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
info@BRPOnesta.com
www.backofficedepot.com
www.thomastramaglini.com
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

Get Your Creative Business Discovered With These Promotional Ideas

Your creativity speaks for itself, but your prospective customers need to find you before they can become raving fans. Getting your creative works discovered can help you generate enough income to turn your creative passion into a full-time income. Use these tips from business expert Thomas W Tramaglini to promote and grow your creative business, whether you’re an artist, fashion designer, cake decorator, or other type of creative business owner.

By Julie Morris, Guest Contributor and Author

Read more of Julie’s work here.

Write a Business Plan

Promoting a business without a clear plan won’t do much good. Write a business plan that provides a business overview, what you do or sell, your planned business structure, funding and financial plans, and your marketing plan. This makes it easier to grow and guides your decisions on promoting your business.

Craft a Marketing Plan

Any business, whether small or large, needs a marketing plan. This is essential to map out a clear strategy for how you will reach your target market and achieve your desired sales goals. Without a marketing plan, it is all too easy to waste time and money on inefficient or ineffective marketing campaigns. Instead, a good marketing plan will help you focus your resources and make the most of your budget. It will also give you a roadmap to track your progress and measure your success over time.

Don’t Underestimate Facebook Ads

Facebook Ads is an effective way to reach out to potential customers on the world’s largest social media platform. By targeting a specific audience and using carefully crafted ad copy, you can create ads that are both eye-catching and informative. Facebook Ads can be used to promote special offers, drive traffic to your website, or simply raise awareness about your brand. Opt for free online templates with a library of design features to create Facebook Ads quickly and easily. Once you’re done, simply upload it for viewing.

Use Video

Video marketing is an important strategy with 86% of businesses incorporating it into their marketing strategy. They’re also effective; 86% of consumers decided to buy something after seeing a video from the company, and 73% of people prefer short videos over text-based articles and other content types. Videos work well with creative businesses because they show off your product. You can also create behind-the-scenes videos, such as the process for making your item, which helps you connect to customers. Post the videos on your social media channels where people can share them and help you reach new customers.

Partner With Other Businesses

Reach out to established businesses to see if they’ll display or sell your products. For example, a local coffee shop might display your paintings and offer them for sale, or a retail shop might let you set up a small display of your crafts. You can also promote each other’s businesses on social media to make it mutually beneficial.

Be Charitable

Supporting a community cause or donating some of your items can get your designs in front of more people. You might donate one of your creative pieces to a silent auction for a charity fundraiser. Another option is sponsoring a community project or a kids’ sports team to get your name on their marketing materials. You can also donate your services to nonprofits. You might design graphics for a charity if you’re a graphic designer, for example.

Promote Your Creativity

Getting your work in front of more people can help you grow your business income significantly. It takes time, but it’s worth the effort if it generates customers and helps you realize your dreams of success. Have a clear business and marketing plan, and make sure social media is a key component of your advertising. Partnering with other businesses and being charitable to the community can also make a difference. Every little bit will help put your business on the path to grow and flourish.

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
info@BRPOnesta.com
www.backofficedepot.com
www.thomastramaglini.com
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 (https://www.backofficedepot.com/smallbusinessgrants).

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.

Plenty of Blame to Go Around: Who is to Blame for The Biggest Fraud in American History?

Over the last year, we have written extensively at the breadth of fraud associated with the Federal Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) Programs during the COVID-19 Pandemic. In recent weeks, the US Small Business Administration Office of the Inspector General (OIG) released a scathing report of the performance of the US SBA during the COVID-19 Pandemic and its attention to fraud during the PPP program. Not only are some small business owners and some lenders to blame for fraud, so is the US Small Business Administration. Clearly, they failed to adequately do their part in preventing fraud, ultimately leading to what some have called the biggest fraud in the history of the United States.

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

How bad was the fraud?

Bad. In past articles we have highlighted the many FRONTLINE ZEROES OF THE PANDEMIC. That is, the countless losers who have defrauded the people of the United States by using a host of strategies to collectively secure millions of dollars and in most cases misappropriately use the funds which were to keep America’s businesses open. In a previous article, we underscored this from a report made by Ken Dilanian and Laura Strickler of NBC.

They called it the largest fraud in the history of the United Stated:

“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

What the cases of COVID-19 Loan Fraud demonstrated

While there are a bunch of cases which have different ways in which PPP or EIDL fraud were conducted, the justice department has already brought criminal charges against hundreds of small business owners for fraud since 2020. The Biden Administration currently has implemented tougher oversight and investigation since Biden took office which has shown hundreds of millions in fraud were committed – More is to come.

What have been the lenses of COVID-19 fraud which have been prosecuted?

A nice overview of the Justice Department’s investigations have been made by the Project on Government Oversight (POGO). They have kept a great database on their website here:

https://docs.google.com/spreadsheets/d/1Z8p-hj2E_VgM3-lRo4eG2CI__iKpiu4UK_SRPqRI7sU/edit#gid=0. A review of their database suggests the following were the main cases of COVID-19 fraud:

  • Accused individuals allegedly falsified payroll documentation to justify either getting a loan or getting a bigger loan than they were eligible for;
  • Accused individuals allegedly created fake tax documents used for verifying details in loan applications;
  • Accused individuals allegedly created bogus companies to get loans;
  • Accused individuals allegedly used defunct companies to get loans;
  • Accused individuals used stolen identities or aliases while applying for loans;
  • Accused individuals allegedly falsified ownership of existing legitimate businesses;
  • Accused individuals also obtained Economic Injury Disaster loans (some of these individuals have been accused of fraudulently obtaining these loans as well).

More of the article can be found here

Who is to blame for the fraud?

This is an interesting question: But there is plenty of blame to go around. While we could explore this topic on many angles, we have selected three main areas: small business owners, lenders, and the US SBA.

Small Business Owners

Small business owners have extensively been prosecuted for fraud in the aforementioned areas and others. What is clear, many small business owners tried to take advantage of the Federal Government. What is not understood is how these people thought they were not going to be cross-checked from the IRS on data such as 940/941.

If there is thing, small business owners were eager to get help that was needed. However, some small business owner clearly saw opportunity to score some easy and free money.

We have underscores other things small business owners did which regard the level of stupidly or ineptitude.

Articles

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

Getting Caught: Small Business Owners Committing EIDL and PPP Fraud.

Fake 940/941s, More Lamborghinis, Rolexes and Real Estate Oh My.

The Frontline Zeroes of the Pandemic.

Lenders

Without a doubt, many lenders were to blame for much of the PPP fraud. Banks, who generally oversee SBA loans make the process to acquire loans very difficult continued tough oversight during the Pandemic. However, other lenders like FINTECH companies have been blamed for poor oversight, and at a minimum have been investigated for allowing PPP loans to be fraudulently received.

Bloomberg reported about a University of Texas at Austin study in 2021 that Fintechs were found to be five times more likely to ok suspicious PPP loans.

As a company who sent many of its client’s applications to lenders including FINTECHs, we could clearly see the level of oversight differences. For instance, PNC Bank required much more back up for their loans and reviewed documentation with a fine-tooth comb. Other lenders like Cross River Bank prided themselves in using technology to speed up the review process. Clearly, one can see how many more SBA loans would be provided if banks did “technologically driven automation” to underwrite and review loan applications.

Clearly, there is much blame to go around, but there clearly was poor oversight with many of the SBA providers. Congress has recently held hearings and brought to light these issues.

Small Business Administration

While policy makers in Congress were quick to point fingers at the lenders and further call for going after fraudulent business owners, The United States Small Business Administration is one who many have suggested to share the blame.

In May the SBA Inspector General issued a report which reviewed PPP loans and how the SBA contributed to what is considered one of the best and worst government programs ever.

Among the findings, the Office of the Inspector General found:

  • There were no established procedures for PPP which could track and address potentially fraudulent applications. Therefore, lenders, many of who were not equipped with trained underwriting staff were left to look for fraud or accuracy.
  • There were no fraud risk frameworks established before the program was released.
  • The SBA was unable to handle the speed of which the program was delivered and employed.
  • Lenders had little guidance for how to handle certain situations, such as finding multiple processes to handle cautionary reviews or uncommon questions.
  • There were few steps established which checked for the accuracy of information, such as if someone had created a false 940 or 941 form.

The full report, which can be found here, describes the COVID-19 fraud and how the SBA contributed to the fraud in the report. In the report, the Office of the Inspector General said:

“The Office of Inspector General (OIG) found that the Small Business Administration (SBA) did not have an organizational structure with clearly defined roles, responsibilities, and processes to manage and handle potentially fraudulent Paycheck Protection Program (PPP) loans across the program. In addition, the agency did not establish a centralized entity to design, lead, and manage fraud risk. This problem occurred because the agency did not establish a sufficient fraud risk framework at the start of and throughout PPP implementation. Management stated this was partly due to the speed of the delivery of PPP and the continuous and rapid discovery of different kinds of fraud schemes. Lenders also were not always clear on how to handle PPP fraud or recover funds obtained fraudulently from the PPP that remained in the borrower’s account. SBA did not provide lenders sufficient specific guidance to effectively identify, track, address, and resolve potentially fraudulent PPP loans.

In the end of the report, the OIG recommended that the SBA establish clearly defined and detained roles, procedures and adopt procedures for finding fraudulent loans.

References

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

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.

How to Handle Late Payments Without Losing Customers

Whether you’re a young, aspiring entrepreneur or a successful leader in academia, you depend on your customers and clients to pay on time, every time, and you need straightforward policies and processes to make that happen. If your customers are late with their payments, your business has to handle the situation with kid gloves because the last thing you want to do is lose a customer. Here are some tips for how to tackle late payments without offending your clients.

By Julie Morris, Guest Contributor and Author

Attempt to Avoid Late Payments in the First Place

In a dream world, your customers will always pay on time and you’ll never have an issue, but that is not reality. However, you can get as close to that as possible by creating a clear and concise payment policy and placing it on your website and your invoices. Yonyx points out that this policy should list all acceptable payment methods and spell out your terms, such as when a payment will be considered late and penalties if a late payment does occur.

Your payment policy should also be clearly stated in all documents that your client or customers receive when they first start working with your company. If the amount of money in question is significant, you may want to work with an attorney to write up a contract. Be sure to work with the business partner during this process so that the document is fair to both parties.

The point is that you want something to point to if a customer is late with the hope that they will understand their obligation and complete the payment ASAP. When customers or clients are late with payments, make sure you’ve sent the invoice to the right person, coordinate your invoicing with the customer’s billing cycles, and/or offer a discount for quick payment. You can also spruce up your invoices to make them more memorable by using a free invoice generator to create a branded invoice that leaves a more professional impression.

It is also a smart idea to invest in payroll software that can properly process and organize payments so you know which clients have paid and which have not. The last thing you want to do is accuse a customer of being late when you actually have received their payment and it slipped through the cracks.

Another way to ensure timely payments is to make it easier for your clients and customers to pay you. When you accept payments through your app, you’ll simplify the payment process, but you need to ensure that your customers’ sensitive financial information is protected. Fortunately, you can use a tool to authenticate bank account information for secure payments.

Polite Follow-Ups

Once you realize that a payment is late, it is time to send a follow-up, but remember you do not want to be overly demanding or threaten litigation at this point. Start by sending an email that reminds the customer of the item you sold or service you completed and the cost for that work, and remind them that they have a past due payment.

If you do not get a response, this may be a good time to call the client’s company and inquire with a different employee about how to be paid. In some cases, the person who requested the service is not the same individual that handles invoices, so ask for the billing department just in case.

If a phone call is required for the follow-up, Practice Ignition suggests keeping it nice and polite. Phrases like “this is a friendly reminder” and “I’d appreciate it if…” are a good way to start. If the customer states that they don’t have the funds to pay the bill in full, you might consider allowing a partial payment or creating an alternative arrangement that fits both of your needs.

Make the Payment Process Easier

Organizations that are finding that they have payments arriving late on a constant basis may want to look at their payment processes and make them simpler to use for the customers. Give your clients multiple avenues to make their payments, be it over the phone, through a web portal, or by mail.

You may also consider sending out automated reminders to your customers. These can be sent out a few days prior to a due date, on that day, and a week after the due date if payment is not made. By receiving automated messages that are sent by a computer, your customers will know that this isn’t a personal attack. Another benefit of setting automated reminders is that you will never forget to ask for a payment, and sometimes, that can be half of the battle.

If you are looking to keep your organization running on full steam, get the payments you’ve earned through the tips above.

About Julie Morris

Julie Morris is a life and career coach. She thrives on helping others live their best lives. It’s easy for her to relate to clients who feel run over by life because she’s been there. After years in a successful (but unfulfilling) career in finance, Julie busted out of the corner office that had become her prison.

Today, she is fulfilled by helping busy professionals like her past self get the clarity they need in order to live inspired lives that fill more than just their bank accounts. When Julie isn’t working with clients, she enjoys writing and is currently working on her first book. She also loves spending time outdoors and getting lost in a good book.

Read her articles here

Improve your company’s performance and decision making with services from BRP Onesta. Find out how our customized solutions can help your business!

Where to Get Free Money for Your Small Businesses: Small Business Grant Portal

Without a doubt, small business owners want access to capital so they can run and grow their businesses. However, many small business owners who we speak with do not know where to start. So, to help small business owners access these free programs we have built a list of small business grants on our portal which we keep current weekly.

In this article, we provide an overview of current grant programs, highlight one current grant program, and list others that are available (scroll down)

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

Is my business eligible for grant funding?

This is always a loaded question. However, most small businesses do qualify for some type of grant funding.

There are always different methods for how to find the right grant. We suggest that any small business owner looks based on:

  • Goals of grant (usually grants carry a greater mission to solve problems – for instance, grants that lead to job creation)
  • Industry – search for grants specific to your industry
  • Grants tend to address places of higher poverty

The key of looking for a grant is to not focus on just getting money. Instead, focus on how organizations that provide grants want you to spend the funds. Then, you can organize your application around how to match your business to what the organization is looking for grantees to accomplish.

Certifications – Where Grants Have Prevalence.

Does your business have a certification? Does the small business owner have a certification? Many grants are put aside for businesses that have a certification. Some of the certifications are:

  • Woman-owned small business
  • Minority-owned small business
  • Disadvantaged business enterprise
  • Veteran-owned small business

For more information on the certifications, and how to get your certification and others, click here.

7 Things Every Small Business Owner Should Be Ready for When Applying for 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. In preparation for writing a grant, we have built an extensive, yet helpful list of important things which will help any small business owner in their pursuit of a small business grant.

This list of what to expect can be found here: Click Here.

Highlighted Grant Database: Grants.gov

For the month of May, we are highlighting the Grants.gov website.

Grants.gov warehouses thousands of different grants provided by the Federal government. Small business owners can search available grants at https://grants.gov/web/grants/search-grants.html. On the database you can look at grants by industry, funding instrument, agency, and opportunity status.

What Small Business Grants are Currently Available?

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.

To help you get started, we always keep and refresh small business grants which are available to small business owners (https://www.backofficedepot.com/smallbusinessgrants).

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.

8 Affordable Small Business Financing Options for The Post Pandemic Era

While the Economic Injury Disaster Loan (EIDL) and the Payroll Protection Programs (PPP) were beneficial for small business owners, as they say, “all good things must come to an end.” What it does not mean is that there are not great options out there for small business owners to take advantage of. We know that traditional bank loans and lines of credit are rarely out there but that does not mean access to financing has to be hard or expensive.

In this article, we will share a list of 8 different financing products which are easy to attain, and in some cases will cost you nothing.

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

What’s out there for small business owners?

In the post EIDL/PPP era, what is out there for small businesses? We get that question a lot from clients to we put together a list of 8 options for small business owners. Also, you can apply through our platform as we do not charge clients broker fees or add on extra origination charges, ultimately making the product more affordable than going through loan brokers or directly through a website for business funding.

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.

To help you get started, we always keep and refresh small business grants which are available to small business owners (https://www.backofficedepot.com/smallbusinessgrants).

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.

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.

Getting Caught: Small Business Owners Committing EIDL and PPP Fraud

Regardless of whether or not small business owners believe they did anything wrong, they should understand what is happening.

From April 2020 to December 2021 over $1.2 Trillion was delivered to small businesses in the form of the Payroll Production Program and Economic Injury Disaster Loans. While many small business owners saved their businesses because of PPP and EIDL, many small business owners provided information to banks and the SBA which were inaccurate and in many cases, purposely fraudulent. This article reviews current oversight efforts and actions by the Department of Justice for those who submitted inaccurate or fraudulent information to get funded. We highlight several cases where small business owners committed fraud.

We also have updated our previous rankings of the Top 15 Frontline Zeroes of The Pandemic and added some new Dishonorable Mentions.

By Thomas 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.

Does the government really referee COVID Relief Programs for small businesses?

The answer is yes.

Fraud was apparently so prevalent that President Biden announced in the State of the Union Address on March 1 an increase scrutiny of both how small business owners secured and used both Payroll Production Program and the Economic Injury Disaster Loan funding.

Government Agencies Cross-Checking Data: Three ways that the government is finding PPP and EIDL fraud

  • There is discrepancy between the business’ taxes and what the business put on their EIDL/PPP application
  • Does the IRS have the 940/941 forms that were submitted with PPP applications?
  • Were funds used appropriately? That is, were funds used for payroll expenses (or allowable expenses) or were the funds used to buy cars, jewelry, or even to pay lifetime alimony?

How bad was the Fraud? BAD

For some time now, news outlets have been describing how some small business owners defrauded the federal government. Some watchdog groups have been suggesting that PPP and EIDL fraud or misuse was terrible. I wrote about this previously in an article and said:

The purpose of this article not to describe how inherent the fraud was but from what some watchdogs are showing, it was 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.”

New cases still coming every day

The government continues to go after cases where fraud has been found. And they are not

always going after the big fish. Some examples have been made of small business owners who received as little as $10K in funding (click here to read).

A local case was just settled in New Jersey close to where BRP Onesta is located. As reported in CentralJersey.com, Jordan Larkins of Edison, NJ admitted to a host of crimes associated with PPP and EIDL programs. “According to documents filed in this case and statements made in court, from May through July 2020, Larkins submitted three fraudulent PPP loan applications to three different lenders and 11 EIDL applications to SBA on behalf of numerous purported businesses. On his 14 fraudulent PPP and EIDL applications, Larkins made false representations to the participating lenders and the SBA, including fake federal tax return documentation for his purported businesses and fake bank statements, according to the statement. He also fabricated the identities of certain individuals listed as applicants and the corresponding driver’s licenses of those purported applicants.

Based on Larkins’ misrepresentations, he obtained approximately $1.6 million in PPP and EIDL funds. Larkins then misused the funds by making a series of cash withdrawals, transferring funds to foreign banks, and for various other personal expenses, according to the statement.” (DOJ Press Release Here)

Will the DOJ come after you? 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.

Re-Ranking Our Top 15 Zeroes of the Pandemic

In December 2021, we ranked the Top 15 “Zeroes of the Pandemic” which were who we thought were the most interesting of those either charged or convicted of PPP or EIDL fraud. Since then we have updated our list.

We also have added a list of dishonorable mentions as well.

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) (8.884M) Benjamin Tifekchian (https://www.justice.gov/usao-or/pr/portland-man-pleads-guilty-bank-fraud-after-stealing-covid-relief-funds)

6) ($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)

7) ($7.2M) Don Cisternino (https://www.justice.gov/usao-mdfl/pr/seminole-county-man-charged-covid-relief-fraud)

8) ($6M) Christopher Lick (https://www.justice.gov/usao-ndms/pr/starkville-man-charged-more-6-million-covid-relief-fraud-false-statements-and-money)

9) ($5.8M) Julio Enrique Lugo (https://www.justice.gov/usao-mdfl/pr/davenport-couple-charged-58-million-covid-relief-fraud)

10) (4.5M) Christina Burden (https://www.justice.gov/usao-ndca/pr/oakland-woman-charged-million-dollar-scheme-defraud-pandemic-relief-programs-struggling)

11) ($3.899M) Brittany Shearod (https://www.justice.gov/usao-ndga/pr/22-people-charged-connection-multi-million-dollar-paycheck-protection-program-fraud)

12) ($3.899M) Darius McCants (https://www.justice.gov/usao-ndga/pr/22-people-charged-connection-multi-million-dollar-paycheck-protection-program-fraud)

13) ($3.8M) Gregory Blotnick (https://www.justice.gov/usao-nj/pr/new-york-and-florida-resident-charged-38-million-paycheck-protection-program-fraud-scheme)

14) ($3M) Anuli Okeke (https://www.justice.gov/usao-edny/pr/two-former-employees-new-york-branch-major-bank-and-accountant-charged-cares-act-loan)

15) ($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)

Dis-Honorable Mentions

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

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

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

($600K) Marc Mason (https://www.justice.gov/usao-ndga/pr/22-people-charged-connection-multi-million-dollar-paycheck-protection-program-fraud)

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.

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

*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 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 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.