SBA Loan Delays due to Vetting Borrowers
As of April 1st, the SBA received more than 94,000 applications for the Economic Injury Disaster Loans (EIDL) relating to COVID-19. Combine those volumes with the lessons learned from prior audits of past EIDLs, and it is safe to assume that loan decisions will not come fast enough.
The beauty of audits is the opportunity for improvement. The SBA’s Office of Inspector General issued a memorandum to the SBA about key points to remember when administering EIDL relating to the COVID-19. The April 3, 2020 white paper provides insight into possible delays with loan approvals.
One of the major findings in prior audits and inspections of SBA EIDLs was insufficient vetting of borrower’s credit or ability to repay the loan. 13 C.F.R. 123.6 requires an analysis of both personal and business cash flows to measure the ability to repay loans.
The current application for the EIDL does not require cash flow details with the initial submission. The SBA will request additional documents from the applicant when the application is being reviewed. Loan officers must perform financial analysis to evaluate an applicant’s ability to repay.
Applicants should be prepared to provide the following documents for evaluation of cash flows:
- Monthly Profit and Loss for 12 to 24 months
- Accounts Receivable Aging Schedule
- Accounts Payable Aging Schedule
- Bank Statements for 3 months (business and personal)
- Monthly Cash Flow Projections for 12 to 36 months
- Executed sales contracts
- Debt Schedule
- Personal Financial Statements
- Pay stubs
- Non-retirement investment statements
- Mortgage Statements
- Utility Bills
This is not an inclusive list. The loan officer may request additional information to sufficiently assess the borrower’s ability to repay. In order to minimize delays, borrowers should proactively compile their personal and business financial documents for quick and easy retrieval upon request.
Contact Xtrategist Accounting Services if you need assistance compiling financial documents for the loan.