Dana Glosson and her husband, Toby, made about $170,000 a year before the pandemic from their Georgetown materials transportation company, Glosson Enterprises. But in May 2020, Toby caught the virus and spent months in the hospital. He died three months later.
“It’s felt like one thing after another and I just can’t get my head above water to even get past one loss to make it to the next one,” Dana said.
Toby was always the driver, while Dana was the bookkeeper. Now that she’s on her own, Dana, 57, created a new business plan to buy a modified van so she can be a medical transporter. She applied for a $218,000 low-interest loan from the U.S. Small Business Administration’s Economic Injury Disaster Loan program created to boost small businesses and nonprofits experiencing COVID-related revenue loss.
Nearly a year after her husband’s death, her loan request was denied. Last week, she started a remote customer service job to help her survive.
“There’s a sadness in our government because they passed the law for the money to be there, and why can’t they give it to people like me who have the drive and a business plan?” she said.
Glosson is far from alone. There was a mass wave of rejections sent out in July for the EIDL program with generic language that frustrated many business owners. They were told they could reapply, but weren’t told what to fix in their application.
The EIDL is meant to replace lost sales vs. new ventures, but that’s not why Dana was declined. Her EIDL increase request was sent in December and there’s nowhere on the application to tell how you plan to use the money. And since she plans to continue in the transportation business, it’s not a violation of the EIDL terms. Now she’s left wondering what she did wrong.
Veronica Pugin, senior adviser to the SBA’s Office of Capital Access that’s in charge of the EIDL applications, said loans were declined for various reasons, including not meeting the credit score requirement or mistakes on applications. She said the agency is working on providing more details in future rejection emails to applicants.
“We’ve noticed a lot of applicants seeking an explanation more detailed than the broader category around unverifiable information, so we’re going to be rolling out an improvement on that,” she said.
The SBA has “plenty” of funds left over in the EIDL program, and business owners with 500 or fewer employees can apply through Dec. 31, Pugin said. Small businesses make up 99.9% of U.S. businesses and employ 47.1% of U.S. employees, according to the SBA.
In June and July, the main complaint about the program was that applications weren’t being processed fast enough — considering these are “emergency” funds for businesses in dire straights. The SBA has since hired more personnel and increased training across the board, Pugin said.
The agency has gone from processing fewer than 2,000 applications per day on June 28 to over 37,000 applications per day on July 28.
“With that process sped up, you’re going to see a higher volume of approvals and declines,” she said.
EIDL loans approved nationwide reached 3.8 million for a total of $258.5 billion on Aug.19, the last time data was updated. That includes 326,330 loans approved in Texas, totaling $22.2 billion. The SBA didn’t know how many loans were turned down.
Connecticut consultant Trevor Curran called the massive wave of loan rejections “an absolute disgrace” as it seemed the SBA swept a load of files into the trash bin when it switched the internal office assigned to review new applications.
The SBA should have let the new team review the applications instead of declining them, said Curran, who runs Aurora Consulting with his partner, Linda Rey. They help business owners apply for EIDL loans, charging each up to $2,500.
The reasons given — “unverifiable information” or “economic injury unsubstantiated” — are “nonsensical and leave applicants shamed and scratching their heads,” Curran said. In one case, an application he submitted for a client was declined for “inactivity and lack of interest from the applicant,” even though he says he responded to every SBA request within hours.
SBA has touted improvements to the program, but Curran said those are “minimal at best.” There was a day in late August when the SBA portal was inaccessible, he said. There has been some increase in responsiveness to requests. But there is still a backup of loan and reconsideration requests that are “languishing” in SBA processing systems, Curran said.
The general consensus is that the original EIDL applications in 2020 were a breeze. But applying for an increase in 2021 has been a nightmare, with SBA requiring detailed supporting documents this time around.
SBA has made processing applications faster a “big priority,” Pugin said. That’s why it had a big hiring spree, even taking employees from other COVID-19 SBA programs that are near closing, like the Restaurant Revitalization Program and the Paycheck Protection Program. The new team wants to
provide better information on how applicants can ensure they have the most accurate application possible the first time, she said.
Bill Carr, owner of Dallas Millwork, said his loan request was denied because of a mismatch in addresses that he had tried to warn the SBA about ahead of time. Agency representatives told him it would be declined because of the mismatch but there was nothing they could do to help him fix it. He would just need to wait to be declined and then reapply.
“It fell on deaf ears,” he said. “It’s like watching a train wreck in slow motion.”
Carr, 51, said his original EIDL loan was for $109,000, and he was eligible for an additional $324,000. Aurora Consulting has taken over for him and resubmitted his application. Now he’s back to waiting.
“Now the SBA has tightened the belt so tight that if you don’t cross a T in the spelling of an address, they deny you,” he said. “I’m about to be put out of business because of a wrong ZIP code.”
Carr took out a loan from the SBA to buy the business five months before COVID hit. That means the SBA is asking for those loan repayments while also holding his EIDL increase application at a time when he can’t get materials or employees to run the business. Materials prices are up 50%, he said, and he doesn’t even pay himself the hourly rate his workers now want.
When he bought the business, it was bringing in about $1 million a year in revenue. Last year, revenue dropped to $200,000. His workforce has dwindled from 14 to three. He’s had to invest in equipment to automate the process to cut manufacturing time and employee costs.
He’s racked up his personal credit to stay in business but has less than two months left, he estimates. He’s looking at bankruptcy as an option if his new EIDL loan isn’t approved.
“Right now, it’s hand to mouth,” said Carr, who was hospitalized earlier this year due to stress. “I don’t have the capital reserves to sustain much longer. It’s like the American dream flushed down the toilet.”
If you’re a business owner, we’ve collected tips from experts about how to avoid common mistakes on the COVID EIDL loan applications.