This is a guest post by Haley Claxton of Koprince Law LLC.
Recently, GAO published a report on small business subcontracting plan compliance, concluding that agency oversight of these plans need improvement.
As many of our readers know, some federal contracts require large business prime contractors to utilize small business subcontractors under a small business subcontracting plan, as described in FAR 52.219-9. For context, in 2019, federal agencies “awarded more than 5,000 contracts requiring a small business subcontracting plan, and obligated more than $300 billion to contracts with required small business subcontracting plans.”
If a small business subcontracting plan is in place, contractors are required to report on any subcontracting achievements and make a “good-faith” effort to keep to the plan. In addition, some regulations and procedures require contracting officers to review the subcontracting plan before or after award to make sure certain information is included in the plan. Agencies are also required to provide SBA Procurement Center Representatives (or PCRs) the opportunity to review the proposed contract and associated subcontracting plan.
After a contract is in place, the FAR requires contracting officers to ensure that subcontracting reports are submitted via the eSRS web platform within a certain amount of time. Contracting officers must then review and decide whether to accept these reports. In addition to reviewing the reports, agencies are also required to perform annual evaluations of all contractor performance though CPARS (the Contractor Performance Assessment Reporting System). One aspect of the annual CPARS evaluation, where applicable, is compliance with the contractor’s small business subcontracting plan.
Despite the amount of oversight agencies appear to have over contractor compliance with small business subcontracting plans on paper, some folks at the Department of Defense were concerned about how much actual oversight agencies were providing to ensure contractors complied with their plans. Thus, GAO looked into how four representative agencies (the DLA, the Navy, GSA, and NASA) provide oversight. It found that the DoD was right to be concerned.
First, GAO looked to pre-award procedures for reviewing subcontracting plans. It found that COs from all four representative agencies reviewed and approved subcontracting plans as required in most, but not all, cases. More problematically, however, the “[a]gencies also could not demonstrate they followed procedures related to PCR reviews in about half of the contracts reviewed.” Put differently, most of the time, the SBA wasn’t involved in reviewing subcontracting plans before contract award, as required.
Next, GAO turned to agency overview of contractor compliance with their subcontracting plans post-award. GAO found this overview was pretty “limited.” Even though each representative agency did offer some amount training to contracting officers on subcontracting plans, GAO found that these contracting officers did not ensure contractors met their reporting requirements in most of the reviewed contracts. In addition, even where reports were submitted as required, many were not reviewed in the manner anticipated.
As a result of its investigation, GAO offered ten recommendations for the reviewed agencies and the SBA. These recommendations are outlined here, but in summary, they ask the relevant agencies to make sure they have steps in place to ensure appropriate review of subcontracting plans and contractor compliance with those plans.
Overall, an increased focus on compliance with subcontracting plans is likely to have an effect on many contractors–hopefully ensuring more contracting dollars go to small business subcontractors. For more on small business subcontracting plans, check out our related blog posts here.
This post originally appeared on the SmallGovCon blog at https://smallgovcon.com/statutes-and-regulations/room-for-improvement-gao-reviews-agency-oversight-of-small-business-subcontracting-plans/ and was reprinted with permission.
This is a guest post by David T. Shafer and Emily J. Rouleau of PilieroMazza PLLC.
Despite requests for delay due to COVID-19, California Attorney General Xavier Becerra has affirmed that enforcement of the California Consumer Privacy Act (CCPA) has started, effective July 1, 2020. The CCPA is a huge step forward in data privacy law, granting California consumers robust data privacy rights and increased control over their personal information. Previous PilieroMazza coverage of the CCPA can be viewed here and here.
While the CCPA has been in effect since January 1, 2020, companies that do business with California consumers will now risk penalties for noncompliance. Below is key information for companies seeking to ensure CCPA compliance and to avoid enforcement action.
Approval of Final Regulations
The Office of the California Attorney General submitted the final proposed CCPA regulations package to the California Office of Administrative Law (OAL) on June 1, 2020, for review. OAL has 30 working days, plus an additional 60 calendar days to review the package.
Once approved, the final regulation text will be filed with the Secretary of State and become enforceable by law. OAL is not expected to make significant changes to the regulations, so a full analysis of the rule will likely be necessary for the creation and implementation of a robust CCPA compliance program.
To understand whether or not you are subject to potential enforcement,, first determine if you fall within CCPA’s compliance criteria. Critically, the statutorily defined terms “consumer” and “personal information” are far broader than comparable statutes and regulations found in other jurisdictions, though that itself is currently the subject of debate in many state legislatures.
The enlargement of these terms causes CCPA’s jurisdiction to be larger than it appears on the face of the statute. Below are certain high-level questions that can help a business determine if it meets certain threshold standards:
- Do you, or any of your subsidiaries or affiliates, engage in business in California?
- Do you do business with contacts or employees who reside in California?
- Does your business have over $25 million in annual gross revenues?
- Does your business buy, sell, or receive personal information?
If you fit certain initial criteria, we recommend identifying the type of personal information your business collects. As briefly mentioned above, CCPA broadly defines personal information as any information that directly or indirectly identifies, describes, or can be reasonably linked to a particular consumer.
CCPA grants consumers significant rights to the use of their personal information, including general notice rights. It is here that companies can take proactive steps to prepare for CCPA’s implementation.
More specifically, CCPA grants consumers the right to know what personal information a business collects, sells, or discloses about them. Additionally, several sections of CCPA require businesses to make affirmative disclosures to consumers by way of privacy policies and other notices.
With the expiration of CCPA’s safe harbor and subsequent July 1, 2020 enforcement, steps that can be immediately taken may include, but are not limited to, the following:
- updating notices and privacy policies;
- reviewing data flows including data mapping and classification;
- segregating data and IT systems between regulated and non-regulated data repositories;
- implementing cookie banners and web beacons in accordance with CCPA-compliant privacy policies;
- implementing individual request processes (including opt-out and deletion); and
- implementing training to meet CCPA’s new requirements.
What to Watch
The California Secretary of State recently announced that the California Privacy Rights Act (CPRA) will be on California’s November 3, 2020, ballot. If approved by voters, the CPRA would significantly update and amend the CCPA, allowing California consumers to block businesses from using a new category of information known as “sensitive personal” information and establishing a new enforcement authority to protect data privacy rights.
PilieroMazza’s attorneys will continue to monitor the CCPA, along with legal developments for data privacy in other states. For assistance with CCPA implementation in your business, please contact the authors of this client alert, Dave Shafer and Emily Rouleau, or a member of the Firm’s Cybersecurity & Data Privacy Group.
This post originally appeared on the PilieroMazza website at https://www.pilieromazza.com/california-consumer-privacy-act-enforcement-effective-july-1/ and was reprinted with permission.
An announcement from the GSA Vendor Support Center.
GSA eBuy will be updated on August 1, 2020 to allow you to self-certify under specific Special Item Numbers (SINs), subgroups of products and services your company offers on contract.
The scope of certain SINs can be very broad. Subgroups were created to highlight specialized products and services that are offered under those SINs. By selecting the subgroup of offerings your company specializes in, your customers can find you more easily in both eBuy and eLibrary when they conduct their searches. As some SINs contain thousands of contractors, this helps the customer to identify the segment of contractors that can perform. Not all SINs have subgroups.
You may have used this functionality under your legacy contract, but you must reestablish these subgroups under the new SIN structure.
Identifying the subgroups of your contract offerings benefits both you and your customers. This function allows your customers to do better market research and email eBuy RFIs/RFQs directly to contractors that can satisfy their requirements.
Please note, the selection of subgroups does not prevent you from seeing opportunities posted for the SIN(s) you have been awarded. Your ability to review all eBuy opportunities on your awarded SIN(s) does not change.
The following SINs will have subgroups starting August 1, 2020:
561210FA, 541690E, 332311P, 532490P, 333241, 336999, 333318F, 335999, 325612, 325998, 325611, 54151HACS, 517312, 54151S, 54151ECOM, 511210, 33411, 339940OS4, 541611, 562112, 541211, 522310, 541330ENG, 562910REM, 541930, 541614, 541620, 561621H, 339113LAB, 334515, 334516, 333997, 332439.
The below steps outline the process to select your SIN subgroups for both eBuy and eLibrary.
How to select SIN Subgroups:
- Step 1: Login to your vendor profile in eBuy
- Step 2: Click on the Modify Subgroups button located on the right hand side of the screen
- Step 3: Select applicable subgroups
A note from Bill: This is really important for those with specialized NAICS and sub-SINS to see the specifics here and make sure to register, since this is an opportunity to register for more and different sub-SINs.
This is guest post by Judy Bradt of Summit Insight.
The federal contracting landscape just changed dramatically. Now what?
I love pretty much everything about geology: The ancient stories in layers under our feet. The slow, relentless, way the earth moves and transforms every day, even when we don’t notice. The way relationships within ecosystems affect each other. And the sudden, dramatic, changes that take us by surprise when pent-up energy suddenly releases.
The pandemic sent shock waves like tectonic plate shifts through our federal contracting world. First, we heard and felt tiny rumblings. Then we were all shaken by unmistakeable, giant waves of change. And just like after an earthquake, we were left to make sense of the aftermath and understand the story that’s still unfolding.
As we get deeper into the pandemic, notice three things about the new federal contracting landscape:
- Some things are still standing: federal departments themselves. Extraordinary federal employees (and their contractors) activated continuity of operations plans to keep government functioning with minimal interruption.
- Some things are completely new: federal agencies are awarding contracts for products and services to carry out programs for pandemic response and recovery.
- Some things have been postponed indefinitely, and we don’t know when they’re coming back: including but not limited to the vast majority of in-person office meetings, conferences, and events.
All three represent opportunities to serve our country as federal contractors, and to thrive as business owners.
Here are five tips that, despite all the challenges and disruptions of life in a pandemic, are bringing wins to my clients right now, and might make a difference for you.
- Go narrow, go deep.
Know who the actual users and choosers are in your niche. Use the bounty of public information (much of it absolutely free) to identify individual federal humans that you know, based on their missions and their spend and your experience, that you know you are meant to serve. Pick only as many as you have the time to research and commit to really getting in front of, no matter how long it takes. Identify the end users, program managers, contracting officers and specialists. (HINT: 99.9% of the time, the Small Business Specialist is not your buyer.) Look ‘em up. Be like a detective: how much can you find out about them? Who they do business with? How they contract? What’s in their forecast? When are their contracts going to be recompeted?
- Federal buyers are answering their phones. Call them.
Federal buyers are working right now. In fact (like you, I’ll bet), many are working even longer hours now, especially those who have extra pandemic responsibilities. If you know you have a product or service they need RIGHT NOW, then put the name of that thing in the email subject and at the top of your voicemail. The phone is the single most overlooked tool for reaching buyers. Expect that it might take a while to get through. Dedicate yourself to persistence. Most people give up after two or three tries. Now you know better. When you leave voicemail, make your tone cheerful and upbeat, let them know when you’ll call again. The “two-fer” is working well these days: when you leave a voicemail, also immediately send a follow up email saying, “Hey, sorry I missed you when I called today. Here’s what’s up…”
- Show up with empathy.
Are you working from home? Got four-footeds underfoot? Naked toddlers zooming through your home office? Having a bad hair day and not enough domestic bandwidth for three online classrooms, two Teams meetings, and why is Aunt Marcie calling now? Your federal buyer is having that life, too. So when you reach them, take your time. Ask, “How ARE you?” and really care about the answer. Really listen. Don’t be in a hurry to sell stuff. Slow the heck down. Maybe what they need more than anything is a chance to just vent, or a reason to smile. Ask them what would make their day a little better. Keep a handful of cheery, hopeful pandemic memes to brighten someone’s day. As Dr. Maya Angelou said, “People will forget what you said. People will forget what you did. But people will never forget how you made them feel.”
- Help them shine.
Federal employees compete for promotions. Your federal buyers are heading for the end of fiscal 2020 with all the same professional goals they started out with last fall. The pandemic probably overloaded that plate. Which means they have all kinds of projects that falling off the bottom of their performance appraisals as “INCOMPLETE.” Even if the pandemic wasn’t their fault. How could you make a difference for that person? How could you change the promotion game for them? What could you help a federal employee finish or achieve by the end of September that would have been otherwise impossible?
- Up your online game.
Sure, in-person meetings and events and conferences and networking are up in the air at best. Many are cancelled for the foreseeable future. So get with the program. If your company isn’t located in or near cities with lots of big federal offices, cheer up: the playing field just tilted in your favor. NOBODY can get into those offices right now in person. Flip side: ANYBODY who has something buyers need and persists in making the connection can set up a video meeting. Not comfortable doing that? Invest in learning how to be an online meeting pro. You’ll get almost immediate, satisfying return on a modest investment in bandwidth, background, audio and video equipment. Then, find a couple of friendly feds to rehearse with, and work out the challenges. Find out what video platforms your target agencies use (it’s almost never Zoom), and master them. See details in this article by the National Security Agency on how agencies make their teleworking choices.
As for networking, get with the program. In particular, see which federal agencies and industry associations are holding online or hybrid events. Register early, and ask the organizers for a briefing on how to master the mechanics of whatever online matchmaking they set up. If you are matched, research in advance as much as you can about the person you’re meeting. Don’t try to sell anything or to recite your capabilities. Try to have two of you from your organization on the call. Get full contact info for the people you’re meeting with. Make your “ask” clear up front. Leave plenty of time (even if it’s only a ten-minute matchmaking slot) for conversation, and make your objective to secure a commitment for a specific date, time, and topic for a follow up call.
Judy Bradt helps established companies win more federal business faster, by getting you in front of your buyer waaaay upstream from everyone else’s pipeline! Find out more at www.growfedbiz.com or book a complimentary call today to find out how she can help you.
This is a guest post by Cy Alba of PilieroMazza PLLC.
Guidance from the Department of Defense (DOD) has finally been issued related to Section 3610 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which allowed for payments to federal contractors to keep non-working employees at the ready to return to work when required to do so. The new guidance can be found here.
As we noted in a previous blog, the CARES Act allows contracting officers to pay contractors at the “minimum applicable billing rates” for any employees who cannot perform work at a government site or government-approved contractor site due to a shutdown of said site because of COVID-19. That is a statutory allowance and, as such, cannot be changed by any agency action. However, there has been confusion about specific terms in the statute and conflicting guidance coming out of various agencies. While this new guidance does not clear up the inconsistencies, it does help clarify how DOD is going to treat contractor requests for 3610 funding.
First, the new guidance clearly states:
- the authority provided by Section 3610 is a permissive authority and the contracting officer is not required to reimburse any or all of the requested paid leave costs;
- any reimbursement under Section 3610 is subject to the availability of funds;
- the contracting officer has sole discretion to make decisions on a contractor’s affected status and the amount of any Section 3610 reimbursement;
- contractors must not be reimbursed (or otherwise paid) twice for the same costs;
- the contracting officer has the right to determine the amount reimbursed under Section 3610 and at what level (e.g., contract, division, segment, company, or corporate) the costs will be reimbursed;
- contractors must segregate COVID-19 paid leave costs in their books and records;
- contractors may not request, and shall not receive, Section 3610 reimbursement for any hours related to employees a contractor has furloughed or laid off—such hours must be excluded from any request for Section 3610 reimbursement;
- paid leave reimbursement under Section 3610 excludes any profit or fees; and
- contracting officers shall document any COVID-19 paid leave reimbursement decisions in a memorandum for record (MFR)—a template that contracting officers may use to complete the MFR will be provided separately, but this template should be tailored to the specific circumstances and is not a substitute for a contracting officer’s independent thought or reasoned judgment.
While some of this is not consistent with a plain reading of the CARES Act itself (specifically, there is no indication that fee or profit is excluded—quite the opposite, as the Act says “minimum applicable billing rates,” not costs), this is the guidance that DOD has chosen to adopt. And because, as noted above, the granting of 3610 funding is entirely discretionary, the cognizant contracting officer can simply give contractors a “take-it-or-leave-it” offer. It is highly unlikely that a contractor could actually sue to seek any additional 3610 funding, or any funding at all under Section 3610, as it not mandatory.
It is also critical to note that this guidance states that you cannot “double dip” by using both 3610 funding and forgiven Paycheck Protection Program (PPP) loans for the same expenses. This is not a shock to those who have been following the guidance and pendulum of thinking on this, but this new guidance does make it much more explicit. It also now requires contractors to take the affirmative step of notifying any contracting officer who has received, or is reviewing, a request for 3610 funding. This is to ensure that contracting officers do not pay 3610 funds to contractors who have received, or will receive, PPP loan forgiveness. Additionally, it is also meant to notify contracting officers of other situations where the contractor has received any other tax credit or other funding which could cover the same costs being requested, or which may have already been paid with 3610 funding. This is to allow the contracting officer to deny 3610 funds, or to demand reimbursement of already-paid 3610 funding.
While this may seem like a change, it should also be noted that most accountants who are well versed in government contract issues have already been instructing clients that any amounts of PPP loan forgiveness or other tax credits would likely be owed back to the government for cost-reimbursable contracts, at the very least, and possibly all contracts in some cases. So this new guidance simply solidifies the reality that a government contractor cannot “double dip” by seeking funding from two different government programs for the same costs.
The guidance includes a number of instructions for how contractors and the government should work together to construct 3610 funding requests and how to determine the appropriate amounts to be paid. Comments from industry are due to firstname.lastname@example.org before 5:00 PM ET on Friday, May 22, 2020. Please review the guidance here and send your comments to email@example.com by 5:00 PM ET on May 21, 2020, so we can then gather comments into one document.
PilieroMazza is working to prepare a fulsome write-up on this new guidance and, on May 20, 2020, Cy Alba presented a new webinar on the PPP loans and 3610 funding crossover. You can access the webinar and slides on demand here.
PilieroMazza is monitoring the rapidly changing COVID-19 crisis and will provide updates when more guidance is released by the government. We also invite you to visit the Firm’s COVID-19 Client Resource Center to access further resources that will help businesses navigate the effects of the COVID-19 pandemic. If you need immediate assistance, please contact us at firstname.lastname@example.org.
This post was originally released as a PilieroMazza Client Alert at https://www.pilieromazza.com/dod-issues-new-cares-act-section-3610-guidance and was reprinted with permission.
This is a guest post by Meghan Leemon of PilieroMazza PLLC.
Just under one year ago, we wrote about the Small Business Administration’s (SBA) proposed rule regarding implementing a certification requirement for Women-Owned Small Businesses (WOSBs) / Economically Disadvantaged Women-Owned Small Businesses (EDWOSBs) and revised economic disadvantage criteria for 8(a) eligibility. SBA’s final rule was recently published, implementing just that. The rule will impact businesses seeking to compete for government contracts under the WOSB and 8(a) Business Development programs.
WOSB / EDWOSB Certification
Effective October 15, 2020, WOSB / EDWOSBs will be required to be certified as such in order to pursue WOSB / EDWOSB set-asides, as well as those seeking to be awarded a multiple-award contract with pools reserved for WOSB / EDWOSBs. Notably, the new regulation provides that, in order to submit an offer on a specific WOSB / EDWOSB set-aside requirement, the company must either be certified as a WOSB / EDOWSB or “represent that it has submitted a complete application for WOSB or EDWOSB certification to SBA or a third-party certifier and has not received a negative determination regarding that application . . . .”
The rule explains that a company may apply to SBA for WOSB / EDWOSB certification, and that it may submit evidence that it is either a women-owned and controlled small business certified by the Department of Veterans Affairs’ Center for Verification and Evaluation as a Service-Disabled Veteran-Owned Small Business or Veteran-Owned Small Business or certified as a WOSB / EDWOSB by an approved third-party certifier. Additionally, a certified 8(a) participant qualifies as an EDWOSB. The final rule states that SBA will make a determination within 90 days after receipt of a complete package, whenever practical. If SBA or a third-party certifier declines certification, that concern must wait 90 days to reapply, and there is no appeal process.
While self-certification will no longer be accepted as of October 15, 2020, the other regulations regarding the certification process are set to be effective on July 15, 2020. It appears that SBA may be providing for a three-month window to allow companies to seek certification prior to October 15, 2020, but it is currently unknown as to exactly when SBA will begin accepting WOSB / EDWOSB applications.
8(a) Economic Disadvantage Eligibility Criteria
As it applies to the 8(a) program regulations, the final rule is effective July 15, 2020. Through the final rule, SBA has revised the 8(a) initial economic disadvantage criteria to be consistent with the EDWOSB requirements. Accordingly, there will no longer be a distinction between initial entry into and continued eligibility for the 8(a) program. The three economic disadvantage criteria will be as follows: $750,000 net worth, $350,000 adjusted gross income, and $6 million total assets.
Notably, SBA has also revised the regulation to provide that funds invested in an individual retirement account or other official retirement account “will not be considered in determining an individual’s net worth.” Presently, the regulation does not speak to an individual’s age, but SBA has interpreted the regulation to state that if an individual has reached retirement age, then it will include the value of such account in calculating an individual’s net worth. The revised regulation clarifying that the value of a legitimate retirement account, regardless of the account holder’s age, is not included will be a welcome change. The same exclusion should also apply for purposes of the total assets test.
Should you have any questions as you prepare for WOSB / EDWOSB certification and / or regarding your eligibility for the 8(a) program, please contact Meghan Leemon, the author of this alert, or a member of PilieroMazza’s Government Contracts Group.
This article was originally published as a PilieroMazza Client Alert at https://www.pilieromazza.com/sba-implements-wosb-edwosb-certification-requirement-and-revises-economic-disadvantage-criteria-for-8a-eligibility-including-treatment-of-retirement-accounts and was reprinted with permission.
1. Find out if your business is qualified
Ultimately, the most accurate way to find out if you qualify for a business credit line is to apply — but you wouldn’t want to apply to many lenders only to get rejected or receive a disappointing offer.
To get a quick pulse on if you’re qualified for funding, consider the factors below:
Most lenders will look at your personal and/or business credit score to figure out the riskiness of your business. The stronger your score (680 is usually the cut-off for banks), the more options you have. However, just because you have a weaker credit score doesn’t mean you won’t be able to qualify for a business line of credit at other lenders.
To determine whether you can pay back your credit line, lenders will look at your monthly or annual revenue from your income statements as well as the trajectory of your revenue over a period of time. Your annual revenue is one of the most important metrics lenders look at; when they see your sales grow month after month, it shows that you know how to run your business and execute on your business plan. This not only makes lenders more likely to lend to you, but also makes them more likely to gradually increase your credit line to support the growth of your business.
When you apply for a business line of credit, lenders will ask you how long your business has been in operation. Banks look for businesses that have been around for at least two years. If you’re a new business (between three to 12 months old), online lenders are a better option because they’re more willing to take on the risk of lending to younger businesses.
Different types of credit lines
There are many types of business credit lines. One major difference is credit lines with short or long repayment terms.
- Short repayment terms are credit lines with six to 12 months repayment terms. These terms are ideal if you’re looking to pay off your line of credit faster and want to potentially save more in interest.
- Long repayment terms are credit lines with repayment terms over 12 months. Longer repayment terms make sense if you need more time to pay off your credit line or want lower monthly payments.
Short-term business line of credit
If you’re looking for a business line of credit with short repayment terms, it’s worth applying to online lenders. Online lenders are generally a better option for businesses that are looking to save time on the application process and want access to funds on-demand. Additionally, since online lenders offer shorter repayment terms, the requirements aren’t as rigid.
When you apply to an online lender you will usually get a decision within one to two business days. To apply to an online lender follow these steps:
- Apply online: for lenders that have shorter repayment terms, they typically have an online application process that takes at most five minutes to complete.
- Upload your statements: online lenders don’t require much documentation; at most, you’ll need to upload three months worth of bank statements. If they need more information, they may ask for your tax returns and/or a debt schedule.
- Get a decision: once you’ve submitted an application, you should get a decision within one to two business days.
Long-term business line of credit
If you want to get a business line of credit with longer repayment terms, you should apply to a traditional bank. Here are the steps you’ll need to take:
- Check your credit score and business financials: to qualify for a bank line of credit you should expect to have a strong credit score of at least 680 and stellar business financials (stable cash flow, high revenue, and little to no existing debt). You may want to consult with a finance professional beforehand so that you have a clear picture of your business’s financial health.
- Get all of your documents together: When applying for a business line of credit with longer repayment terms, you must be prepared to submit a lot of documentation. This includes historical financial statements, balance sheets, tax returns, P&L statements, and income statements.
- Apply and wait: Once you’ve sorted out your documents, all you have to do is apply and wait. Some banks such as Wells Fargo still require you to visit a branch in order to submit your application. After you apply, expect to wait at least a couple of months to get a decision.
2. Compare your business line of credit options
Now that you have a general idea of how to apply for a business line of credit, your next step is to understand the major pros and cons of each type of popular lender:
Traditional bank lines of credit
Getting a line of credit from traditional banks are highly sought after because of their affordability and terms. If you manage to get a line of credit from a bank, you probably should accept the offer. But securing a line of credit from a bank is a lot easier said than done. To qualify for a line of credit, traditional banks often require at least two years of business history and $250,000 in annual revenue.
A good first step to securing a business line of credit with a bank is to contact the bank you have an existing relationship with. However, you should note that most banks have a time-consuming application process. If you have a hard time getting accepted by traditional lenders but still want reasonable rates and terms (like Bank of America or Chase) you might want to consider a line of credit from your local credit union or community bank.
Online lender business lines of credit
For those who don’t have the time or resources to spend filling out a traditional bank application, online lenders are a better option. In order to qualify for a business line of credit, most online lenders will ask you to complete the entire application online. The best part is that most online lenders don’t require sky-high credit scores or extensive financial records.
Once you submit your application, these lenders use a combination of both automation and manual underwriting to get you an offer. This means you can get a decision on your application within one to two business days. The interest rates are slightly higher with online lenders because they get the funds they lend to businesses from capital markets which is more expensive. But their application and approval processes are typically much faster.
Business credit lines from credit unions
Credit unions are member-owned and not-for-profit. This means that each member of a credit union has equal ownership and that any earnings made will go back to improving their products and services, which means lower rates and generally better products for their customers. To join a credit union, you usually must qualify for their field of membership, pay a small fee, and use your account frequently. Fields of membership vary depending on the credit union. Some credit unions are community-based, which only requires you to live within a certain area, and others are occupation-based.
A major drawback of credit unions is ease of use. Most credit unions have fewer branches and ATMs, which can make drawing funds a hassle. Additionally, credit unions don’t have strong mobile and online banking capabilities like online lenders and banks.
3. Know the minimum requirements
The following table is a broad overview of the minimum qualifications for each lender. As you can see, traditional banks are the hardest to qualify for, followed by credit unions and online lenders. Please note that the information here is not definitive; you should use it as a benchmark to gauge where your business stands the best chance of getting a business line of credit.
4. Understand the total cost of interest rates and fees
Annual percentage rate (APR)
When it comes to rates, it’s often thought that APR is the only rate to keep an eye out for, but that simply isn’t true. APR, or annual percentage rate, is an annualized percentage of the original loan amount plus the additional fees.
While knowing the APR is important, in some cases knowing the simple interest rate – the amount of interest you pay as a portion of the loan – makes more sense and may be cheaper. For instance, if you plan on borrowing money for less than a year, calculating the simple interest rate would give you a clearer picture of how much the loan would cost you than an annualized rate.
Simple interest rate
The simple interest rate is the interest you’ll pay to the lender on top of the loan you’re borrowing. You can use this formula to calculate simple interest rate:
Simple interest rate = Total interest charged / Loan amount
So if you are charged $100 in interest fees on a $10,000 six-month loan, you would pay a 1% simple interest rate.
Other lender fees
Here are some of the most common fees that lenders charge to use a business line of credit.
- Draw fees: Draw fees cost between one to two percent of the total draw amount. They are charged on each draw that you take.
- Payment processing fees: Payment processing fees are incurred depending on how fast you want funds deposited in your bank account. A wire transfer can get you funds within hours but usually costs between $15 to $35. The ACH method is usually free of charge but takes about two or more business days to complete.
- Late fees: When you pay late or fail a payment, you may be charged with late fees. Late fees usually cost a low percentage of your credit line but can add up quickly.
- Termination fees: If you decide to end your line of credit at any point before the full term of your loan, you may have to pay a termination fee of one to two percent of your credit line.
- Prepayment fees: Some lenders will actually charge fees if you pay your draws off early. These fees range from 3 to 5 percent of the loan principal. The good news is that many online lenders offer no prepayment fees.
5. Gather your financial documents and apply
The last step to get a business line of credit is to gather your documents and wait for the right time to apply. Here are some of the documents and type of information you’ll be expected to submit to a lender:
- Personal information: to verify your identity, lenders will require you to submit information about yourself. This includes your full legal name, social security, criminal record, and educational background.
- Bank statements: many lenders require at least one year of bank statements; alternative lenders are the exception to this and need only three months of statements.
- Financial statements: to determine the financial strength of your business, you’ll need to submit important financial statements such as your P&L sheet, cash flow sheet, and balance sheet.
- Information about other stakeholders: if you own less than 50% of the business, you must provide information about any additional stakeholders.
- Legal documents: depending on the lender you apply to, you will be expected to submit one or more of the following: business licenses and registrations, business formation document, business tax ID, contracts with third parties and/or UCC filings.
- Debt schedule: if you have any existing debt, some lenders will expect you to provide a debt schedule. This shows all your business’s outstanding loans, credit, and payment schedule.
- Tax returns: lenders will require you to show personal and business income tax returns over the last three years.
After you’ve applied, all you need to do is wait. Applying when your business is doing well is a smart way to increase your chances of getting a business line of credit, as well as getting a higher credit line amount.
This post originally appeared on the BlueVine blog at https://www.bluevine.com/how-to-get-a-business-line-of-credit/.
This is a guest post by Stuart Blake of BlueVine.
Having available cash on hand is crucial for businesses of all sizes, and a business line of credit is often a great way to get that cash. A credit line can help when you have unexpected cash flow gaps or when you want to take advantage of opportunities that arise. That’s why so many business owners have turned to a business line of credit—according to a 2017 study by the Federal Reserve, a business line of credit was one of the top three most popular financing options amongst business owners who applied for financing.
But how easy is it to actually get a business line of credit? Your chances of getting a credit line largely depend on a few things: your qualifications, the lender, and type of credit line you want.
Most line of credit lenders require businesses to have at least a few years of history and healthy revenue numbers to qualify for a line of credit. Larger lines of credit may require additional requirements, such as collateral.
This can all seem intimidating — especially if you’re a new business. To make the process easier, we’ve laid out five straightforward steps to securing a business line of credit.
- Review your credit score and finances. Your credit score and financial history are a big part of your business line of credit application. A higher credit score will give you a better chance of getting approved.
- Compare your options. Compare your lending options (link to Part 2) to get an idea of how well you qualify for a business line of credit.
- Check the requirements. Traditional banks tend to be harder to qualify than other types of lenders.
- Know the cost. Some lenders are more costly than others. Make sure you know your interest rates and fees upfront from your lender.
- Gather documents and apply. When you’re ready, gather and submit your documents and business information, and you’re done!
Why consider a business line of credit?
A business line of credit is a convenient form of financing for businesses that want a flexible way to cover working capital expenses or finance growth opportunities. Whether you need funds to pay rent, cover payroll, purchase equipment or take on a new project, a business line of credit can create a cash cushion when you have cash flow gaps and want to keep your business running smoothly.
Business lines of credit are inexpensive to maintain, especially compared to other forms of financing (think term loans or merchant cash advances). Keeping one open costs virtually nothing—and just like how a personal credit card works, you’re only responsible for paying interest on the amount you draw.
Common business line of credit application mistakes
1. Not having a clear idea why you need the funds
You should always have a game plan when applying for a business line of credit or any form of financing. When we speak to potential clients, we want to make sure that the financing we’re offering fits into a longer term plan for the business.
Sometimes business owners obtain financing without a long-term strategy. Some businesses have applied for financing with us two months after getting a short-term loan with another lender. That limits what we can do for them because now they’re more leveraged. It affects what we could offer them. When there are liens on a business that might limit our offer. From what could have been a $50,000 credit limit, we’re now looking at $20,000.
2. Rushing through the application
If you’re a small business owner, it’s a given that you wear many hats and work very long hours. So when there’s a desperate situation and you need funds quickly, it may be tempting to rush through as many credit line applications as possible. Sadly, this can hurt your chance to obtain financing.
Simple errors can cause you problems, such as a typo in the EIN [employer identification number] or using the incorrect business address.
That’s why you should set aside at least an hour of your day to really focus on the application.
TIP: Make sure you list the best contact number or information. There are times when business owners put down the main business line or email even though they typically don’t answer calls on that line. So lenders end up not being able to get a hold of them, leaving business owners wondering why they haven’t gotten a response.
3. Being dishonest on the application
You may be tempted to over-state your financial standing on your application. Bad idea.
Lenders know that sometimes businesses are in a desperate situation. But don’t try to fudge the numbers, because that typically gets exposed in the end through their underwriting process. And once the lender finds out, it can really hurt your chances of getting a line of credit.
So keep this in mind: never compromise the integrity of your business.
Ready to get a line of credit?
A business line of credit is one of the most convenient forms of financing for businesses. Before applying, it’s important to consider your business’s financial health, know the rates, understand your options, and gather the appropriate documents. Make sure your application stands out by having a web presence, inputting the correct information, and being honest about your business financials.
This post originally appeared on the BlueVine blog at https://www.bluevine.com/how-to-get-a-business-line-of-credit/.
Government contractors often outsource proposal writing and proposal management services, which means the company you use for your proposal support is part of your supply chain and must meet established security standards.
The folks at ProposalHelper have documented and ingrained security processes and practices in every aspect of their operations, and their information security processes have been independently audited and verified to meet ISO 27001:2013 standards.
The following is a guest post by Dr. Troy A. Tyre, Vice President U.S. Operations/Delivery Solutions, ProposalHelper, LLC.
Businesses focused on government contracts for significant amounts of the company’s revenue face unique challenges as we move into 2020 and beyond. The cybersecurity industry faces unparalleled changes, more so than other industries. The status quo will no longer meet the requirements. Key changes include:
- Business requirements: Federal agencies are now evaluating cybersecurity preparedness and maturity of programs in awarding new contracts. Cybersecurity preparedness is now a competitive advantage.
- Regulatory complexity: New regulations, imposed by federal and state agencies, are either already in effect or going into effect in 2020. Some of these regulations are clear while others require interpretation, making compliance difficult.
- Liability increasing: Several new elements of liability impact Government contractors. Government contractors are now held accountable for cybersecurity deficiencies in products/services under the False Claims Act. The Government contractor may also be liable under new and existing state laws, which are more frequently being enforced.
- Evolving threats: Cybersecurity threats are increasingly working their way down the supply chain. Vendors are often seen as the “weakest link” and the easiest way to infiltrate the government.
Understanding the changing landscape is a real requirement and can provide first adopter differentiation, at least initially. In 2019, the Department of Defense (DoD) identified cybersecurity weaknesses in supply chains as a critical threat to the economy and national intelligence. DoD’s response was the development of the Cybersecurity Maturity Model Certification (CMMC), which sets standards for cybersecurity preparedness and documents the process for all DoD contractors.
Large and small, primes and subs, all contractors are required to be third-party certified for cybersecurity preparedness in order to bid on new contracts and re-competes with the DoD. The DoD has deemed cybersecurity to be a foundational element in their procurement process. In other words; if a contractor does not meet the required level of preparedness, they cannot bid on any DoD contracts or re-competes. The DoD is the first agency to mandate third-party audits for their entire supply chain and to remove the ability to self-certify.
The military sees the importance of cybersecurity as well. In March 2018, the Marine Corps took the next step in growing cyber forces with the creation of the new officer military occupational specialty (MOS) focused on cyber operations. Senior leadership intends for the new cyber officers to lead within both the Marine Corps Cyberspace Command and across the wider Fleet Marine Forces.
The new officers will integrate the capabilities and effects of offensive and defensive cyberspace operations at the tactical level, supporting troops on the ground; the operational level, supporting commanders at every echelon; and the strategic level, supporting policymakers across the DoD. On November 21, 2019, the Naval Academy Class of 2020 received their first cyber warfare community selections, including six highly qualified candidates who were designated as Marine Corps cyber warfare officers.
Cybersecurity is one of the most eminent requirements for companies, regardless of whether you provide services, construction, commodities or products.
Dr. Troy Tyre, Vice President of Delivery Solutions at ProposalHelper, brings over 35 years of industry experience in project and proposal management. He can be reached at email@example.com or 571-449-6071.
This is a guest post by Benjamin Brooks of Beryllium InfoSec Collaborative.
When you think “contractor with the U.S. government,” what do you think of? Bureaucracy? Guaranteed steady revenue? Those are the most popular responses, because after-all, we are in business to make money, right? But how many people reading this think of “cybersecurity” as one of the ideas surrounding contracting with the United States government?
Today, however, when it comes to getting a government contract, cybersecurity is “the new black.” Traditionally, cybersecurity requirements were only a big deal for direct, prime contractors or their subs. However, because there have been so many breaches involving contractors, and the associated costs of those breaches, the United States government is starting to get tough on cybersecurity.
So much so, that the government is going to issue a certification process for ensuring cybersecurity before allowing contracts to be awarded! Because government contractor cybersecurity is such a huge issue today, let’s jump into some information to help companies earn their contractor cybersecurity “badge.”
1. Identity management
Contractors are going to need to make sure that all the users in the organization can be positively identified when using the information system (the network/computers). This means everyone who uses a computer gets a username. And who needs one, gets a mailbox. You can have a shared inbox, but the logins need be unique to each person. That goes for admins too!
2. Multi-factor authentication (MFA)
Multi-factor authentication is one of the most affordable ways to protect your organization from a plethora of cyber-attacks. Whether your organization uses single sign-on, zero-trust, or another model in between, MFA is a powerful tool against cybercriminal activity.
For example, if Tiny Tim wants to log in to his email remotely, it would be a good idea to confirm it is he who is logging in, right? By using MFA, an alert can be sent to Tiny Tim’s phone to prompt “is this you logging in?”…and Tiny Tim clicks “yes.” If a hacker were to obtain Tiny Tim’s username (typically his email address) and his password (which often is an easy one to remember, yikes!), the hacker still needs Tiny Tim’s phone to gain access. That is a simple way to make it much harder for the bad guy! For smaller organizations (and larger ones too) MFA solutions like DUO are a great way to provide MFA services/software.
Security tip: Avoid using an SMS code push, or a phone call for your second authentication factor, as SIM-swap attacks are on the rise.
3. Effective anti-malware programs
There are plenty of anti-malware programs around, and unless your organization has been hiding under a rock for the past 10 years, you probably know this simple and essential protection. On that note, the most effective anti-malware solutions are those that can be centrally managed for updates, patches, etc., by your IT folks.
4. General user cybersecurity awareness training
Training your employees of the current cybersecurity threats, and what to do in the event something bad does happen, is one of the biggest bangs-for-your-security-buck! With email-based compromises being one of the largest sources of breaches these days, improving poor user behavior into an effective line of defense is a huge double impact investment. Of course, the right user awareness training is key. Making it fun and memorable will make your employees be more aware of cyber threats.
If you really want your organization to build internal information security defense via your people, test them via a phishing simulation tool! What good is training if you aren’t testing to see if it is working? There are very good (and super affordable!) solutions out there to strengthen your first line of defense (your employees). There have been rave reviews about InteproIQ’s platform that combines both training and a phishing tool, so it is definitely worth looking into.
5. The Cybersecurity Maturity Model Certification
If your organization has been anywhere near the United States government defense contracting space for the last few months, you hopefully have heard of the newly announced Cybersecurity Maturity Model Certification (CMMC). I think we can all agree that cybersecurity is important. The new sheriff in town for DOD contractor (and potentially other federal) cybersecurity policy and practice adherence is the Office of the Under Secretary of Defense.
The Cybersecurity Maturity Model Certification will be tiered-out in order to ensure affordability by even the smallest of sub-contractors, but more importantly, by the data potentially sensitive data shared with outside organizations. The CMMC allows for different levels of security for different amounts and types of information that need protection. Whether or not this will be implemented outside of the DOD is yet to be determined.
In cases where the contract is not with the DOD, specific clauses for cybersecurity requirements will be laid out through FAR clauses, specific organizational requirements, and NIST 800 series documents.
To summarize, cybersecurity in government contracting is not going away anytime soon. If your organization is aspiring to get a GSA schedule, or be a contractor to the U.S. government in any regard, it will pay dividends to get help understanding the ins-and-outs of both contract negotiating and cybersecurity requirements.
Ensuring taxpayers are not overspending on goods and services is a worthwhile and potentially lucrative business opportunity. Safeguarding the information and data surrounding that venture will ensure it stays lucrative.
Beryllium InfoSec Collaborative helps defense contractors get compliant and implemented with all the DFARS 252.204-7012 and NIST SP 800-171 requirements. We do so in an affordable, practical and secure way, so you can focus on your business. You can watch Winvale’s joint webinar with Beryllium about “Managing Cybersecurity Requirements in Today’s Federal Market” here.
This post originally appeared on the Winvale blog at https://info.winvale.com/blog/top-5-cybersecurity-tips-for-government-contractors.