Getting Your Hands on ARC Loans for Small Business

Keyword: SBA Business plans for small business

SBA Interest-free loans will give businesses “breathing room”

Many small businesses are now eligible for interest-free loans under a new program created by the American Recovery and Reinvestment Act (ARRA). The “America’s Recovery Capital” (ARC) program allows small firms to take out loans of $35,000 to pay down existing business debts. Borrowers pay no interest on the ARC loans and repayment does not begin for one year. The loan program was established through the Recovery Act, which the President signed into law in February.

To qualify for the ARC loans, small companies must demonstrate they are experiencing immediate financial hardship due to the economic downturn, but are otherwise deemed by the Small Business Administration (SBA) to be viable.

The loans will be made by commercial lenders and can be used for payments of principal and interest for existing, qualifying small business debts like credit card obligations, mortgages, lines of credit, and balances due to suppliers, vendors, and utilities. In addition to the ARC loan program, the Recovery Act contained other measures aimed at helping small firms access credit. For instance, the new law increases the percentage of a loan that the SBA can guarantee, makes SBA-backed loans more affordable and provides tools to unfreeze the small business credit markets, helping small companies access capital at affordable rates.

To apply for ARC loans, businesses should visit their local SBA-approved small business lenders. The loans will be available through Sept. 30, 2010, or until appropriated funding runs out. But it is not just a matter of putting together a business plan for SBA loan and taking it in.

Not surprisingly, there is a caveat to all this largess: Banks don't like lending small amounts of money, and many of them will discourage such lending, or even deny that they are part of the program, even with a strong business plan and a good track record.

So what do you do?

First, there is power in numbers. Gather together with like minded businesses in your area, put together a jiffy business plan demonstrating the clout of all of you together. Send one or two people as spokespeople to speak with local bankers. Find one that is friendly to your interests. And, if that bank will support you now, you should support that bank when times are better. It is only fair.

Second, there is power in who you know. If your local banks refuse to cooperate, contact your US Representatives and US Senators. Get them on your side. Most Representatives and Senators are well aware of the importance of small business to the local economy, and they WILL help you out.

I wish I had confidence in banks. But I don't. We get letters all the time from veterans who can't access veteran lending programs because the money is too little for banks to deal with, and I fear the same thing will happen with ARC funds. It is absolutely criminal. It is about time that banks helped out all small businesses that are eligible for funding.