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Small Business Digest


New SBA Program Offers Loans That Can Really Help A Small Business

An unusually lenient, short-term financial help for smaller enterprises is now available through the Small Business Administration’s American Recovery Capitol (ARC) program.

Under provisions of this economic recovery offering, small businesses can obtain loans up to $35,000 from their local bank that are guaranteed by the SBA.

More importantly, interest is paid by the federal government for the first year and payback is over several years.

Equally as important, these funds may be used to pay off credit card debt as well as other expenses not usually recognized as reasons for banks to provide loans.

These ARC loans are a "no-lose" for lending institutions as they are guaranteed 100% by the federal government.  However, a quick check by this newsletter's parent, Information Strategies, Inc. revealed that few if any banks are planning to participate in the program.

Put simply the ARC program provisions are:

  • The America’s Recovery Capital, or ARC, loan program is designed to give viable small businesses suffering immediate financial hardship some temporary financial relief so they can keep their doors open and get their cash flow back on track.
  • The ARC loan program is a new, temporary program authorized by the 2009 Recovery Act.
  • An ARC loan is a deferred-payment loan of up to $35,000, to be used for principal and interest payments on existing, qualifying debt/loans.
  • ARC loans are 100% guaranteed by SBA and have no SBA or lender fees associated with them (unless the lender must secure collateral as part of the loan).
  • There are no interest charges to the borrower. The SBA will pay the monthly interest at the rate of Prime plus 2% to the lender on behalf of the borrower. The current rate is published in the Federal Register.
  • There is a disbursement period of up to six months followed by 12 months with no repayment of the ARC loan principal. After the 12-month deferral period, the borrower pays back only the ARC loan principal over a period of five years.

The key provision in the program as it affects potential borrowers is that the company must be viable.

According to the SBA, viable means the business is an established, for-profit business with evidence of profitability or positive cash flow in at least one of the past two years. An analysis of financial statements going back three years is also used.

Future cash flow projections based on reasonable growth going out two years should show that the business will be able to meet current and future debt obligations, including future repayment of the ARC loan.

Also, the borrower must certify that they are currently no more than 60 days past due on any loan being paid with an ARC loan and they must have an acceptable business credit score as determined by SBA.

The problem for small enterprises is finding a bank offering an ARC loan.

For more details, go to:

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