in all 50 states, Puerto Rico, Mexico and Canada.

What SBA loan should I apply for?

Although small business owners are interested in applying for an SBA loan, routinely they do not know where to start? In this article, we describe the different types of SBA loans and offer a list of lenders who directly fund SBA loans.

By Thomas Tramaglini, Managing Director at BRP Onesta
info@BRPOnesta.com
www.backofficedepot.com
www.thomastramaglini.com
About Thomas Tramaglini

SBA Loans – What type is best for you?

SBA loans have grown in popularity, especially since the pandemic. The number of small businesses who received funding from popular programs such as the Payroll Protection Program and the Economic Injury Disaster Loan, a previous analysis we did suggests that nearly 1 in 2 business owners have received funding from an SBA product.

However, don’t be fooled! Just because you received an EIDL or PPP loan does not mean you will qualify for a traditional SBA loan.

In fact, in 2021 the SBA reported that there were 32 million small businesses in the United States and only about 12,000 received an SBA 7(a) loan. So, about 0.038% of small businesses in the country did not receive an SBA loan. Since only about 12,000 SBA loans (7(a)) were doled out in 2021 it would suggest that banks are not so motivated to lend to small businesses.

Because this number is so low many small business owners choose to borrow using online or alternative lending options.

If you are a small business owner and you want loan options that are similar to an SBA but without the barriers of SBA, contact our team of advisors now.

Yet, if you are going to apply for an SBA loan, you should know what you are applying for.

Here are different SBA loan products which small business owners can apply for:

PPP and EIDL

Before I get into the other SBA loans, at least 5 times a day we are asked by small business owners if they can apply for the EIDL or if there is another round of PPP coming.

Currently, EIDL is still an active program. However, the date for new applications ended on December 31, 2021, and the SBA is only funding those who applied before that date. The majority of the EIDL applications being considered at this time are those who were declined originally and are in the reconsideration process.

If you are a small business owner and had your EIDL application declined: We have a high success rate of working with small business owners getting their declined EIDL applications funded – contact us and one of our advisors will go over your file.

The PPP program had 2 draws and small business owners would love to get another draw of forgivable funds. To date, there are no plans on providing another draw of PPP funds.

Sign Up for Our Secret Sauce Newsletter for Small Businesses and receive the link to 1 Tradeline Who Gives Business Credit for Free Click Here

The difference between EIDL and SBA loans

The major difference between EIDL and other SBA loans is that the EIDL directly comes from the US Department of Treasury and the other loans come from approved lenders. True SBA loans are loans from approved lenders guaranteed up to a certain amount (program dependent) by the federal government.

SBA 7(a) and Express Loan (same guidelines)

SBA 7(a) loans are the most common loan program offered by SBA. The SBA suggests that the 7(a) can be used for business real estate purchases, as well as short- and long-term working capital, refinancing current business debt, as well as the purchase of furniture, fixtures, and supplies. The maximum loan amount for a 7(a) loan is $5 million. Key eligibility factors are based on what the business does to receive its income, its credit history, and where the business operates. SBA 7(a) loans are not forgivable.

SBA 504

The Certified Development Companies/504 Loan Program provides long-term, fixed rate financing of up to $5 million for major fixed assets that promote business growth and job creation. 504 loans are available through SBA’s community-based partners who regulate nonprofits and promote economic development within their communities. CDCs are certified and regulated by the SBA. SBA 504 are repayable over 10 – 20 years and pegged to an increment above the current market rates. SBA 504 loans are not forgivable.

Microloans

The SBA microloan program provides loans up to $50,000 to help small businesses and certain not-for-profit childcare centers start up and expand. The average microloan is about $13,000. SBA provides funds to specially designated intermediary lenders, which are nonprofit community-based organizations with experience in lending as well as management and technical assistance. These intermediaries administer the Microloan program for eligible borrowers.

What are the most prevalent banks for SBA loans?

The US Small Business Administration keeps a list of their 100 most active SBA lenders on their website. So, if you are going to apply for an SBA loan, you need to know who to apply for the loan from. While this list changes frequently, here is a list of SBA’s most active 100 banks.

Not all banks are created equal

In 2021, 1,189 lenders funded SBA 7(a) loans. We work with over 100 SBA banks, and it is important that one knows what these banks are looking for. One does not simply just call the bank and apply for an SBA loan. Lenders can be particular in who they want to fund.

  • Some of the SBA lenders prefer that you do your banking with their bank
  • Some SBA lenders prefer to work with certain industries
  • Some SBA lenders only serve a region or a small area

Almost always better to use an Agent for an SBA loan

Using a specialist may be one of the best ways to attain an SBA loan. Specialists or “Agents” understand what goes into an SBA loan application. Agents like BRP Onesta specialize in both knowing what is needed for approval for an SBA loan and can help a small business owner prepare what is needed for the bank. In the end, small business owners will save a lot of time and money using an agent. If you have any questions or would like to apply for an SBA loan, we will help you.

Do you want to apply for an SBA loan? Do you think you are ready to qualify now? Do you want to find out if you can get pre-approved for an SBA loan before you apply?

If you answered YES to any of these questions, please contact our team at any time for a free, no-obligation phone consultation with one of our specialists. We will set up a time with you and go over what you are looking for, what we think you can qualify for, and what we can do to get you to the finish line.

We also have a host of small business funding opportunities, from equipment loans to small business grants which we keep updated each week (click here)

References

SBA EIDL Loan Data: https://www.sba.gov/sites/default/files/2022-02/COVID-19%20EIDL%20TA%20STA_02032022_Public-508.pdf

SBA PPP Loan Data: https://www.sba.gov/funding-programs/loans/covid-19-relief-options/paycheck-protection-program/ppp-data

SBA Office of Advocacy Data: https://cdn.advocacy.sba.gov/wp-content/uploads/2020/11/05122043/Small-Business-FAQ-2020.pdf

SBA Loan Descriptions: https://www.sba.gov/funding-programs/loans

Dr. Thomas Tramaglini is the Managing Director for BRP Onesta, a company that supports small businesses. By offering a host of important and affordable services that small business owners tend to not have time to do themselves, the team at BRP Onesta can help small businesses grow infinitely. Although located in on the famous Jersey shore, BRP Onesta serves clients in all 50 states, Puerto Rico, Mexico and Canada.

Are SBA Loans Forgivable?

In this article, we tackle SBA loan forgiveness. We identify what SBA loans are forgivable and how to get those SBA loans forgiven. This article is part of our series, SBA Loans for Small Business Owners: The Complete Beginners Guide, we share our experiences and expertise to answer questions that small business owners have about SBA loans.

By Thomas Tramaglini, Managing Director at BRP Onesta
info@BRPOnesta.com
www.backofficedepot.com
thomastramaglini.com

Business Owners Confused

Are you a small business owner that has an SBA loan? Do you receive an SBA loan in recent years? Is your loan forgivable? Are parts of your loan forgivable?

Business owners are confused and continue to be confused.

According to the SBA, there are over 31 million small businesses in the United States. Using SBA data, of the 31 million+ small businesses, over the last 5 years approximately 12 million loans have some sort of SBA tag to it. So, about approximately 1 in 3 small business owners have recently had some sort of SBA small business loan. We believe the percentage could be closer to 1 in 2 with the number of small businesses that the SBA Office of Advocacy also suggests that many businesses have no employees, or they may be dormant.

Since so many small business owners have a loan associated with the SBA in some way, we frequently are asked if they must pay back their SBA loan. As part of our blog series SBA Loans for Small Business Owners: The Complete Beginners Guide, we provide some simple answers below.

Sign Up for Our Secret Sauce Newsletter for Small Businesses and receive the link to 1 Tradeline Who Gives Business Credit for Free Click Here

Access to SBA Loans Blew Up in 2020

Before 2020, I am not sure if anyone had ever seen an SBA loan be forgiven. In fact, according to the Small Business Credit Survey suggests that before the Pandemic, only about 1 in 5 small businesses were actually able to secure an SBA loan of some type.

So, we know that since April 2020, the number of small business owners having some sort of associated SBA loan is 30%-50% higher.

Mass Confusion Prevalent

Regardless of your educational level, time in business or the size of SBA loan, it was and still is clear that small business owners are confused about what is forgivable and what is not. A recent report in the Wall Street Journal suggests that the majority of small business owners continue to be confused about SBA loans.

What is considered “Loan Forgiveness?”

The advisors at Brothers Road Partners LTD (BRP Onesta) are asked about Loan Forgiveness every day. Simply, Loan Forgiveness means that you do not have to pay back the loan.

With this definition, we still live by one tenet set by Managing Director, Thomas Tramaglini: Until the loan is forgivable, the business owner is responsible. This is good advice considering the confusion surrounding SBA loans.

What SBA Loans are Forgivable?

Below is a list of SBA loans (and we included advances/grants) we have helped our clients get or manage and whether or not the loans are forgivable:

Payroll Protection Program (PPP)

PPP loans were designed to provide an incentive for small businesses to keep workers on the payroll (List of PPP allowable uses). Like other SBA loans, PPP loans were underwritten, funded and forgiven by approved SBA lenders. So far, there have been 2 rounds of PPP available to small business owners. PPP loans are forgivable if the borrower spent the funds and can provide proof that the funds were used for the intended purposes. To date, about 87% of the PPP loans have been forgiven.

Getting your PPP loan forgiven is not hard as long as you used the money for what it was intended for. The SBA has made it easier to apply for forgiveness with the website https://directforgiveness.sba.gov/requests/borrower/login/?next=/ Depending on if the bank the PPP loan was funded from opts to use this portal, this site is easy to apply for the PPP loan through. Otherwise, each bank either directly has their own process (PNC Bank, Fountainhead) or may use a 3rd party for forgiveness (Scratch).

Verdict: Forgivable

Is your PPP loan(s) still not forgiven? Contact us today – we can help.

Click here to find out here whether your PPP loan or loans are forgiven.

Economic Disaster Injury Loans (EIDL)

The EIDL loan program was extended to Pandemic relief under the CARES and American Recovery Acts. EIDL loans are loans directly provided to small business owners by the US Department of Treasury. After the initial EIDL loans were provided for 6 months of working capital, the loan was extended to those who qualified for up to 24 months. The terms of this loan are 2.75% (non-profit) to 3.75% (for-profit) and go out to 30 years. This direct long-term loan program from the SBA is not forgivable.

List of EIDL allowable uses

Verdict: Not Forgivable

Do you need help with EIDL Reconsideration? Contact us today – we can help? We have helped numerous clients with their EIDL loans and loan expansion.

Misuses of EIDL and PPP Loans: If you are curious about some of the misuses of PPP and EIDL, I wrote a couple of articles on the topic:

The Front-Line Zeroes of the Pandemic: Ranking our top 15 EIDL/PPP SM Business Owners Accused or Convicted of EIDL/PPP Fraud

Fake 940/941s, More Lamborghinis, Rolexes and Real Estate, Oh My. More Fraud from PPP/EIDL

EIDL Advance | EIDL Targeted Advance | EIDL Supplemental Targeted Advance

EIDL Advances has been rolled out in a host of different ways. That is, the government has found different ways to provide funds set aside for small businesses. From $1,000 per employee up to $10,000 for any small business that qualified to more targeted small businesses that mainly drove funds to lower income areas generally, EIDL Advance programs have been intended to not have small business owners pay back funds. It is important to note that some EIDL Advances were rolled into PPP loans however, SBA guidance is all over the place on that topic, so our disposition is that if you received an EIDL Advance, you likely do not have to pay the funds back.

Verdict: Forgivable

SBA 7(a) and Express Loan (same guidelines)

SBA 7(a) loans are the most common loan program offered by SBA. The SBA suggests that the 7(a) can be used for business real estate purchases, as well as short- and long-term working capital, refinancing current business debt, as well as the purchase of furniture, fixtures and supplies. The maximum loan amount for a 7(a) loan is $5 million. Key eligibility factors are based on what the business does to receive its income, its credit history, and where the business operates. SBA 7(a) loans are not forgivable.

Verdict: Not Forgivable

SBA 504

The Certified Development Companies/504 Loan Program provides long-term, fixed rate financing of up to $5 million for major fixed assets that promote business growth and job creation. 504 loans are available through SBA’s community-based partners who regulate nonprofits and promote economic development within their communities. CDCs are certified and regulated by the SBA. SBA 504 are repayable over 10 – 20 years and pegged to an increment above the current market rates. SBA 504 loans are not forgivable.

Verdict: Not Forgivable

Microloans

The SBA microloan program provides loans up to $50,000 to help small businesses and certain not-for-profit childcare centers start up and expand. The average microloan is about $13,000. SBA provides funds to specially designated intermediary lenders, which are nonprofit community-based organizations with experience in lending as well as management and technical assistance. These intermediaries administer the Microloan program for eligible borrowers.

Verdict: Not Forgivable

Implications

Over the past two years our team at BRP Onesta has been hit with many questions regarding whether or not one has to pay back their SBA loans. In this article, I have provided an overview of different SBA loans and whether they are forgivable.

If you have any questions, you can contact us or reach out directly to SBA.

Do you want to apply for an SBA loan? Do you think you are ready to qualify now? Do you want to find out if you can get pre-approved for an SBA loan before you apply?

If you answered YES to any of these questions, please contact our team at any time for a free, no-obligation phone consultation with one of our specialists. We will set up a time with you and go over what you are looking for, what we think you can qualify for, and what we can do to get you to the finish line.

We also have a host of small business funding opportunities, from equipment loans to small business grants which we keep updated each week (click here)

References

SBA EIDL Loan Data: https://www.sba.gov/sites/default/files/2022-02/COVID-19%20EIDL%20TA%20STA_02032022_Public-508.pdf

SBA PPP Loan Data: https://www.sba.gov/funding-programs/loans/covid-19-relief-options/paycheck-protection-program/ppp-data

SBA Office of Advocacy Data: https://cdn.advocacy.sba.gov/wp-content/uploads/2020/11/05122043/Small-Business-FAQ-2020.pdf

SBA Loan Descriptions: https://www.sba.gov/funding-programs/loans

Dr. Thomas Tramaglini is the Managing Director for BRP Onesta, a company that supports small businesses. By offering a host of important and affordable services that small business owners tend to not have time to do themselves, the team at BRP Onesta can help small businesses grow infinitely. Although located in on the famous Jersey shore, BRP Onesta serves clients in all 50 states, Puerto Rico, Mexico and Canada.