Is Your Business Eligible for an ARC Loan?

It isn’t like finding buried treasure, but it’s a close second.  I’m talking about a new loan program available through the Small Business Administration that launched this week.  Called America’s Recovery Capital, the loan program provides funds up to $35,000 to small businesses that are viable but are facing a credit crunch.  The loans are not directly funded by the SBA, but the SBA is guaranteeing the loans at 100% to banks who agree to fund them.

How Do ARC Loans Work?  Here are the details:

• The loans are interest-free to the borrower, 100% guaranteed by the SBA, and without fees to the borrower.
• The loans are for struggling business which can show a record of profits but which have outstanding debt that needs to be repaid.
• The loans are not for start-up businesses.
• The loan is disbursed over six months, and the business has up to six years to repay to loan.
• All the standard loan documents will be needed, including details of the company’s current and past financial situation.

Ultimately the banks are going to have to decide whether to fund these loans.  Several sources I looked at from the NY Times and the LA Times, indicated that banks are reluctant to provide the loans, even with the 100% SBA guarantee.

The loan program is due to expire at the end of September 2010, or when the funds run out, whichever comes first. It is my guess that there will be a “run on the bank” for these loans, and lenders will be forced to cooperate or face pressure from the public and the small business community.

If you are eligible, get your paperwork together and get down to your local SBA preferred or certified lender and get in line.

Image: Newscom