The Ease of Finding Pandemic Disaster Loan Cheaters

In 2021, the SBA Inspector General suggested that nearly $80 billion of funding may have been fraudulent and the number is getting larger. However, while many criminal cases include complex investigations, finding EIDL or PPP fraud on the surface is quite easy. This article highlights how easy it really is to find those who may have committed COVID-19 Relief fraud and several techniques that the government can and probably is using to find those who committed fraud from the pandemic funding programs.

By Thomas Tramaglini, Managing Director at BRP Onesta
About Thomas Tramaglini

Since the onset of COVID-19 Relief offered small businesses during the pandemic, fraud has been reported as rampant. Considerable action has been taken to underscore the importance of oversight as well. Since President Biden vowed to ramp up oversight of the Pandemic Programs passed by Congress during the Trump Administration and after as well, the Department of Justice has prosecuted many small business owners and legislation has been passed that make oversight a long-term reality.

However, finding pandemic fraud is not hard. Video evidence is not needed. The proof is in the data and the trail of data which applications can be tied to.

Pandemic fraud was easy.

Many small business owners (and some were not small business owners) used a host of different tactics to defraud the US Government’s PPP and EIDL programs from March 2020 through August 2021. Some of these tactics include bank and wire fraud, identity fraud, as well as the submission of false documents such as quarterly tax reports and taxes.

In our industry, we have seen fraud for many years. Commonly, we see fraudulent bank statements regularly, as well as other fake documents such as false payroll data, tax forms, etc. However, when the Trump Administration rolled out pandemic relief in good faith, many small business owners did not return

the favor. They saw “free money” and clearly did whatever it would take to get funded.

We have written extensively about many of the fraud cases and background of cases that continue to pop up in the news, as well as new indictments and convictions in the following articles:

Small Business owners are accountable for what they attested to when submitting their pandemic relief applications

When small business owners filed applications for PPP and for EIDL, they attested that the information they were submitting was true. For instance, in the standard PPP application, the small business owner had to “certify that the information provided in this application and the information provided in all supporting documents and forms is true and accurate in all material respects. I understand that knowingly making a false statement to obtain a guaranteed loan from SBA is punishable under the law, including under 18 USC 1001 and 3571 by imprisonment of not more than five years and/or a fine of up to $250,000; under 15 USC 645 by imprisonment of not more than two years and/or a fine of not more than $5,000; and, if submitted to a federally insured institution, under 18 USC 1014 by imprisonment of not more than thirty years and/or a fine of not more than $1,000,000.”

Therefore, small business owners who knowingly filed requests for disaster relief funding knew in advance of accountability, and they hedged that they would never be held accountable for submitting false (or verifiable) information.

Evidence is Easy to Be Found

Unlike many criminal cases that are cloak and dagger and require massive, complex investigations to uncover hidden evidence, investigating COVID-19 fraud is relatively easy because there are verifiable data and a paper trail leading the way to who done it.

Anyone Can Mine EIDL and PPP Data

The SBA has released a host of PPP and EIDL data which can be found here:

BackOffice Depot Data for Download

Feel free to download all public data as because the data are public data under the Freedom of Information Act (FOIA).

Cross-Checking Data is Not Hard

In many cases, people believe that the government is not very smart.

However, what is needed to find fraud is not hard and the government does not have to be smart to outsmart stupid. Anyone who has access to data can find those who possibly committed fraud with a simple V Lookup or the use of a Pivot Table using Microsoft Excel. Here are a few simple ways that the government is using data to find those who may have committed fraud.

Were the companies who submitted applications, operating?

During review and underwriting their EIDL or PPP loans, the SBA and many lenders did not ask for articles of organization or incorporation or even back up that the company was operating. For instance, anyone can download any of the spreadsheets that we have on our website (see above) to pull the data for themselves. We have easily accessible datasets listing have every pandemic relief loan given from March 2020 through October 2021.

One can go through the list of businesses and just Google the businesses. It is easy to find businesses who are operating and who are not. Websites report scores of data on businesses including number of employees, how many trucks are in operation, and more.

The easiest data to find discrepancies are with the larger EIDL and PPP loans that were taken by small businesses. For instance, I was able to download all loans for PPP over $150K and then sort the column with loan amounts. I was easily able to then choose 10 loan recipients at random. Just in my cursory review I was able to find 1 trucking company that received $700,000+ but they only had listed on the USDOT site that they had 2 trucks. The same business also showed on the EIDL website that they had listed 4 employees. Given the PPP rules for how much salary was able to be delivered in funding, something there seems fishy. The other company I found listed in the 10 companies I reviewed also received $700K+. The company seemed to not have a website, business in good standing, did not file an annual report for more than 6 years, or have any notable information which demonstrated a legitimate business. I even Googled the business address, and the business address was a vacant home sold more than 2 years ago.

Matching tax data with PPP/EIDL Applications

Tax data. It is that simple.

Simply put, the IRS has a record of every tax return and report of quarterly payroll data.

One can easily take the PPP dataset, combined with the data from the IRS (which the Department of Justice or Inspector General for the SBA) should be able to cross-reference using a V Lookup or Pivot Table and find matching and non-matching numbers. Those who submitted quarterly payroll data (940/941) which does not match the IRS records should immediately be investigated.

I am going to guess (however, I cannot give the government that much credit) that the IRS and SBA have begun cross-checking these data and found many fraudulent applications.

The same governmental agencies should also be able to cross-check income from 1040s or 1120 (or other forms) to see if what was submitted was really what was submitted. That is, many people or small businesses do not file taxes. However, when submitting their applications everyone did. It wasn’t until much later on during the pandemic that the SBA began asking for tax transcripts. One can only think of the millions of loans that were approved without any check of tax forms or the infamous 3506T review.

Were some people really that stupid?

The answer is yes.

As aforementioned above, we have written extensively on the subject, as far as ranking the most dubious losers who defrauded the government.

Congress recently passed legislation that extends the statute of limitations out to 10 years for pandemic fraud. It is likely that those who cheated, will be called on it.

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

23 Reason Why Business Loans Get Declined

Why did my deal get declined? This is a common question that we get from our clients. While the economy seems to be tightening, there are common ways that borrowers can understand what lenders are looking for and avoid being declined for small business financing. In this article we review thousands of declined lending applications and narrowed 23 specific reasons for why small business owners get declined for small business financing.

By Thomas Tramaglini, Managing Director at BRP Onesta
About Thomas Tramaglini

More Loans Are Declined Than Approved

While small business owners apply for financing for their small businesses, more deals are declined than won. From 2019 – 2021, over 60% of small business owners who applied for financing through our platform were denied for one of several reasons. From over 3,000 deals submitted we pulled together a list of common reasons for why lenders decline small business owners for business financing.

The Goal

The goal that any lender has is to get paid back on time. What reasons for decline really amount to is the risk of whether or not the lender believes that they will be paid back on time, in full. The greater the instability in the bank statements or financials, the greater the risk.

Simply put – when the lender gets paid back, they make money.

1. Judgements, Defaults, and Negative Payment History

When a lender sees that the borrower has had a negative payment history, defaulted on a loan or advance, or received a judgement its usually an automatic decline. We have written extensively on this in the past and more information can be found here.

When a lender finds any type of negative payment history in the past it is usually an automatic decline.

Lenders have become smarter than in the past with finding negative payment history through data clearing houses like CLEAR, LexisNexis, and Chex Systems. The alternative lending industry also has Data Merch which helps share between lenders who has had negative payment histories in the past.

2. Decline in Revenue

Most lenders use your previous 3 to 6 months of revenue to evaluate the financial health of your business. If your decline in revenue declines by 10% or more lenders can suggest that revenue is not stable, and you may not be able to pay back what you owe. Some industries are seasonal, and the lender may ask for more bank statements to gauge lendability. Some lenders will customize payments so that seasonal businesses can pay based on the average revenue of the season which they are in. Some lenders will also cut the amount they will lend if there is a decline in revenue.

3. Business Owner Has a Cash Business

We see many small business owners have some or most of their revenue in cash. This can be done to minimize tax exposure or just because its easier to not go the bank. Yet, when revenue is not in statements, lenders see that as risky behavior and if a default occurs then they may not get paid back. The moral of the story is to make deposits and stay away from having a cash business if your intention is to borrow money.

4. The Owner is Not the Owner

Most lenders who fund small businesses make sure that the businesses are owned by who is requesting the financing. Most lenders ask for things like the small business’s EIN letter or K-1 to show proof of ownership. When the owner cannot demonstrate proof of ownership, it demonstrates risk or in some cases fraud. They important thing is that most lenders want a majority owner to be responsible for the loan or advance, so they are paid back.

5. Business is Not in Good Standing

Many lenders want to ensure that they are dealing with a business that is in good standing with their state of registration. That is, have they fulfilled their reporting requirements of their state, paid their fees, and done what is needed to ensure that their business can legally operate in their state. If a business is either not in good standing or forfeited, most lenders will allow businesses to rectify the issue. However, in some cases the borrow has not maintained their business for too long which can cause a decline or in some instances the business to not be in business (or authorized to do so) causing a decline.

6. More Money Out than In

When lenders review bank statements they can easily see that when more money is going out than coming in, the company is losing money. Unless the company has great balances on the bank statements, it is likely that the deal will be seen as weak and declined.

7. Behind on Mortgage

Some lenders ask for a recent mortgage statement from the borrower. When a borrower is late on their mortgage, it demonstrates risk to the lender and could mean doom for the deal. Lenders want to see small business owners being able to pay their bills.

8. Borrower Fails to Say that He or She Took One or More Advances in the Past 30 Days

When one applies for a loan or advance from a lender, the lender wants to ensure that the borrower is going to be able to afford the obligation. When a borrower presents bank statements to a lender, approvals are based on the average revenue of expenditures and spending patterns therein. When an approval is made and then a month to date or during bank login its demonstrated that the borrower took another advance (or more than one) the deal is likely to get killed. No lender wants to give an approval and then see that the borrower has taken money. This suggests risk and likely becomes an instant decline. Some lenders will allow an advance but not knowing about it is a reason for decline.

9. Borrower Took One or More Advances in the Past 30 Days

Most lenders have rules where they will not fund a borrower if they have taken on funding in the past 30 days. Unless the withhold is in the range of affordability, that is the amount that a merchant pays cumulatively is within the allowable range by the borrower, most deals showing funding taken in the past 30 days will be killed. Lenders see this as risk and an indicator of future decline.

10. Amount Borrow Owes is Too High

If a borrower already has 20 -40% of their monthly expenditures going out to pay debt, especially on advances or loans the lender is likely to decline the deal. Owing too much is an indication that the business may fail, or money borrowed may not be paid back. This may be indicated by the lender saying there is no room, or the borrower is over the withhold limits.

11. Borrower is in a Reverse Consolidation Program

Some small business owners who have multiple loans or advances may be in a reverse consolidation program. When they are in a reverse consolidation program, the lender provides weekly deposits into the small business’s bank account so the borrower can make its payments. As payments fall off when paid off, the amount paid daily to the reverse consolidation lender does not decrease. When most lenders see a reverse consolidation in the borrowers’ statements they run. When a borrower in a reverse is funded, the reverse lender usually automatically stops their deposits, still requires to be paid back, and in most cases provides penalties for breaking their contract. Without the influx of funds the borrower will have a hard time making their payments and in many instances defaults. So, when lenders see reverse consolidations, they decline.

12. Previous Stacking

When a lender sees a borrower take two or more advances or loans at the same time its is called stacking. When underwriters gauge risk and the lender makes an offer, it’s based on the information in the statements that were provided. When a borrower is seen stacking or taking more than one offer at the same time lenders will not want that to happen to them so they will decline the deal. The lender also sees that even if the borrower is not stacking on the lender now, they may take another advance later on which would bring on more risk to the lender and suggest a decline is in order.

13. Too Many Insufficient Funds of Negative Days

When bank statements are presented and they show some or lots of negative days, it suggests that lenders may not be paid back. Most lenders have rules for how many NSFs or negative days they will allow. However, make no mistake – if there are NSFs in statements it is going to be a killer.

14. Negative Trade or Landlord References

One thing that we saw was that after a deal was approved, it was killed because lenders will check references from time to time. Landlords and trade references are asked about their experiences with the client. If the client is difficult to work with or has a negative history with the trade reference or landlord, the lender may kill the deal.

15. Non-Business-Related Expenditures

Many of the upper tier lenders will scrutinize the expenditures on business bank statements. If business bank statements demonstrate there to be expenditures which are not business related it can suggest risk to the lender. Here are some expenditures that brought on declines over the past year from lenders to our clients:

  • Too many trips to restaurants – meals are not typically what lender want to see in business bank statements so too many expenditures for fast food or lavish restaurants can bring about a decline.
  • Visits to stores for personal purchases.
  • Trips to adult entertainment establishments. Just a no-no. However, about 4% of our applications
  • Payments for things like personal mortgages and cars can bring a decline. For instance, if you are a trucking company and you have a BMW payment in your statement it can draw attention.

16. No Financials Available When Lender Asks for Financial Statements

For deals that are larger, most lenders will require financials. That is, a current profit and loss statement, a well as a balance sheet. When small business owners cannot produce financials, it is a sign of weakness to lenders. Financials provide the business owner a level of granular attention to operations and when larger deals are in the works, the lender would want to 1) know that the business has a grasp on its financials and 2) has positive balance sheets showing cash on hand and the business’s ability to service the debt.

17. Tax Liens

Although tax liens are not a deal killer two instances have caused deals to be declined. The first is that the borrower has liens which are excessive. For instance, if a lien is over $200,000 or whatever the threshold is for the lender it will bring an automatic decline. Also, an automatic decline may occur if the lender finds that the borrower has a lien but there is no payment plan intact.

18. Settlement in Statements

Sometimes, borrowers who have had difficulty on previous loans or advances and chose to use settlement companies to settle their debt. Not that this is the end of the world, but when a lender sees that they borrower has payments coming out on their statements to a settlement company it raises a red flag, and an automatic decline. If a company uses a settlement company, it demonstrates that the borrower could not make its commitment to the lender.

If a borrower cannot or could not make its payments previously then why would a lender lend any funds to the borrower?

19. Recent Bankruptcy

While some lenders will allow borrowers to fund if they have had bankruptcy, most borrowers require the bankruptcies to be discharged or closed before funding. Some lenders have time requirements such as funding after 2 years following discharge. If a borrower has a bankruptcy which is very recent, it indicates that they may not pay back their financing.

20. Failure to Allow for Decision Logic or Bank Login (authentication)

Part of what most lenders do before funding is they authenticate a borrower’s bank account. Such a process ensures that the borrower is not negative in their bank account, that they have not taken another advance, that their statements provided to the underwriter can be confirmed, as well as the account and routing numbers are correct. One would not want funds to be sent to the wrong place.

When a borrower refuses to comply with the authentication process, most lenders will automatically decline the deal. There are a few lenders like Wide Merchant Group who does not require decision logic or bank login, but most companies want to do authentication because it makes their transaction safer.

21. Failure to Pass the Merchant Interview

Most lenders conduct one or a series of calls with a borrower before their funding occurs. The content of these interviews can range from purpose of using the funds to specific questions about businesses. When deals get killed during the interview, the main reason is that the borrower has not been honest about something from the past, what his or her intention is for using the funds or demonstrating the want to pay back the funds.

22. Criminal History

Most lenders will shy away from borrowers who have a negative criminal history. Some lenders will specify infractions not allowed in their review as well. For instance, borrowers who commit burglary or fraud are going to get declined by just about every lender. Some lenders will fund those who had a drug charge 7 years earlier. All capital crimes are a decline. The safe thing to say is that if a small business owner has a negative criminal history, he or she will have their deal declined.

22. Fraudulent Bank Statements

With photoshop (and other software) and the ability for borrowers to doctor bank statements, we see fraudulent bank statements regularly. Few fraudulent statements get to funding. With good underwriting, as well as bank authentication, lenders can smell fraud in statements relatively easy. Few people who try to provide fraudulent statements have the skill and ability to provide statements which look authentic and can pass meta-data checks.

Obviously, when fraudulent statements are found, lenders decline. There are times lenders may report this fraud to the authorities.

Need Financing and Having Trouble Getting Approved?

Have you had issues in the past getting funding because of one of the reasons below? We can help. Please contact us immediately and one of our advisors will call you within 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.

Affordable, “Recession-Proof” Financing Options for Small Businesses

On July 11, 2022, for the first time ever the exchange rate between the US dollar and the EURO reached parity. With the volatility of a recession and uncertainty looming across the global market, small business lenders and community banks will certainly think twice in providing loans. What is abundantly clear is that small business owners will continue to rely on financing to sustain and grow their businesses. This article explores several recession-proof ways small businesses can take on business financing without the worries of the recession affecting their options.

By Thomas Tramaglini, Managing Director at BRP Onesta
About Thomas Tramaglini

Recessions never good for the economy. BUT…sometimes recessions can be good for small businesses.

While there would be few who would suggest that a recession is good, during recessions there can be

opportunity for small businesses to thrive.

For instance, some industries like grocery stores, home health care, bars and restaurants with liquor sales, maintenance services, and the sweets industry tend to gain quite well. Regardless, small business owners right now should be thinking about the next 12 months and how they can capitalize on consumer demands which come along with a recession.

Small business owners need to position themselves now for the future. They should budget for balancing the everyday costs of running their businesses and focusing on increased efficiency. However, the most important thing small business owners should be working on now is their mindset. Their mindset should be to play like you are losing. This amplifies consideration of efficiency, effectiveness, and streamlining waste. This also allows small business owners to focus on risk.

The need for business financing.

Without a doubt, the small business financing industry is back after the pandemic. Companies like eNOVA (who owns OnDeck) posted record earnings in 2021. Other small business lenders have pushed forward with earnings and expanded. Credibly, a major small business lender based in Michigan announced that it had secured at $50M credit facility for its small business lending division in July of 2022.

Record profits infers record lending to small business owners. That is, if lenders are lending more than ever, small businesses are taking more than ever. With the return from the pandemic, small business owners need access to capital that not only makes sense, it must be helpful.

Recession-Proof small business financing.

With small business lenders thriving, so are programs which small business owners should be focusing on before the recession hits. While some would indicate that we are already in a recession, with the parity of the Dollar and the EURO the admission of recession appears to be coming soon.

Small business owners need to look at the signs and find financing products which are recession-proof. That is, recession-proof products tend to have the following commonalities:

  • The terms allow for cash flow which does not kill profit margins.
  • Financing products carry terms which are reasonable. Many times, while rates for longer terms seem to be lower, they are much more expensive because you have the financing longer.
  • The product allows you to save while you pay back the financing.

Small Business Grants

Small business grants are free money for small businesses which are provided by government, non-public, and for-profit entities. Most small business grants provide business owners an avenue to apply for a bigger goal. For instance, the US Department of Labor has hosted grants to small businesses in places of high poverty for the development of careers and creation of new jobs.

While it takes time and effort to research and apply for grants, the end game can be worth it as small business grants are funds which do not need to be paid back. However, grants are not always rosy. As I wrote in a recent article:

Purpose – Along with most grants is purpose. That is, grants have purposes. For instance, State grants or Federal grants may focus on a bigger picture such as developing jobs or creating a new product that might help the public.

Restrictions as well as Reporting – Grants have restrictions and reporting requirements which generally ensure that the grant is being used the correct way. Further most grants have time limits for attaining results and reporting those results to an overseeing organization or entity.

Matching Funds – Many grants come along with a requirement for the organization to match the funds from the grant with their business’s funds. Matching funds can be tricky as many small business owners apply for grants with matching funds and do not even know that matching is a requirement.

To help you get started, we always keep and refresh small business grants which are available to small business owners (

Term loans

Term loans are easy to apply for and usually provide small business owners terms from 1 year out to 5 years. Approvals are based on underwriting guidelines specific to the industry, amount of loan, monthly revenue, credit score, business credit score, and time in business.

Small business term loans usually have set fixed interest rates and payments can be daily, weekly, bi-weekly, or even monthly. For most term loans under $150K the only documentation needed tends to be an application, business bank statements, as well as proof of business. Some lenders ask for taxes if your funding request is for more than $150,000 or on a case-by-case basis.

Average Range for Borrowing: $1,500 to $550,000

Rate(s): 7% – 38% APR

Credit Score Requirement: 600

To apply for pre-qualification (no credit pull) for a Small Business Term Loan Click Here.

Equipment Term Loans with Rebate

Some equipment loans carry rebates which can be advantageous for small business owners. That is, a

lender will lease to the small business a piece of equipment and provide a rebate at an amount which is parallel to the costs of the equipment loan. For instance, if it is determined that the equipment loan is for $25,000, the equipment is then amortized with interest over 60 monthly payments, without origination or fees. Then, upon receipt of equipment, a rebate is provided for the business owner for the equipment at the amount the equipment costs.

What is beneficial about the loan is that to an extent, equipment is tax deductible under Chapter 179 of the IRS Tax Code so what you are paying back is tax deductible. Also beneficial is that this loan is not one that counts as an MCA position and having a longer term make the payments more affordable than traditional term loans.

Average Range for Borrowing: $20,000 to $100,000

Rate(s): 15% – 20% APR

Term(s): 5 years

Credit Score Requirement: 680

Business Credit Score: Paydex Score of 80

To apply for pre-qualification (no credit pull) for a 5 Year loan click here.

Line of Credit

Lines of credit have the most flexibility. For instance, the beauty of a line of credit is that you only draw what you need when you need to. Applications for lines of credit are fast and have flexible terms.

Range for Borrowing: $1,500 to $250,000

Rate(s): 7% – 28% APR

Term(s): Variable

Credit Score Requirement: 680

To apply for pre-qualification (no credit pull) for a line of credit, click here.

Short Term Loan

Short term loans are those which go from 6 months to 5 years. Most short-term loans have weekly payments and little underwriting requirements. Further, credit is less important and while rates tend to be higher for small business owners, there is minimal paperwork needed and funds can be disbursed in as fast as 1 hour.

Average Range for Borrowing: $2,500 to $500,000

Rate(s): 8.99% – 34% APR

Credit Score Requirement: 450

To apply for pre-qualification (no credit pull) for a line of credit, click here.

Consolidation Loan

Consolidation loans present a host of different options for small business owners who already have debt or would like to combine working capital already taken. There are different consolidation programs available which small business owners can use to ensure that they have the maximum economic performance they can have.

For originators, loan consolidation is an art. There are virtually dozens of ways to consolidate loans which can be helpful. Once you apply, our team will craft an option which provides you a simple, affordable road map for consolidation and beyond.

Average Range for Borrowing: $25,000 to $500,000

Rate(s): 9.0% – 39% APR

Term(s): Up to 3 years

Credit Score Requirement: 500 and up

To apply for pre-qualification (no credit pull) for a consolidation loan, click here.

Equipment or Vehicle Loans

Perhaps one of the best loans small business owners can take is for equipment or vehicles. With relatively low rates, equipment or vehicle loans can be efficient and lower in cost than working capital loans or merchant cash advances. Plus, the benefits are that the loan does not usually go on the business owner’s personal credit and has a longer term, up to 6 years.

Further, many lenders do not count an equipment loan towards working capital loans or merchant cash advances, so small business owners may be able to acquire more capital. Some equipment and vehicle lenders may also provide additional working capital as well.

Average Range for Borrowing: $25,000 to $150,000

Rate(s): 6.0% – 21% APR

Term(s): Up to 6 Years

Credit Score Requirement: 600

To apply for pre-qualification (no credit pull) for an equipment or vehicle financing, click here.

Asset-Based Loans

Asset-based loans are loans that are collateralized with either equipment or real estate. Loans that have collateral attached to it are usually cheaper than regular term loans and less risks for lenders to provide funds.

Asset-based loans for small business owners can be a great way to access lower-cost working capital and the terms can be beneficial as well. Also, asset-based loans usually carry simple monthly interest, which means you pay interest by the month, not the term. If the borrower pays the loan back earlier, they can save on the interest as they do not pay the months that they do not have the loan. This is a similar loan product to a line of credit.

Average Range for Borrowing: $10,000 to $500,000

Rate(s): Simple Monthly Interest (starting at 1.5% per month)

Term(s): Up to 5 Years

Credit Score Requirement: None

To apply for pre-qualification (no credit pull) for an asset-based loan, click here.

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 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
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.


(Rumore, 2021)

(Voigt & Campbell, 2017)

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.