Businesses around the world, be it big or small, are equally affected by the Coronavirus. Fortunately, there are still disaster loans available to help mitigate some of the costs that businesses still incur despite lockdowns. In this episode, Merrill Chandler is joined by Jessica Tabora, a Business Manager at CreditSense, to discuss fundability despite the rise and fall of the economy. Jessica enumerates the three different loans that can be availed by businesses—Paycheck Protection Program (PPP), Economic Injury Disaster Loan (EIDL), and Express Bridge Loans (EDL). Currently, lenders are tightening up lending protocols but are still lending to dependable borrowers. That is why if you are thinking of applying for a loan, you must evaluate your need because lenders can eventually see that and may affect future fundability.
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Economic Injury Disaster Loans: The Latest Updates With Jessica Tabora
I did a Facebook Live with my partner and CFO Jessica Tabora about more offerings from the SBA in their EIDL, the Economic Disaster Relief Program. I start at the 10,000-foot level and talk about not just the loan solutions but how to show up in a way that lenders are going to look at you. You need to watch this FBL, the main thing that I share is that everything we’re doing right now is compacted. The better you perform, the borrower behaviors you do are going to be far more meaningful in the future and your future funding approvals. Your fundability can go through the roof or can decline based on how you show up. We’re going to drop right into the FBL with Jessica Tabora and learn because the things we talk about there are timeless. We went through 2008. I went through the dot-com of the early ’90s. This will happen again. Read the strategies and the learnings that are going to help you be fundable whether the economy is up or down.
I want to welcome you to this episode of The Get Fundable Crisis Fundability Updates. I have the unique and special pleasure of having my subject matter expert join us so that you get all of the I’s dotted and T’s crossed when it comes to what’s going on out there especially the loans and things that are being offered from lenders, government, and SBA, etc. Big picture, first of all, the five truths that we know and we’re operating from at Get Fundable is that lenders are tightening up lending protocols. They always have when there’s a small contraction but they’re not lending. They’re lending to the people who have proven over the last 24 months lookback period. The people who they’ve been able to depend upon in treating their money with deference, respect, and who have used this time of expansion and kept their borrowing behaviors in alignment with their funding guidelines.
They’re still lending to those people. Fact number two is that they’re changing who they’re giving more money to. It’s based on history. Number three, our clients, our students, the people who are implementing the coaching and borrower behavior, the bootcamp, training, and things that we have given them, the people who’ve read my book, they are still getting approvals and automatic increases. Every single day, when my team meets, we’re getting feedback from clients who are still getting increases in credit lines. They’re choosing to give more money to the people who are behaving with the borrower behaviors with the highest chance of success and the lowest possible risk. Those are the things we keep talking about. Human beings, we are wildly resilient. Everything, every Facebook Live we do, every episode that I do, every message we’re sending out there is that we’re not throwing in the towel and neither should you.
Don’t lose hope. There is so much that we can do to improve your chances so that you can survive, thrive, and prosper. Napoleon Hill said, “Every adversity carries with it the seed of equal or greater opportunity.” Remember that slingshot effect I keep referring to. I’m going to refer to it every single time. We are here to see how we can pull back and draw this dynamic tension that the markets and COVID-19, everything out there is compressing. Does anybody know what the Bernoulli effect is? The Bernoulli effect is about fluid dynamics. It says that the tighter the aperture, the greater the force of the liquid. It’s like you put your finger on a hose and you are able to spray 20 to 30 feet from the same amount of water coming out of that hose, that’s the Bernoulli effect. The same thing happens here. The tighter the pressure, the more force of creativity, the more force power, the more force there is to break through some of our limiting beliefs, some of our older or more antiquated behaviors and activities.
Now is the time to pop the top off of this and make this an opportunity to continue to grow. This is why I brought Jessica Tabora. She’s my Partner, Business Manager, and plays the role of CFO as well in our organization. In her due diligence, we agreed as an executive team that she be here to give you the nuts and bolts and giving you an update on the PPP, the Paycheck Protection Plan that we did. She’s going to bring us some more information on the EIDL. That EIDL is the Economic Injury Disaster Loan. I’d like you to welcome Jessica Tabora. Jessica, talk to us about what the differences are in between the types of loans that are being offered. Can we do one or the other or both? Fill us in on what’s happening out there in your experience as doing research for us that we can pass along to them?
First of all, one of the application requirements should be if you can say Economic Injury Disaster Loan five times fast, you automatically get it.There's more room for forgiveness in paycheck protection, but it takes longer. Click To Tweet
You’re on the fast track to approval.
With the CARES Act, there are three different offerings. It’s the Paycheck Protection Program, the Economic Injury Disaster Loan, and then Express Bridge Loans. The Express Bridge Loans are only available if you already have a business relationship with the SBA. If you already have a loan and it goes up to $25,000 and it’s a quicker turnaround time because the SBA already has your information. The two that we are focusing on are the Paycheck Protection Program which Merrill spoke about on Facebook Live and then the Economic Injury Disaster Loan. With the EIDL loan, you send in your application and you are eligible for a $10,000 advance, which will get to you a lot quicker. While that is sent out to you, the SBA is still reviewing your application, reviewing the business documents that you’ve sent in, and they decide how much you get for your business. They take into account how much it’s going to take your business to operate for six months, and then get that to you. You’ve got that $10,000 advanced and right upfront.
I understand that that’s like, “Thank you for applying. Here’s your gift of $10,000.” Whether you are approved for the larger amount, you get to keep this tax-free for a loan that’s forgiven.
The $10,000 depends on what you use it for. The Paycheck Protection Program is used for tax, utilities, and rent. If you use it for that, you have the ability to refinance that part then and haven’t forgiven.
You’re saying I can’t take my long away trip to Australia with that $10,000 and wait the COVID out.
That is the EIDL Loan in a nut. You can apply for both. SBA says that small businesses are eligible to apply and be approved for both the Paycheck Protection Plan and the EIDL. Here’s a great breakdown of the two. One thing I want to point out near the bottom where it says collateral, these EIDLs are subject to getting a UCC lien put on there. However, the Paycheck Protection Program is not.
Let’s take a look at that. Some people don’t know what the UCC lien is. UCC means Uniform Commercial Code. A bank or private lenders has the right to file paperwork with your state. That’s the Uniform Commercial Code at each state. At the state level that you’re declaring a lien against assets in that organization. For our Funding Hackers, clients, those types of loans may limit other types of loans that you can get from your lenders in the regular day-to-day of acquiring business lines of credit, business loans because in those loans, we always seek for loans that are not going to file a UCC. It caps out $25,000 or whatever up to $2 million. It’s saying, “We get all those if you don’t pay it off.” There is a thing you’ve got to be aware of if you’re going to do the EIDL Loan. The PPP, Paycheck Protection Plan does not file those UCC. That’s a big deal. Thank you, Jessica, for bringing that up.
We’ve got this graph that came from the SBA website. While I was doing my research, we bank at several different banks but we have a great relationship with Wells Fargo. I started up their website to find as much information from a lender’s point of view as I could from here. In my research, after two days, they had to shut down their application program because they’ve reached their asset cap.
Let’s talk about what an asset cap is. An asset cap says that you can only loan so much cash out into the world as a percentage of the assets that you own as a company. All the buildings, all the branches. It depends on the bank and it depends on the time because I believe they’re going to raise that asset cap so that people can keep lending. They have in the past. Technically, by federal law, you cannot lend more than a multiple of what you own in assets. They shut down two days.
Before we got on, I was reading more about that. It’s specifically Wells Fargo because a few years ago, they were making all the fake accounts. They have a significantly lower cap.
We got the rug pulled out from underneath them. Remember, even though it’s the SBA that is backstopping these loans, the Paycheck Protection Program is being provided by the commercial banks. They have to follow all the lending rules. Wells Fargo has a lower lending cap but they make the interest on it and they get to the fees or whatever other contingencies that are based on that. Everybody’s down to lend if they can still put everybody through fraudulent applications and software, etc. There is a lot going on behind the scenes from what’s being announced by the government. Weigh in on that, Jess.
In fact, Wells Fargo is pushing hard to get that cap temporarily raised so that they can keep helping with the Coronavirus effects. The second point is this is not going to be quick. You’re going to fill out this application and you’re not going to get the money within a few days.You need to treat the lender with respect. Talk to them and have a conversation with them. Click To Tweet
The application might not even be processed at the latest before a couple of weeks.
Is there a pro and con about both of them? I don’t know. One thing that comes with the EIDL is that they do give you that advance upfront and then it can take a little while on the backend. In Paycheck Protection, there’s more room for forgiveness but it takes longer. That’s another thing to see. If you are considering applying for one of these loans, does your business need this loan or do you just want it? It wouldn’t be nice. Make sure you’re taking that into consideration not only because there are many other people who need it but lenders are going to see that if you’re getting money and getting a loan because it’s available, but don’t necessarily need that. How does that look?
One of the other things that we want to add to this is that our team like we serve our clients and provide solutions coaching, we’re giving you as much solution coaching even on FBL. We’re trying to over-deliver. We’re committed to you guys to know at least enough to protect, survive, thrive and ultimately prosper. One of the other things that I wanted an update is that the new notices are going out at least from FedLoan Servicing, which is one of the servicing organizations for federal loans like Fannie Mae and Freddie Mac, buy the loans and service them for mortgages. I believe it’s Sallie Mae and FedLoan Servicing. There are groups out there who service the student loans and they have a 0% interest rate from March 13th through September 30th, 2020. There are no interest rates whatsoever.
This is from their actual official documentation. “We placed the loans identified in an administrative forbearance for the period March 13th through September 30th. During this period, you will not be required to make monthly payments on your loans. If your payments are made through auto-debit, those debits will not occur while the forbearance is in place.” This is important to know because every single one of the banks said you have to manually stop your auto pays or they’re going to keep paying the Fed. I can’t speak for Sallie Mae but it’s another version of the FedLoan Servicing. They are another entity that is in charge of that. They’re saying through auto-debit, these debits will not occur while the forbearance is in place.
They have to identify yours. One of our team members got this as the result of her student loans. You need to make sure your loan is available if you get one of these letters or emails. If you have not received one of these then you need to call your servicer and find out your status. You can’t stop making payments unless you receive notification that you qualify. It’s important. We have to be conscientious. We have to be deliberate in the moves that we make so that we can create the best and most prosperous time now and have our lenders love us when we move back into 6, 12, 24 of prosperity and things are growing. Lenders are going to look at us how we treat their money and how we treat our relationship with them is how they’re going to lend to us. That’s vital that we do this.
I was going to say it all comes down to relationships even in a time where we can assume or expect that payment is going to be in forbearance. That’s not okay. You need to treat the lender with respect, talk to them, and have a conversation with them.
Communication, every time you talk to a rep, they’re taking notes. Those notes have key words like a hashtag or a tag. Those tags are going to be filtered through their underwriting software about how to evaluate you as you go through this. It’s like the Bernoulli effect. Everything is compacted here. Everything we’re doing is more meaningful. Every activity we do for good or for ill is more meaningful because of the circumstances. We can go 100 miles instead of 5 miles in this period in advancing our fundability and our opportunity for additional funding approvals as time goes on.
One last thing that I want to add is I know hold times for banks are ridiculously long, knock on wood and this might not always be the case, but I called the SBA and the whole time was maybe 5 to 10 minutes. If you do have questions, maybe about your specific situation or for more detail on these, the whole times on the SBA weren’t too bad.
I want to put out there, even though the website is a public website and hopefully, not ten million people are going to have this shared. Instead of calling the number on the back of your card, if you will Google and say executive numbers for Chase. There are opportunities in our regular coaching and modeling for fundability where we call these numbers and we’re able to fast track an app or overturn a denial or a low-value approval. We can get fifteen instead of ten because you’re calling the equivalent of a manual underwriting department. I’m giving that to you guys. The executive numbers are a thing. Google your bank and executive number but don’t believe the guys who are phishing for you, “Pay us $10 and we’ll give you this list.”
We’ve never bought a list ever. Look for executive numbers, Google search for your bank and see what you can come up with. Jessica, what a great update. In conclusion, make sure you like so you get notifications on Get Fundable, Funding Hackers. If you’re a member, CreditSense Insider Secrets, stay tuned because we’re coming up nearly daily. We’ve been killing it, making sure that every new thing that we have researched with our due diligence, we’re doing it for you. We want to make sure that you succeed in this time that is constricted and compacted. We have more positive effect if we do the right things now than ever when times were good. Let’s take advantage of this slingshot to our fundability forward. Anything else, Jessica?
No. Thanks for having me.
Thank you for all the crazy, awesome deep dives that you do to take care of our team, clients, and community. Thanks for reading. You have a spectacular rest of your day and we will see you soon on our fundability updates.
- Jessica Tabora
- FedLoan Servicing
- Sallie Mae
- Get Fundable – Facebook
- Funding Hackers – Facebook group
- CreditSense Insider Secrets – Facebook group
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