The Small Business Administration (SBA) recently created a new program called the American Recovery Capital (ARC) in order to help struggling businesses during these hard economic times. These loans are not designed for start-up businesses, but those that have been in operation for at least three years and have supporting documents for proof. Effective on June 15, 2009, the ARC loan program will give up to $35,000 to small businesses that are suffering economically until September 30, 2010 – or until the funds have run out.
Some of the benefits of obtaining an ARC loan are that they are interest free, with no other hidden fees, and each one is a deferred payment loan. In addition, the business has 12 months after the last loan check received before payments are owed on the loan. The loan will be paid back over a period of 5 years. The funds provided are to go toward term and revolving lines of credit, mortgages, business credit cards, capital leases as well as other vendors, suppliers and utilities.
One of the main eligibility requirements to get one of these loans is that the business must have a history of good performance and their current financial difficulties are a result of the current economy. There must be supporting documents stating that in at least one of the past three years the business has turned a profit and will have sufficient cash flow to make current future loan payments over a two-year period. The SBA wants these documents and the projected cash flow in order to deem whether or not your debts are able to be paid off in a two year period as well as repaying the loan. Their logic is that it would make no sense for the SBA to give an ARC loan to a struggling business that, even with assistance, will ultimately fail due to severe pre-existing debt or lack of future cash flow.
The money is not coming from the SBA itself, which is why the loan must be repaid promptly within a two year period and only certain good standing businesses are eligible. One of the major benefits of this loan is that the banks are loaning the money to the businesses, but the SBA will be paying the interest charges, not the small businesses. By having the loans payments wait a year, the SBA is giving small businesses a chance to invest in themselves instead of pouring all their money in their debts. These loans are going to be given out in the hopes that they will stimulate the community that the business serves through creating jobs and restoring the bank’s faith in loaning to small businesses for future loans.
For more information about applying for an ARC Loan visit the SBA website: http://www.sba.gov/recovery/arcloanprogram/REC_ARCLOAN_WHERE.html