A bail-out, of sorts, for small businesses
The closest to federal bail-out money that small business owners may get comes
in the form of the America’s Recovery Capital (ARC) Loan Program.
The interest-free loans are designed to help small businesses facing immediate
financial hardship get temporary relief so they can keep operating. In essence,
the loan gives a business owner cash-flow breathing room by postponing payments
on current debt.
The ARC loans can be used to make payments of principal and interest, in full or
in part, on one or more existing, qualifying small business loans for up to six
months. Borrowers can then redirect cash flow from making loan payments to
other business needs.
The loans carry a 100 percent guarantee from the Small Business Administration
to the lender.
Proceeds are provided over a six-month period and repayment of the principal is
deferred for 12 months after the last disbursement of the proceeds. Repayment can extend up to five years.
SBA said the best candidates for ARC loans are small businesses that in the past
were profitable but are currently struggling, yet have been making loan
payments or are just beginning to miss loan payments due to financial hardship.
To qualify, a business should be able to show evidence of profitability or
positive cash flow in at least one of the past two years. Cash flow projections
should show that the business will be able to meet current and future debt
obligations, including repayment of the ARC loan and operating expenses. A
borrower should be no more than 60 days past due on any loan being paid with an
ARC loan.
The borrower should also be able to show evidence of a change in financial
condition such as declining sales, frozen credit lines, difficulty meeting
payroll, paying rent, or difficulty making loan payments.
Loans and debts qualifying and eligible for assistance with ARC loans include:
secured and unsecured conventional loans (mortgages, term and revolving lines
of credit); capital leases; notes payable to vendors/suppliers/utilities;
Community Development Company (CDC) Loan Program first mortgage loans; and
credit card obligations for business purposes
The ARC loans are made by commercial lenders, not by the SBA itself, so the
first step to obtain a loan would be to talk to your current lender. SBA
district offices can assist lenders in becoming approved SBA lenders.
